WAGEDISTORTION

WAGEDISTORTIONasituationwhereanincreaseinprescribedwageratesresults
intheeliminationorseverecontractionofintentionalquantitativedifferencesinwageor
salaryratesbetweenandamongemployeegroupsinanestablishmentastoeffectively
obliteratethedistinctionsembodiesinsuchwagestructurebasedonskills,lengthof
service,orotherlogicalbasesofdifferentiation.(Article124)
ThedefinitionofWageDistortionasaforequoted,showsthatsuchdistortioncanso
existwhen,asaresultofanincreaseintheprescribedwagerate,aneliminationor
severecontractionofintentionalquantitativedifferencesinwageorsalaryrateswould
occurbetweenandamongemployeegroupsinanestablishmentastoeffectively
obliteratethedistinctionsembodiedinsuchwagestructurebasedonskills,lengthof
service,orotherlogicalbasesofdifferentiation.
Whendoeswagedistortionhappen?
Ithappenswhentheemployergrantsanincreaseonlytoacertaingroupofemployees
drasticallyreducingoreliminatingthenormalsalarydifferentialorgap.
PossibleCausesofWageDistortion:
.

1)Governmentdecreedincreasethruwageorders

2)Mergerofestablishments(confusionoreliminationofthestatusofemployee)

3)Increasegrantedbyemployers

4)PassageofRA6727ortheWageRationalizationAct

1)GovernmentdecreedincreasesthroughissuanceofWageOrders
2KindsofWageOrders:
(a)TheCongressprovidesforastatutoryminimumwage(duringthemartiallawera)and
anincreaseisgivenandaddedtothedailywage.
(b)WiththepassageofRA6727,insteadofprovidingforafixedamountforanincrease,
thewageordernowfixesaminimumwagebelowwhichthewagescannotfall.

2)Mergeroftwoestablishmentswherebytheemployeesofthedissolvedcompanyare
absorbedbythesurvivingcompany
McDonalds

Jollibee

Casual

P160

P190

Permanent

P190

P200

McDonaldsJollibee
CasualP190
PermanentP190
Therewillbewagedistortion.

3)Employergrantedincreasestotheworkersofanestablishment
Theemployergrantsanincreaseaffectingonlyacertaingroupofemployeesthereby
reducingdrasticallyortotallyeliminatingthesalarygapbetweensuchgroupandthenext

higherlevel.
4)PassageofRA6727

EffectsonExistingWageStructure.(Section16,IRRofRA6727)
WheretheapplicationofthewageincreaseprescribedhereinresultsinDISTORTIONS
inthewagestructurewithinanestablishmentwhichgivesrisetodisputetherein,such
disputeshall:

(a)Firstbesettledvoluntarilybetweentheparties
(b)Intheeventofdeadlock,suchdisputeshallbefinallyresolvedthrough
compulsoryarbitrationbytheRegionalArbitrationBranchoftheNLRChaving
jurisdictionintheworkplace.
CorrectionofWageDistortion:
(broughtaboutbytheenactmentorpassageofawageorder)
TheCourthaspointedoutthatthroughArticle124,thelawrecognizesthevalidityof
NEGOTIATEDWAGEINCREASEStocorrectwagedistortion.
A.IFUNIONIZED
.

(a)Theemployerandtheunionshouldfirstnegotiatetocorrectthedistortion

(contemplatestheabsenceofagrievanceprocedure)
.

(b)Ifnegotiationsfail,themattershouldbebroughttothegrievance(machinery)
procedureundertheirCBA

(c)Ifnosettlementisarrivedat,thedisputeshouldbesubmittedtovoluntary
arbitration(voluntaryarbitratorsorpanelofvoluntaryarbitrators)

(d)Ifstillunresolved,orpartiesareunsatisfied,anappealmaybemadetothe
appropriatebranchoftheNLRC.

B.IFNOTUNIONIZED
.

(a)Theemployerandtheworkersshouldnegotiatetocorrectthedistortion.

(b)Ifnegotiationsfail,themattershouldbebroughttotheNationalConciliation
and
MediationBoard(NCMB).

(c)Ifnosettlementisarrivedatafter10calendardaysofconciliation,thedispute
shouldbebroughttotheappropriatebranchoftheNLRC,whichshallconduct

continuoushearingsanddecidethedisputewithin20calendardaysfromthetime
saiddisputeissubmittedforcompulsoryarbitration.
GrievanceMachineryorProcedure(Article260)
Thepartiestoacollectivebargainingagreementshallestablishamachineryforthe
adjustmentandresolutionofgrievancesarisingfrom:
TheinterpretationorimplementationofCBA
Theinterpretationorenforcementofcompanypersonnelpolicies(thevoluntary
arbitratorshallhaveexclusiveandoriginaljurisdictiontohearanddecidesuch
grievanceswhichremainunresolvedafterexhaustionofgrievanceprocedure)
Allgrievancessubmittedtothegrievancemachinerywhicharenotsettledwithin7
calendardaysfromthedateofitssubmissionshallautomaticallybereferredto
VOLUNTARYARBITRATIONprescribedintheCBA.
Forthispurpose,partiestoaCBAshall
NameanddesignateinadvanceaVoluntaryArbitratororpanelofVoluntary
Arbitrators,or
IncludeintheagreementaprocedurefortheselectionofsuchVoluntary
Arbitratoror
panelofVoluntaryArbitrators,preferablyfromthelistingofqualifiedVoluntary
ArbitratorsdulyaccreditedbytheBoard.
IncasethepartiesfailtoselectaVoluntaryArbitratororpanelofVoluntary
Arbitrators,theBoardshall
DesignatetheVoluntaryArbitrators,asmaybenecessary,pursuanttothe
selectionprocedureagreeduponintheCBA,whichshallactwiththesameforce
andeffectasiftheArbitratororpanelofArbitratorshasbeenselectedbythe
partiesasprescribed.
ThejudgeinvoluntaryarbitrationiscalledARBITRATORwhilethatin
compulsoryarbitrationiscalledLABORARBITER.
APetitionforCertiorariunderRule65oftheRevisedRulesofCourtwilllie
where
Agraveabuseofdiscretionor
Anactwithoutorinexcessofjurisdictiononthepartofthevoluntary
arbitratoris

clearlyshown.
ORGANIZEDESTABLISHMENTreferstoafirmoracompanywherethereisa
recognizedorcertifiedexclusivebargainingagreement.
UNORGANIZEDESTABLISHMENTwherethereisnorecognizedunionor
collectivebargainingagreement.
WhatshouldbecontainedinaCBA?
(1)Termsandconditionsofemployment(2)Wages
(3)HoursofWork
(4)Procedureforresolvinggrievances
Organizedorunionizedestablishmentsmay:
.

(a)Meetandsitdownanddiscussthewageadjustment

(b)Incaseofdisagreement,thematteriselevatedtothetopexecutives

(c)Companygrantsanincreaseifitbeproventhatwagedistortionexists(this
increasemay
becalledaNEGOTIATEDWAGEINCREASE)
Incaseoforganizedorunionizedestablishmentswhosubmittovoluntary

arbitration,themutualconsentofthepartiesgovernstheselectionofacommon
arbitrator,usuallyfromalistfoundintheNationalConciliationandMediation
Board(Sanciangko)[itisalistingofqualifiedvoluntaryarbitratorsduly
accreditedbytheBoard].
Ifoneofthepartiesdoesnotagreewiththeotherpartysselectionofa

voluntaryarbitrator,partieswillhavetosubmittocompulsoryarbitration.
PROCEDUREFORRESOLVINGWAGEDISTORTION
A.WAGEDISTORTIONinanUNORGANIZEDESTABLISHMENT:

Situation:Inacompany,thereare3classesofemployees:

AwageorderisissuedfixingtheminimumwageatP190.whichgroupwillbeaffected?
OnlyclassCbecausetheyaretheminimumwageearners(unlikebeforewhenthewage
ordersprovidedforanacrosstheboardincreasewhichaffectedeverybody).
UnderWageOrderNo.8,onlyCisentitledtothewageadjustmentcomeDecember1,
2001.ItwillnotapplyequallytoAandB.AandBcannotvalidlydemandasimilar
wageadjustmentbyvirtueofthewageorderbecausethewageorderonlyappliestothose
employeesreceivingtheminimumwage.
Asaresult,BandCwillreceivethesamesalaryofP195comeDecember1.Bnow
complains,whatshouldhedo?
ProcedureforResolvingWageDistortioninanUNORGANIZED
ESTABLISHMENT:
(1)Theemployersandtheworkersshouldnegotiatefortheadjustmentofthewagerates
Shouldtheemployerrefusetograntanadjustment,thenBshouldfileacomplaint
withtheNCMBonthegroundofwagedistortion.
(2)ThedisputeshouldbereferredtotheNCMBforconciliation. HOWISTHIS
DONE?
.

(a)ThisprocedureisinitiatedbythefilingofacomplaintwiththeNCMB
(Sanciangko)onthegroundofwagedistortion.

(b)JustfillupthecomplaintformprovidedbytheNCMB

(c)TheRegionalDirectoroftheNCMBwillnowissueaNOTICEOF
HEARINGdirectedtotheemployerinvitinghimtomeetwiththemata
designatedtime,date,andplace.

(d)AttheNCMB,thecomplainantBandtheemployerwillhavetobe

present.ThisproceedingwillbesupervisedbyanNCMBHearingOfficer.
Thisisentirelydifferentfromthefirststepbecausethethirdperson(NCMBHearing
Officer)nowinterferesandaskstheemployers
Howmuchcanyouafford?
Andtotheemployees
Howmuchincreasedoyouwant?
Insodoing,intakesintoconsiderationthefinancialcapacityoftheemployerandthe
needoftheworkers.
.

(e)TheNCMBwilltrytosettlethedisputethroughAMICABLE
SETTLEMENT.
Example:EmployerwantstopayP1increase.EmployeewantsP5increase.
NCMBwillsettleforP3andsuggeststhissolutiontobothparties.

(f)ShouldtheemployerrefusetoaccedetotheremedysuggestedbytheNCMB,
theNCMBcannotmakenegotiationstobindbothpartiesbecausethemain
purposeofNCMBistoconciliateanditwillsuggestthatthepartiessubmitto
VOLUNTARYARBITRATION.

(3)Ifnotsettlementisarrivedat,thenthedisputeshallbereferredtotheRegional
ArbitrationBranchoftheNLRCforCOMPULSORYARBITRATION.

ThisispresidedoverbyLaborArbiters(Article217).

Theproceedingisusuallyadversarialincharacterbecauseitisinitiatedbya
complaintbeforetheLaborArbiterandtheotherpartyisrequiredtoanswer.

So,therewillbeafullblownhearingtoresolvewagedistortion.

AnydecisioncomingoutoftheLaborArbitershallbebindingonbothparties,
whether
theylikeitornot.

 Note:inthecaseofUNORGANIZEDESTABLISHMENTS

PriortothetimethepartiessubmittheirdisputetotheNCMB,theycouldresortto
VOLUNTARYARBITRATION.

VOLUNTARYARBITRATIONisnotcompulsory;thepartieswillhavetogive
theirconsentiftheywanttosubmittheirdisputetoVoluntaryArbitration.

TheywillbegivenaLISTofvoluntaryarbitratorsfromwhichtheywillpickout
thosewhichtheyhavechosentobethearbitrators.

However,mostoftenthannot,thepartiesdonotsubmittheirdisputetovoluntary
arbitrationbecausemostofthemdonottrusttheVoluntaryArbitrators.

ThedecisionoftheVoluntaryArbitratorisBINDINGupontheparties.Why?This
isacontractualproceedingandthecontractisthelawoftheparties.

Inresolvingwagedistortions,youdonotalwaysconsidermonetarymatters.You
alsohavetotakeintoconsiderationthelengthofservice,theskills.

IsthedecisionoftheVoluntaryArbitratorappealabletotheNLRC?NO,unlessit
becomesfinalandexecutory.
ThelegalremedytothedecisionoftheVoluntaryArbitrator
(1)TotheCourtofAppealsbywayofPetitionforReviewunderRule43(Quasi
JudicialAgency)within15days
LuzonStevedoringEmployeesUnion
IfAPPEAL,willthatstaythedecisionoftheVoluntaryArbitrator?
NO,becausethedecisionoftheVoluntaryArbitratorisfinalandinappelable,but
TemporaryRestrainingOrderandaWritofPreliminaryInjunctionmaybeapplied
for.

 So,usePetitionforReviewwithMotiontoStay,becauseofitsfinaland

executorynature.
(2)ThentotheSupremeCourtunderRule45onquestionsoflaw(Appealby
Certiorari)15daysfromreceiptofthedecisionoftheCourtofAppealsor
receiptofthedenialofthemotionforreconsideration.
BeforetheSt.MartinsFuneralHomesCase(inthepast),fromthedecisionofthe

VoluntaryArbitrator,theaggrievedpartywouldgodirectlytotheSupremeCourt.
B.WAGEDISTORTIONinanORGANIZEDESTABLISHMENT:

Mostoftenthannot,whenthereisaunion,thereisaCBA.Andthemostimportant
matterin
theCBAisWAGES.
Theunionhasmorebargainingpowerthantheordinaryemployee;itcandemandfor
better
laborstandards(canevendemandtoseethepresidentofthecompany).
TheCBAprovidesusuallyforwageincreaseswhichareusuallyacrosstheboard(forthe
benefitofallemployeesinthebargainingunit).
However,awageordermaybepassedoffsettingtheincreasegivenbytheemployer,so
thereisaWAGEDISTORTION.
ProcedureforResolvingWageDistortioninanORGANIZEDESTABLISHMENT:
.

(1)Theemployerandtheunionshallnegotiatetocorrectthewagedistortion.

(2)Ifthenegotiationsfail,thenthedisputeissettledthroughthegrievance
procedureundertheirCBA.
GRIEVANCEMACHINERYissimplyadetailedprocedureofhowthe
partieswouldresolveadisputearisingfrom:
i.

TheinterpretationorimplementationoftheCBAand

ii.

Thosearisingfromtheinterpretationorenforcementofcompanypersonnel
policies.

(3)Ifthedisputeinunresolved,thematterissubmittedforVOLUNTARY
ARBITRATION(whichisnotalwaysthecasebecausepartiescannotbe
compelledtosubmittoit).

(4)ThematterisalsoresolvedthroughtheNCMBbyfilingacomplaint;
MEDIATIONisdonebytheNCMBthroughitsHearingOfficer,advisingthe
partiestosubmittheirdisputetoavoluntaryarbitrator.
IfbothoroneofthepartiesisunwillingtosubmittoVoluntaryArbitrator,then
thematterbecomesunresolved.

(5)ThematterissubmittedtotheRegionalArbitrationBranchoftheNLRCfor
COMPULSORYARBITRATION.
Howisthisdone?
ByfilingacomplaintwiththeRegionalArbitrationBranch

Thedecisionwillbebindingupontheparties.

FromthedecisionoftheLaborArbiter,thematterwouldbebroughttothe
NLRC,thentheCA,andevenuptotheSC.
CommonProcedureinUnorganizedandOrganizedEstablishments:

Ifnegotiationsfail,themattershallbereferredtotheNationalConciliation
andMediationBoard(NCMB).
Now,theHearingOfficeroftheNCMBwilltrytoconciliateandmediate
betweenthepartiessothattheywillreachanAMICABLESETTLEMENT.
Ifanamicablesettlementisnotreached,theHearingOfficeroftheNCMB
willadvisethepartiestosubmitthemattertoVOLUNTARYARBITRATION.
So,thereisVoluntaryArbitrationforbothorganizedandunorganized
establishments.
Insettlingdisputes,strikesandlockoutsareimpliedlyexcludedasamodeofsettlement
becausethereisaverydetailedprocedureprovidedforbythelawinresolvingwage

distortions(Article124).TheauthorityonthismatterisIlawatBuklodatMangagawa
vs.NLRC.
MainReasonforNegotiations:WageAdjustments
DoestheprocedureprovidedinArticle124precludethecompanyfrominitiatinga
solutiontotheproblemofwagedistortion?Say,theemployerhimselfbelievesthatwith
thepassageofacertainwageorder,awagedistortioniscreated.Canhetakeactionto
solveit?
YES,becauselawthroughArticle124hasrecognizedthevalidityofnegotiatedwage
increases.
Thecompanycanevenprovideforaunilateralwageincreasetoimmediatelysolvethe
problemofwagedistortion.
Note:Theotherlevelofemployeesreceivingwageswayabovetheminimum

allowablebylawcannotlegallycompelthecompanytoprovideasimilarrateofincrease
providedbythewageorderforminimumwageearners.Why?
(1)RA6727aswellasthepolicyofthestaterequiresthatintheadjustmentofwage
rates,thesamemustnotbedonebycompulsionbutthroughnegotiationorCBA.
(2)Notallemployerscanaffordthesameamountofincreasetoallemployeesatthe
sametime.