WAGE RATIONALIZATION ACT (RA 6767)

Importance: This law, which amended the

Labor Code, will tell us the different
government agencies involved in the fixing
of wages, and also, how to resolve wage
distortion.
Purpose: was intended to rationalize wages
FIRST, by providing for full-time boards to
police wages round-the-clock.
SECOND, by giving the boards
powers to achieve this objective.

enough

Policies:
(a) To rationalize the fixing of the minimum
wage. (important)
It has been rationalized because Article 124
provides for the standards and criteria that
should guide the agency of government
when it comes to fixing the minimum wage.
It is noted that under the standard criteria,
that the Congress has tried to weigh the
factors involving the employers, as well as
the factors involving the laborers when it
comes to fixing of employees wage in order
to rationalize it.
Before RA 6727, it was only Malacaang,
through a Presidential Decree, that dictates
how much should be the minimum wage in
the Philippines. Most often than not, those
employers in the far-flung areas are
adversely affected because the fixing of
minimum wage is not rationalized. It does
not take into consideration, for example, the
capitalization of the employer, the profit
expected, the cost of living in a particular
area.
With the advent of RA 6727, the law deems it
necessary that there shall be standard
criteria in fixing the employees wage.
Article 124. Standards or Criteria for
Minimum Wage Fixing.
a. The demand for living wages;
b. Wage adjustment vis--vis the consumer
price index;
c. The cost of living and changes or
increases therein;
d. The needs of workers and their families;
e. The need to induce industries to invest in
the countryside;
f. Improvements in standards of living;
g. The prevailing wage levels;
h. Fair return of the capital invested and
capacity to pay of employers;
i. Effects on employment generation and
family income; and
j. The equitable distribution of income and
wealth along with the imperatives of
economic and social development.
(b) To promote productivity-improvement and
gain-sharing measures to ensure a decent

standard of living for the workers and their

family.
(c) To guarantee the rights of labor to its just
share in the fruits of production.
(d) To enhance employment generations in
the countryside through industry dispersal.
(e) To allow business and industry reasonable
returns on investment, expansion and
growth.
(f) The state shall also promote collective
bargaining as the primary mode of setting
wages and other terms and conditions of
employment; and whenever necessary, the
minimum wage rates shall be adjusted in a
fair and equitable manner, considering
existing regional disparities in the cost-ofliving and other socio-economic factors and
the
national
economic
and
social
development plans. (important)
This is an important policy because it
promotes collective bargaining as a mode of
settling labor disputes.
REGIONAL TRIPARTITE WAGES AND
PRODUCTIVITY BOARD (RTWPB)
An agency of Government responsible for
fixing the minimum wage
Composition of the Board:
1) Regional Director of the DOLE as
Chairman
2) Regional Directors of NEDA and DTI as
Vice Chairmen
3) President of the Philippines, upon
recommendation of the Secretary of the
DOLE
4) Each Regional Board to be headed by its
Chairman shall be assisted by a Secretariat
(7 members-please check wage order
signatories)
Two Major Functions of the Board:
(1) It has the power to receive, act and
process application for wage increase and
adjustment.
(2) The power to act, process and approve
application for exemption from the wage
orders.
These are the two most important functions
of the board as far as lawyers are concerned.
Because that is where lawyers play an active
role in representing the parties:
1) on the matter of application of wage
increase, and
2) on the matter of granting wage
exemption or exemption from the
minimum wage.
Get a copy of the Revised Rules of Procedure
on Minimum Wage Fixing. (1990)
NATIONAL WAGES AND PRODUCTIVITY
COMMISSION (NWPC)

An appellate agency. This is not the same as

the NLRC.
REVISED RULES OF PROCEDURE ON
MINIMUM WAGE FIXING:
The procedure will tell us that you can file a
petition for a wage increase with the RTWPB.
Also, that the Board can Motu Proprio fix the
minimum wage or can act on the application
for a minimum wage increase or reduction.
Ordinarily, the Board will not act motu
proprio. It will wait until an application for a
wage increase is files before it.
Modes to initiate the fixing of the
minimum wage:
1) Motu Proprio by the RTWPB
2) Wage fixing by virtue of a petition filed
Rule II. Section 3. Procedures in
Minimum Wage Fixing:
(a) Motu Proprio by the Board
Whenever conditions in the region, province
or industry so warrant, the Board may, motu
proprio on its own initiative, or as directed
by the Commission (NWPC), initiate action or
inquiry to determine whether a wage order
should be issued. The Board shall conduct
public hearings.
The Board may also conduct consultations
with concerned sectors/industries.
(b)By Virtue of a Petition Filed
1) Form and Content of Petition
Any party may file a verified (subscribed and
sworn to) petition for wage increase with the
appropriate Board in 10 legible copies, which
shall contain the following:
a) Names and addresses of petitioners and
signatures of authorized officials
b) Grounds relied upon to justify the increase
being sought
c) Amount of wage increase being sought
d) Area and/or industry covered.
PROPER PARTY: Any party may file the
petition to increase the wage or fix the
minimum wage, provided:
The petitioner is a legitimate organization
of workers duly registered with the DOLE
The employers are with substantial
interest and are affected by the decision of
the order of the Board
If employed in an establishment, the
employee cannot go to court and file a
petition for a wage increase because the
employee is not considered a proper party. It
must be an employer or a legitimate labor
organization.
2) Board Action
The Board must first examine if the formal
and substantial requirements are complied
with and are completed. If the petition
conforms with the substantial requirements,
the Board shall conduct public hearings in
the manner prescribed, to determine

whether a wage order should be issued. The

Board may also conduct consultations with
concerned sectors/industries.
3)
Publication
of
Notice
of
Petition/Public Hearing
The notice shall be published in a newspaper
of general circulation in the region and/or
posted in public places as determined by the
Board. The publication or posting shall be
made at least 15 days before the date of
initial hearing and shall be in accordance
with the suggested form.
The notice of petition and/or public hearing
shall include
The names and addresses of the
petitioners
The subject of the petition
The date, place and time of the hearings
This is posted or published before the
hearing of the petition.
4) Opposition
Any party may file his opposition to the
petition on or before the initial hearing, copy
furnished to the petitioners. The opposition
shall be filed with the appropriate Board in
10 typewritten legible copies, which shall
contain the following:
a) Names and addresses of the
oppositors, and signatures of authorized
officials;
b) Reasons or grounds for the
opposition; and
c) Relief sought
5) Consolidation of Petitions
If there is more than one petition filed, the
Board may motu proprio or on motion of any
party, consolidate these for purposes of
conducting joint hearings or proceedings to
expedite resolutions of petitions. Petitions
received after publication of an earlier
petition need not go through the publication
or posting requirement.
6) Assistance of Other Government and
Private Organizations
The Board may enlist the assistance and
cooperation of a government agency or
private person or organization to furnish
information in aid of it wage fixing function.
Rule III. Conduct of Hearings.
In the performance of its wage-fixing
functions, the Board shall conduct public
hearings or consultations, giving notices to
employees
and
employers
groups,
provincial, city and municipal officials and
other interested parties.
Hearings may be conducted by the Board en
banc or by a duly authorized committee
thereof. The Board shall determine the date,
place and time of the hearing which shall be
open to the public except as otherwise

requested by the party and so determined

by the Board.
Order of Hearing (Section 3)
As much as practicable, the petitioners shall
present their evidence first, followed by the
oppositors, the Board may then call on other
persons to present their views and submit
position papers and other supporting
documents.

Effectivity (Section 4)
A Wage Order shall take effect 15 days after
its publication in at least 1 newspaper of
general circulation in the region.
Upon issuance of the Wage Order, it does not
immediately become effective. It has to be
published and takes effect 15 days after its
publication.

Manner and Duration of Hearings

(Section 4)
Public hearing shall be conducted in each
province in the region as far as practicable.
Hearings shall be concluded within 45 days
from the date of initial hearing except when
conditions in the region warrant otherwise.

Frequency of Wage Order (Section 3)

General Rule:
Any Wage Order issued by the Board may
not be disturbed for a period of 12 months
from its effectivity. And no petition for wage
increase shall be entertained within the said
period.

Records of Proceedings (Section 5)

The Board Secretariat shall keep records or
minutes of all Board proceedings, duly noted
by the members of the Board.

Exception:
In the event, however, that supervening
conditions (such as extraordinary increase in
prices of petroleum products and basic
goods and services), demand a review of the
minimum wage rates as determined by the
Board and confirmed by the Commission, the
Board shall proceed to exercise its wage
fixing function even before the expiration of
the period (12 months).
Reason: The petitions would clog the Board
dockets unreasonably.

Non-Applicability of Technical Rules

(Section 6)
The Board shall not be bound strictly by
technical rules of evidence and procedures.
Prohibition Against Injunction (Section
7)
NO preliminary or permanent injunction or
temporary restraining order may be issued
by any court, tribunal or any other entity
against
any
proceeding
before
the
Commission or Board.
On the date of hearing, the Board will sit as a
collegial body and will hear the petition, first
from the petitioner presenting their position
paper and after that from the oppositors. And
thereafter, the Board will then determine
whether to grant the petition or not. Whether
to grant the wage increase or not, and how
much. In effect, the Board will fix the
minimum wage and this will be done through
the issuance of a wage order.
Rule IV. Wage Order.
Issuance of Wage Order (Section 1)
Within 30 days after conclusion of the last
hearing, the Board shall decide on the merits
of the petition, and where appropriate, issue
a wage order establishing the regional
minimum wage rates to be paid by
employers, which, shall in no case be lower
than the applicable statutory minimum wage
rates. The Wage Order may include wages
by industry, province or locality as may be
deemed necessary by the Board, provided,
however, that such wage rates shall not be
lower than the regional minimum wage rates
unless expressly specified in the Wage
Order.
The Board shall furnish the NWPC a copy of
the decision on the petition or the Wage
Order.

The rules prohibit any interested party from

filing a wage increase petition within 12
months from the effectivity of a wage order.
Please note the exception. Absent such
circumstance, there will be no disturbance of
the Wage Order within 12 months from its
effectivity. That is why the date of effectivity
of a Wage Order is important.
Remedy on the part of the aggrieved party
from a Wage Order?
Rule V. Appeal.
Appeal to the Commission (NWPC)
(Section 1)
Any party aggrieved by a Wage Order issued
by the Board may appeal such Order to the
Commission by filing a verified appeal with
the Board in 3 typewritten legible copies, not
later than 10 days from the date of
publication of the Order. The appeal shall be
accompanied by a Memorandum of Appeal
which shall state the grounds relied upon
and the arguments in support of the appeal.
The Board shall serve notice of the appeal to
concerned parties.
So watch out for the date of the publication
of the Wage Order because that is when the
10 calendar days will start to run. Not from
the effectivity, but from the date of
publication.
Grounds for Appeal (Section 2)

(a)
Non-conformity
with
prescribed
guidelines and/or procedures
(b) Questions of law (Rule 45)
(c) Grave abuse of discretion (Rule 65)
The NWPC has established guidelines on the
fixing of the minimum wage. If the Board, for
instance, did not conduct a hearing, that
contravenes
the
guidelines,
therefore,
constituting the first ground.
As for instance, the Board is confronted with
an issue on a question of law and the Board
erred in interpreting the law, this will fall
under the second ground.
As when the Board acts arbitrarily,
capriciously or whimsically in issuing the
wage order, this will constitute grave abuse
of discretion.
Period to Act on Appeal (Section 4)
The Commission shall decide on the appeal
within 60 days from the filing thereof.
Effect of Appeal (Section 5)
The filing of the appeal does not operate to
stay the Order unless the party appealing
such Order shall file with the Commission an
undertaking with a surety or sureties
satisfactory to the Commission for payment
to employees affected by the Order of the
corresponding increase, in the event such
Order is affirmed.
Instance when the appeal will stay the Wage
Order: In case the employer will post a surety
bond. The Wage Order fixes the minimum
wage. The employer has to comply with that,
unless the employer is exempted from
complying with the Wage Order. The
employer, however, as an aggrieved party,
can appeal from the Wage Order on grounds
provided by the law or by the rules. If he
does appeal, that appeal will not stop the
employer from complying with the Wage
Order. That means, he has to still pay his
employees. He can only refrain from paying
his employees or giving them the minimum
wage if he posts a cash or surety bond in an
amount equivalent to the wage increase. On
the condition that the bond will answer in
case his appeal is dismissed by the NWPC.

Is the Regional Board under the DOLE?

It is not. It is only an attached to the
department for policy and correlation
purposes. The decision of the Board is
appealable to the NWPC.
From the decision of the NWPC, does the
aggrieved party have any remedy? YES.
Remedy from the decision of the NWPC:
No appeal from the decision of the NWPC.
The legal remedy is by means of Special
Civil Action of Certiorari under Rule 65 to

the Court of Appeals within the period of 60

days.
Under Rules of Civil Procedure, the Court
of Appeals and the Supreme Court, shares
originaland concurrent jurisdiction over
Certiorari, including Prohibition, Mandamus,
Quo Warranto,etc.
In Certiorari, there should be no other
appeal, no other plain, speedy remedy in the
course of law that is why a motion for
reconsideration should be filed from the
decision of the NWPC.
If a motion for reconsideration is filed, the
period for filing it will not be considered in
determining the 60-day period for filing the
Certiorari. So, from the denial of the motion
for reconsideration, there is still 60 days to
file for Certiorari.
It is the prevailing rule that even is a motion
for reconsideration is filed; there is still 60
days to file a Petition for Certiorari from
receipt of the denial of the motion for
reconsideration.
Under the old rule, the SC said that there will
only be a balance, but a most recent
Supreme Court Circular has repealed that.
So, with or without a motion for
reconsideration, there is 60 days to file the
Petition for Certiorari. This should be
grounded on grave abuse of discretion
amounting to lack or excess of jurisdiction.
Remedy from the decision of the Court
of Appeals:
From the decision of the Court of Appeals
ruling on the denial of the petition for
certiorari, a motion for reconsideration can
still be filed within 15 days. If denied by the
CA, the legal remedy is Rule 45 to the
Supreme Court on question of law.
Summary:
The decision of the NWPC becomes final
and executory.
There is no appeal from the decision of the
NWPC, but there is still a remedy of
Certiorari to the Court of Appeals within 60
days.
From the decision of the CA, a motion for
reconsideration can be filed
And if the motion for reconsideration is
denied, can file a Petition for Review on
Certiorari or Appeal by Certiorari under
Rule 45 to the Supreme Court. Meanwhile,
the decision of the CA will not become final
and executory. It can be reviewed by the SC.
Of course, the decision of the NWPC
becomes final and executory upon the denial
of motion for reconsideration. If it becomes
final and executory, it could be subject on
execution. And the only way to prevent the
enforcement of the decision of the CA would

be to file a Petition for Certiorari and

simultaneous or subsequent therewith,
apply for the issuance of a Temporary
Restraining Order and/or a Writ of
Preliminary Injunction. Without the TRO
and/or WPI, the decision of the NWPC cannot
be enjoined and therefore, it should be
executed.
If the NWPC affirms the Wage Order and
there is no more review or there is no more
remedy availed of by the aggrieved party,
then the decision and the Wage Order will
have to be complied with.
Prevailing Wage Order: Wage Order No. 8, as
of today, November 12, 2001. P190,
covering the Cities of Cebu, Lapulapu and
Mandaue. Another round of increase of P5
will take effect on December 1, 2001.

EXEMPTION FROM MINIMUM WAGE

1) By operation of law
2) By application for wage exemption
Who are exempted from the minimum
wage by operation of law?
Article 98. Application of Title.
This title (Wages) shall NOT apply to farm
tenancy or leasehold, domestic service and
persons working in their respective homes in
needle work or in any cottage industry duly
registered in accordance with law.
Relate this to Employment of Homeworkers,
Article 159-155. If a homeworker performs
needlework in or at his home, that person is
exempted from employing the minimum
wage by operation of law. So employers of
these employees are not obliged to comply
with the minimum wage. If you are
employing a househelper, you are not
covered by the minimum wage by operation
of law. That means, you do not have to file
an application for exemption. And you do not
have to comply with the P190 prevailing
minimum wage.
Revised Guidelines on Exemption from
Wage Orders NWPC Guidelines No. 011996
Section 2. Criteria for Exemptible
Establishments.
Exemption
of
establishments
from
compliance with the wage increases and cost
of living allowances prescribed by the Boards
may be granted in order to
(1) Assist establishments experiencing
temporary difficulties due to losses to
maintain the financial viability of their
businesses and continued employment of
their workers;
(2) Encourage the establishment of new
businesses and the creation of more jobs,
particularly outside the National Capital
Region and Export Processing Zones, in line
with the policy on industry dispersal; and

(3) Ease the burden of micro establishments,

particularly in the retail and service sector
that have a limited capacity to pay.
Types
of
Employers
Eligible
for
Exemption
from
the
Applicable
Minimum Wage:
1) Distressed Establishments
2) New Business Enterprises (NBEs)
3)
Retail
or
Service
Establishments
employing not more than 10 workers
4) Establishments adversely affected by
natural calamities
Exemptible categories outside of the abovementioned list may be allowed only if they
are in accord with the rationale for
exemption reflected above. The concerned
Regional Board shall submit strong and
justifiable reasons for the inclusion of such
categories which shall be subject to review
or approval by the Commission.
Note: Please check the guidelines for the
documentary requirements that must be
submitted in order to process and secure
approval of the application for wage
exemption.
SERVICE ESTABLISHMENT refers to one
principally engaged in the sale of services to
individuals for their own or household use
and is generally recognized as such.
RETAIL ESTABLISHMENT refers to one
principally engaged in the sale of goods to
end users for personal or household use.

Reason for Exemption

A wage exemption is intended to assist
financially beleaguered companies to meet
their labor cost without endangering the
viability of the company.
WAGE DISTORTION
WAGE DISTORTION a situation where an
increase in prescribed wage rates results in
the elimination or severe contraction of
intentional quantitative differences in wage
or salary rates between and among
employee groups in an establishment as to
effectively
obliterate
the
distinctions
embodies in such wage structure based on
skills, length of service, or other logical bases
of differentiation. (Article 124)
The definition of Wage Distortion as
aforequoted, shows that such distortion can
so exist when, as a result of an increase in
the prescribed wage rate, an elimination or
severe contraction of intentional quantitative
differences in wage or salary rates would
occur between and among employee
groups in an establishment as to effectively
obliterate the distinctions embodied in such
wage structure based on skills, length of

service,
or
other
differentiation.

logical

bases

of

When does wage distortion happen?

It happens when the employer grants an
increase only to a certain group of
employees drastically reducing or eliminating
the normal salary differential or gap.
Possible Causes of Wage Distortion:
1) Government decreed increase thru wage
orders
2) Merger of establishments (confusion or
elimination of the status of employee)
3) Increase granted by employers
4) Passage of RA 6727 or the Wage
Rationalization Act
1)
Government
decreed
increases
through issuance of Wage Orders
2 Kinds of Wage Orders:
(a) The Congress provides for a
statutory minimum wage (during the martial
law era) and an increase is given and added
to the daily wage.
(b) With the passage of RA 6727,
instead of providing for a fixed amount for an
increase, the wage order now fixes a
minimum wage below which the wages
cannot fall.
2) Merger of two establishments
whereby
the
employees
of
the
dissolved company are absorbed by the
surviving company
Example:
Casual
Permanent

Magnolia
P160
P190

Nestle
P190
P200

Magnolia-Nestle
Casual -- P190
Permanent -- P190
There will be wage distortion.
3) Employer granted increases to the
workers of an establishment
The employer grants an increase affecting
only a certain group of employees thereby
reducing drastically or totally eliminating the
salary gap between such group and the next
higher level.

4) Passage of RA 6727
Example: SM Company
Casual -- P145 a wage order is passed =
Casual -- P190
Permanent -- P180 particularly Wage Order =
Permanent P195
#8, increasing the minimum wage
distortion
wage to P190 now exists

Effects on Existing Wage Structure.

(Section 16, IRR of RA 6727)
Where the application of the wage increase
prescribed herein results in DISTORTIONS in
the wage structure within an establishment
which gives rise to dispute therein, such
dispute shall:
(a) First be settled voluntarily between the
parties
(b) In the event of deadlock, such dispute
shall be finally resolved through compulsory
arbitration by the Regional Arbitration
Branch of the NLRC having jurisdiction in the
workplace.
Correction of Wage Distortion:
(brought about by the enactment or passage
of a wage order)
The Court has pointed out that through
Article 124, the law recognizes the validity of
NEGOTIATED WAGE INCREASES to correct
wage distortion.
A. IF UNIONIZED
(a) The employer and the union should first
negotiate
to
correct
the
distortion
(contemplates the absence of a grievance
procedure)
(b) If negotiations fail, the matter should be
brought to the grievance (machinery)
procedure under their CBA
(c) If no settlement is arrived at, the dispute
should be submitted to voluntary arbitration
(voluntary arbitrators or panel of voluntary
arbitrators)
(d) If still unresolved, or parties are
unsatisfied, an appeal may be made to the
appropriate branch of the NLRC.
B. IF NOT UNIONIZED
(a) The employer and the workers should
negotiate to correct the distortion.
(b) If negotiations fail, the matter should be
brought to the National Conciliation and
Mediation Board (NCMB).
(c) If no settlement is arrived at after 10
calendar days of conciliation, the dispute
should be brought to the appropriate branch
of the NLRC, which shall conduct continuous
hearings and decide the dispute within 20
calendar days from the time said dispute is
submitted for compulsory arbitration.
Grievance Machinery or Procedure
(Article 260)
The parties to a collective bargaining
agreement shall establish a machinery for
the adjustment and resolution of grievances
arising from:
The interpretation or implementation of
CBA
The interpretation or enforcement of
company personnel policies (the voluntary
arbitrator shall have exclusive and original

jurisdiction to hear and decide such

grievances which remain unresolved after
exhaustion of grievance procedure)

The power of the Voluntary Arbitrator to

try and decide the case if the same as that of
a Labor Arbiter.

All grievances submitted to the grievance

machinery which are not settled within 7
calendar days from the date of its
submission shall automatically be referred to
VOLUNTARY ARBITRATION prescribed in the
CBA.

VOLUNTARY ARBITRATOR means

(1) Any person accredited by the
Board as such, or
(2) Any person named or designated
in the CBA by the parties to act as their
voluntary arbitrator, or
(3) One chosen, with or without the
assistance of the NCMB, pursuant to a
selection procedure agreed upon in the CBA,
or
(4) Any official that may be authorized
by the Secretary of Labor to act as voluntary
arbitrator upon the written request and
agreement of the parties to a labor dispute.

For this purpose, parties to a CBA shall

Name and designate in advance a
Voluntary Arbitrator or panel of Voluntary
Arbitrators, or
Include in the agreement a procedure for
the selection of such Voluntary Arbitrator or
panel of Voluntary Arbitrators, preferably
from the listing of qualified Voluntary
Arbitrators duly accredited by the Board.
In case the parties fail to select a Voluntary
Arbitrator or panel of Voluntary Arbitrators,
the Board shall
Designate the Voluntary Arbitrators, as
may be necessary, pursuant to the selection
procedure agreed upon in the CBA, which
shall act with the same force and effect as if
the Arbitrator or panel of Arbitrators has
been selected by the parties as prescribed.
The judge in voluntary arbitration is called
ARBITRATOR while that in compulsory
arbitration is called LABOR ARBITER.
A Petition for Certiorari under Rule 65 of
the Revised Rules of Court will lie where
A grave abuse of discretion or
An act without or in excess of
jurisdiction on the part of the voluntary
arbitrator is clearly shown.
LABOR ARBITRATION reference of a labor
dispute to a third party for determination on
the basis of evidence and arguments
presented by such parties, who are bound to
accept the decision.
Arbitration may be classified on the
basis of obligation on which it is based,
it may either be:
(a) VOLUNTARY
ARBITRATION a
contractual proceeding whereby the
parties to any dispute or controversy
in order to obtain a speedy and
inexpensive final disposition of the
matter, select a judge of their own
choice and by consent, submit their
controversy to him for determination
(this is pursuant to a voluntary
arbitration clause in the CBA)
The judge is called ARBITRATOR whose
determination is a final and binding
resolution.

(b) COMPULSORY ARBITRATION process

of settlement of labor disputes by a
government agency (or by other means
provided by the government) which has the
authority to investigate and to make award
which is binding on all the parties.
Parties are compelled to forego their right to
strike.
A disinterested person or third party is
usually appointed by the state. It is
compulsory because the law declares the
dispute subject to arbitration, regardless of
the consent of the parties.
Done by the Regional Arbitration branch of
the NLRC (please refer to Article 217)
It is an adversarial proceeding initiated by a
complaint (usually by the union) for wage
distortion before the Labor Arbiter. The other
party is entitled to answer.
The parties can agree to select a Labor
Arbiter as a Voluntary Arbitrator because it is
as to the agreement between the parties.
ORGANIZED ESTABLISHMENT refers to a
firm or a company where there is a
recognized or certified exclusive bargaining
agreement.
UNORGANIZED ESTABLISHMENT where
there is no recognized union or collective
bargaining agreement.
What should be contained in a CBA?
(1) Terms and conditions of employment
(2) Wages
(3) Hours of Work
(4) Procedure for resolving grievances
Organized or unionized establishments
may:
(a) Meet and sit down and discuss the wage
adjustment
(b) In case of disagreement, the matter is
elevated to the top executives

(c) Company grants an increase if it be

proven that wage distortion exists (this
increase may be called a NEGOTIATED WAGE
INCREASE)
In case of organized or unionized
establishments who submit to voluntary
arbitration, the mutual consent of the
parties governs the selection of a common
arbitrator, usually from a list found in the
National Conciliation and Mediation Board
(Sanciangko) [it is a listing of qualified
voluntary arbitrators duly accredited by the
Board].
If one of the parties does not agree with
the other partys selection of a voluntary
arbitrator, parties will have to submit to
compulsory arbitration.
Section 16 of Implementing Rules of RA
6727:
Any issue involving wage distortion shall not
be a ground for strike or lockout.
STRIKE any temporary stoppage of work
by the concerted action of employees as a
result of an industrial or labor dispute.
LOCKOUT is the temporary refusal of an
employer to furnish work as a result of an
industrial or labor dispute.

(1) Adjustment of wage rates as mandated

by law (RA 6727 and as the policy of the
state) is not by way of compulsion but
through negotiation or CBA.
(2) Not all employers can afford to grant the
same wage increase to all its employee
(financial capacity and the company has to
be taken into consideration)
The law is based on equity between the
employer and employee.
The employer, thru his own initiative
(unilateral act) may correct wage distortion.
The
usual
way
though
is
through
negotiations between the employer and the
employee or through CBA.
PROCEDURE
DISTORTION

FOR

RESOLVING

WAGE

A. WAGE
DISTORTION
in
an
UNORGANIZED ESTABLISHMENT:
Situation: In a company, there are 3 classes
of employees:
A 200 (2 years or more)
B 195 (1 year to 2 years)
C 190 (newly hired)

Reasons why a STRIKE or LOCKOUT is

prohibited:
(1) RA 6727 provides for a procedure in
settling disputes (Article 124)
(2) RA 6727 (Section 2) provides that it is the
policy of the state to promote collective
bargaining as the primary mode of settling
wages and other terms and conditions of
employment.
(Ilaw at Buklod ng Manggagawa vs.
NLRC, 198 SCRA 586)

Wage Order No. 8 = 190

December 1, 2001 + 5
195

National Federation of Labor vs. NLRC,

234 SCRA 311
Correction of a wage distortion may be done
by reestablishing a substantial or significant
gap between the wage rates of the differing
classes of employees. It must be a
reasonable but NOT necessarily a historical
gap.

Under Wage Order No. 8, only C is entitled to

the wage adjustment come December 1,
2001. It will not apply equally to A and B. A
and B cannot validly demand a similar wage
adjustment by virtue of the wage order
because the wage order only applies to those
employees receiving the minimum wage.

Should a wage distortion exist, there is not

legal requirement that, in the rectification of
that distortion by readjustment of the wage
rates of the differing classes of employees,
the gap which had previously or historically
existed be restored in precisely the same
amount. In other words, correction of a wage
distortion may be done by reestablishing a
substantial
or
significant
gap
(as
distinguished from the historical gap)
between the wage rates of differing classes
of employees.
No law obligates the employer
restore the historical gap because:

to

A wage order is issued fixing the minimum

wage at P190. Which group will be affected?
Only class C because they are the minimum
wage earners (unlike before when the wage
orders provided for an across-the-board
increase which affected everybody).

As a result, B and C will receive the same

salary of P195 come December 1. B now
complains, what should he do?
Procedure
for
Resolving
Wage
Distortion
in
an
UNORGANIZED
ESTABLISHMENT:
(1) The employers and the workers
should negotiate for the adjustment of
the wage rates
Should the employer refuse to grant
an adjustment, then B should file a complaint
with the NCMB on the ground of wage
distortion.
(2) The dispute should be referred to
the NCMB for conciliation.

 HOW IS THIS DONE?

(a) This procedure is initiated by the
filing of a complaint with the NCMB
(Sanciangko) on the ground of wage
distortion.
(b) Just fill up the complaint form
provided by the NCMB
(c) The Regional Director of the NCMB
will now issue a NOTICE OF HEARING
directed to the employer inviting him to
meet with them at a designated time, date,
and place.
(d) At the NCMB, the complainant B and the
employer will have to be present. This
proceeding will be supervised by an NCMB
Hearing Officer.
This is entirely different from the first
step because the third person (NCMB
Hearing Officer) now interferes and asks the
employers
How much can you afford?
And to the employees
How much increase do you want?
In so doing, in takes into consideration the
financial capacity of the employer and the
need of the workers.
(e) The NCMB will try to settle the dispute
through AMICABLE SETTLEMENT.
Example: Employer wants to pay P1
increase.
Employee wants P5 increase.
NCMB will settle for P3 and suggests
this solution to both parties.
(f) Should the employer refuse to accede to
the remedy suggested by the NCMB, the
NCMB cannot make negotiations to bind both
parties because the main purpose of NCMB is
to conciliate and it will suggest that the
parties submit to VOLUNTARY ARBITRATION.
(3) If not settlement is arrived at, then
the dispute shall be referred to the
Regional Arbitration Branch of the NLRC
for COMPULSORY ARBITRATION.
This is presided over by Labor Arbiters
(Article 217).
The proceeding is usually adversarial in
character because it is initiated by a
complaint before the Labor Arbiter and the
other party is required to answer.
So, there will be a full-blown hearing to
resolve wage distortion.
Any decision coming out of the Labor
Arbiter shall be binding on both parties,
whether they like it or not.
Note: in the case of UNORGANIZED
ESTABLISHMENTS

Prior to the time the parties submit their

dispute to the NCMB, they could resort to
VOLUNTARY ARBITRATION.

VOLUNTARY
ARBITRATION
is
not
compulsory; the parties will have to give
their consent if they want to submit their
dispute to Voluntary Arbitration.
They will be given a LIST of voluntary
arbitrators from which they will pick out
those which they have chosen to be the
arbitrators.
However, most often than not, the parties
do not submit their dispute to voluntary
arbitration because most of them do not
trust the Voluntary Arbitrators.
The decision of the Voluntary Arbitrator is
BINDING upon the parties. Why? This is a
contractual proceeding and the contract is
the law of the parties.
In resolving wage distortions, you do not
always consider monetary matters. You also
have to take into consideration the length of
service, the skills.
Is the decision of the Voluntary Arbitrator
appealable to the NLRC? NO, unless it
becomes final and executory.
The legal remedy to the decision of
the Voluntary Arbitrator
(1) To the Court of Appeals by way of
Petition for Review under Rule 43
(Quasi- Judicial Agency) within 15 days
Luzon Stevedoring Employees Union
If APPEAL, will that stay the decision of the
Voluntary Arbitrator?
NO, because the decision of the Voluntary
Arbitrator is final and inappealable, but
Temporary Restraining Order and a Writ of
Preliminary Injunction may be applied for.
So, use Petition for Review with
Motion to Stay, because of its final and
executory nature.
(2) Then to the Supreme Court under
Rule 45 on questions of law (Appeal by
Certiorari) 15 days from receipt of the
decision of the Court of Appeals or
receipt of the denial of the motion for
reconsideration.
Before the St. Martins Funeral
Homes Case (in the past), from the decision
of the Voluntary Arbitrator, the aggrieved
party would go directly to the Supreme
Court.
B. WAGE
DISTORTION
in
an
ORGANIZED ESTABLISHMENT :

Most often than not, when there is a union,

there is a CBA. And the most important
matter in the CBA is WAGES.
The union has more bargaining power than
the ordinary employee; it can demand for
better labor standards (can even demand to
see the president of the company).
The CBA provides usually for wage increases
which are usually across-the-board (for the
benefit of all employees in the bargaining
unit).
However, a wage order may be passed
offsetting the increase given by the
employer, so there is a WAGE DISTORTION.
Procedure
for
Resolving
Wage
Distortion
in
an
ORGANIZED
ESTABLISHMENT:
(1) The employer and the union shall
negotiate
to
correct
the
wage
distortion.
(2) If the negotiations fail, then the
dispute is settled through the grievance
procedure under their CBA.
GRIEVANCE MACHINERY is simply a
detailed procedure of how the parties would
resolve a dispute arising from:
i. The interpretation or implementation
of the CBA and
ii.
Those
arising
from
the
interpretation or enforcement of
company personnel policies.
(3) If the dispute in unresolved, the matter is
submitted for VOLUNTARY ARBITRATION
(which is not always the case because
parties cannot be compelled to submit to it).
(4) The matter is also resolved through the
NCMB by filing a complaint; MEDIATION is
done by the NCMB through its Hearing
Officer, advising the parties to submit their
dispute to a voluntary arbitrator.
If both or one of the parties is unwilling
to submit to Voluntary Arbitrator, then the
matter becomes unresolved.
(5) The matter is submitted to the Regional
Arbitration Branch of the NLRC for
COMPULSORY
ARBITRATION.
How is this done?
By filing a complaint with the Regional
Arbitration Branch
The decision will be binding upon the
parties.
From the decision of the Labor Arbiter,
the matter would be brought to the NLRC,
then the CA, and even up to the SC.
Common Procedure in Unorganized and
Organized Establishments:

If negotiations fail, the matter shall be

referred to the National Conciliation and
Mediation Board (NCMB).
Now, the Hearing Officer of the NCMB will
try to conciliate and mediate between the
parties so that they will reach an AMICABLE
SETTLEMENT.
If an amicable settlement is not reached,
the Hearing Officer of the NCMB will advise
the parties to submit the matter to
VOLUNTARY ARBITRATION. So, there is
Voluntary Arbitration for both organized and
unorganized establishments.
o
National
Conciliation
and
Mediation Board:
Main Office: DOLE, Intramuros,
Manila
Executive Director: Rolando
Rico C. Olalia
Region VII: Sanciangko, near
UC, Coliseum
Director II: Isidro L. Sepeda
In settling disputes, strikes and lockouts
are impliedly excluded as a mode of
settlement because there is a very detailed
procedure provided for by the law in
resolving wage distortions (Article 124). The
authority on this matter is Ilaw at Buklod
at Mangagawa vs. NLRC.
Main Reason for Negotiations: Wage
Adjustments
Does the procedure provided in Article 124
preclude the company from initiating a
solution to the problem of wage distortion?
Say, the employer himself believes that with
the passage of a certain wage order, a wage
distortion is created. Can he take action to
solve it?
YES, because law through Article 124 has
recognized the validity of negotiated wage
increases.
The company can even provide for a
unilateral wage increase to immediately
solve the problem of wage distortion.
Note: The other level of employees
receiving wages way above the minimum
allowable by law cannot legally compel the
company to provide a similar rate of increase
provided by the wage order for minimum
wage earners.
Why?
(1) RA 6727 as well as the policy of the state
requires that in the adjustment of wage
rates, the same must not be done by
compulsion but through negotiation or CBA.
(2) Not all employers can afford the same
amount of increase to all employees at the
same time.

Two
Methods
of
Minimum
Wage
Adjustment:
1. Floor Wage Method involves the fixing
of a determinate amount that would be
added to the prevailing statutory minimum
wage.
2. Salary-ceiling Method whereby the
wage adjustment is applied to employees
receiving a certain denominated (minimum)
salary ceiling.
The first method was adopted in the earlier
wage orders, while the latter method was
used in RA 6640 and RA 6727.
The shift from the first method to the
second method was brought about by labor
disputes arising from wage distortions, a
consequence of the implementation of the
wage orders.
The shift from the first to the second
method was due to the fact that the latter
minimized wage distortion disputes.
Penal Provision for Non-compliance with
the Wage Order:
Section 12, RA 6727
Any
person,
corporation,
trust,
firm,
partnership, association or entity which
refuses or fails to pay any of the prescribed
increases or adjustments in the wage rates
made in accordance with this ACT shall be
punished by a fine not exceeding P25,000
and/or imprisonment of not less than 1
year nor more than 2 years: Provided,
that any person convicted under this Act
shall not be entitled to the benefits under
the Probation Law.
If the violation is committed by a
corporation, trust or firm, partnership,
association or any other entity, the penalty
of imprisonment shall be imposed on the
entitys responsible officers, including, but
not limited to, the president, vice-president,
chief executive officer, general manager,
managing director or partner.
However, RA 8188 Amended Sec. 12 of
RA6727
RA 8188 (June 11, 1996): An Act Increasing
The Penalty And Imposing Double Indemnity
For Violation of the Prescribed Increases or
Adjustments in the Wage Rates, Amending
for the

Purpose Section 12 of RA 6727:

Any
person,
corporation,
trust,
firm,
partnership, association or entity which
refuses or fails to pay any of the prescribed
increases or adjustments in the wage rates
made in accordance with this Act shall be
punished by a fine not less than P25,000
nor
more
than
P100,000
or
imprisonment of not less than 2 years
nor more than 4 years, or both such fine
and imprisonment at the discretion of
the court:
Provided, That any person convicted under
this Act shall not be entitled to the benefits
provided for under the Probation Law.
The employer concerned shall be ordered to
pay an amount equivalent to double the
unpaid benefits owing to the employees:
Provided, that payment of indemnity shall
not absolve the employer from the criminal
liability imposable under this Act.
If the violation is committed by a
corporation, trust or firm, partnership,
association or any other entity, the penalty
of imprisonment shall be imposed on the
entitys responsible officers, including, but
not limited to, the president, vice-president,
chief executive officer, general manager,
managing director or partner.
Penalty for Violation of the Prescribed
Increase or Adjustment in the Wage
Rate (RA 8188):
1. Payment of a fine of not less than P25,000
nor more than P100,000
2. Imprisonment for not less than 2 years nor
more than 4 years, the imprisonment being
nonprobationable
(The case should therefore be filed with the
MTC pursuant to BP 129 as amended by RA
7691, see below)
3. Both imprisonment and fine, at the
discretion of the Court
4.
Paying
double
the
unpaid
benefits/amounts owing the employees,
provided that the Payment of Indemnity shall
not absolve the employer from criminal
liability imposable under the Labor Code.