G.R. No.

L-50320 March 30, 1988

PHILIPPINE APPAREL WORKERS UNION
vs
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE APPAREL, INC.

FACTS

The parties finally came to an agreement and signed a collective bargaining agreement (CBA) on
September 3, 1977 after negotiations between the petitioner union and respondent company regarding a
set of bargaining proposals from June 2, 1976, presented by the former to the latter. The CBA, among
other things, provided for a three-stage pay increase for all rank and file employees retroactive as of April
1, 1977.
Effective (1) April 1, 1977, P0.80; (2) April 1, 1978, P0.50; and (3) April 1,1979, P0.50.

Presidential Decree 1123 was issued providing for a P60 monthly increase in allowance effective May 1,
1977. The Rules and Regulations Implementing the said decree exempted from its operation employers
who had granted, in addition to the allowance under Presidential Decree 525, at least P60 monthly wage
increase on or after January 1, 1977, provided that those who paid less than this amount shall pay the
difference.

When petitioner sought implementation of the first stage of the wage increase, respondent company
refused alleging that since there was already a meeting of the minds between the parties about the wage
increase as early as April 2, 1977, which was made retroactive to April 1, 1977, it fell within the exemption
provided for in the said implementing rules issued by the Secretary of Labor, so that it was obliged to pay
only the difference between the P60 increase in allowance provided by the presidential decree and the
wage increase granted by the company (roughly P22 a month). Claiming that respondent company acted
in bad faith when it refused to pay the negotiated wage increase in violation of the CBA, petitioner filed a
complaint for unfair labor practice, but the Labor Arbiter dismissed it and asked the parties to resolve their
dispute in accordance with the Machinery established in the CBA.

On appeal, the respondent commission, on the premise that there was already a meeting of the minds as
to the wage increase as of April 2, 1977, dismissed the appeal stating that respondent company clearly
fell within the exemption under the subject implementing rules and regulations. Hence, the instant petition.

ISSUE

Whether or not this case falls under the exception of PD 1123

RULING

The Supreme Court held that because there was neither payment of the negotiated wage increase either
before or after the effectivity of PD 1123 on May 1,1977, nor was there a "grant" of wage increase as of
the effectivity of PD 1123 on May 1, 1977, since there was no contract to speak of on May 1, 1977, the
company cannot avail of the exemption under the implementing rules; that the conclusion of the Labor
Department that respondent company falls within the ambit of exemptions provided for under Section 1(k)
of the Rules and Regulations Implementing PD 1123 is based on the erroneous premise that an
agreement as to the wage increase was perfected between the parties on April 2, 1977; and that the
Secretary of Labor exceeded his rule-making authority under Section 4 of P.D. 1123 when he exempted
from coverage of the decree not only distressed employers as expressly provided therein but also "those
who have granted in addition to the allowance under PD 525 at least P60 monthly wage increase on or
after January 1, 1977.”

FALLO

PREMISES CONSIDERED, We hereby enjoin the respondent NLRC to fully implement this Court's
Resolution dated October 27,1983, with these modifications: (a) To pay members of the petitioner the
partial backwages in the amount of P695,413.17 plus legal interest computed from the time the decision
became final (October 21, 1981) until fully paid, with 10% thereof to be deducted as attorney's fees
payable to the Menzon Law Office, less the amount that respondent company may have paid to some
members of the petitioner union; and (b) The BPPAWU Atty. Luis D. Flores and respondent Philippine
Apparel, Inc. are hereby adjudged guilty of contempt and are ordered to pay TEN THOUSAND
(P10,000.00) PESOS each within ten (10) days from notice thereof. This resolution is immediately
executory.