B.

Wage-Fixing

Labor Code: Articles 99, 101, 120-127

R.A. 6727, R.A. 8188

R.A. 9178

NWPC Guidelines No. 2, Series of 2012, Guidelines on the Implementation of the Two-
Tiered Wage System

Wage Order No. RTWPB-XI-19

G.R. No. 150326

THE NATIONAL WAGES AND PRODUCTIVITY COMMISSION (NWPC) and THE REGIONAL
TRIPARTITE WAGES AND PRODUCTIVITY BOARD (RTWPB)- NCR, Petitioners,
vs.
THE ALLIANCE OF PROGRESSIVE LABOR (APL) and THE TUNAY NA NAGKAKAISANG
MANGGAGAwA SA ROYAL (TNMR-APL), Respondents.

DECISION

BERSAMIN, J.:

This case concerns the authority of the National Wages and Productivity Commission (NWPC)
and the Regional Tripartite Wages and Productivity Board (RTWPB) created under Republic Act
No. 6727,1 otherwise known as the Wage Rationalization Act, to issue wage orders, and to
receive, process and act on applications for exemption from the prescribed wage rates.

The Case

Petitioners NWPC and RTWPB of the National Capital Region (NCR) appeal the decision
promulgated on June 15, 2001,2 whereby the Court of Appeals (CA) reversed the decisions
rendered by the NWPC on February 28, 20003 and July 17, 20004, and declared as null and void
Section 2(A) and Section 9(2) of Wage Order No. NCR-07.

Antecedents

On June 9, 1989, Republic Act No. 6727 was enacted into law. In order to rationalize wages
throughout the Philippines, Republic Act No. 6727 created the NWPC and the RTWPBs of the
different regions.
Article 121 of the Labor Code, as amended by Section 3 of Republic Act No. 6727, empowered
the NWPC to formulate policies and guidelines on wages, incomes and productivity
improvement at the enterprise, industry and national levels; to prescribe rules and guidelines
for the determination of appropriate minimum wage and productivity measures at the regional,
provincial or industry levels; and to review regional wage levels set by the RTWPBs to
determine whether the levels were in accordance with the prescribed guidelines and national
development plans, among others. On the other hand, Article 122(b) of the Labor Code, also
amended by Section 3 of Republic Act No. 6727, tasked the RTWPBs to determine and fix
minimum wage rates applicable in their region, provinces or industries therein; and to issue the
corresponding wage orders, subject to the guidelines issued by the NWPC. The RTWPBs were
also mandated to receive, process and act on applications for exemption from the prescribed
wage rates as may be provided by law or any wage order.5

Consequently, the RTWPB-NCR issued Wage Order No. NCR-07 on October 14, 1999 imposing
an increase of P25.50/day on the wages of all private sector workers and employees in the NCR
and pegging the minimum wage rate in the NCR at P223.50/day.6 However, Section 2 and
Section 9 of Wage Order No. NCR-07 exempted certain sectors and industries from its coverage,
to wit:

Section 2. The adjustment in this Order does not cover the following:

A. [W]orkers in the following sectors which were granted corresponding wage increases on
January 1, 1999 as prescribed by Wage Order No. NCR-06:

a.1. Agriculture workers

-Plantation P 12.00
-Non-plantation P 18.50
a.2. Cottage/handicraft industry P 16.00
a.3. Private hospitals with bed capacity
of 100 or less P 12.00
a.4. Retail/Service establishments
-Employing 11-15 workers P 12.00
-Employing not more than 10 workers P 19.00

B. Workers in small establishments employing less that ten (10) workers.

xxxx

Section 9. Upon application with and as determined by the Board, based on documentation and
other requirements in accordance with applicable rules and regulations issued by the
Commission, the following may be exempt from the applicability of this Order:
 1.Distressed establishments as defined in the NPWC Guidelines No. 01, series of 1996;

2.Exporters including indirect exporters with at least 50% export sales and with forward
contracts with their foreign buyers/principals entered into on or twelve (12) months
before the date of publication of this Order may be exempt during the lifetime of said
contract but not to exceed twelve (12) months from the effectivity of this Order.

Feeling aggrieved by their non-coverage by the wage adjustment, the Alliance of Progressive
Labor (APL) and the Tunay na Nagkakaisang Manggagawa sa Royal (TNMR) filed an appeal with
the NWPC assailing Section 2(A) and Section 9(2) of Wage Order No. NCR-07. They contended
that neither the NWPC nor the RTWPB-NCR had the authority to expand the non-coverage and
exemptible categories under the wage order; hence, the assailed sections of the wage order
should be voided. The appeal was docketed as NWPC Case No. W.O.- 99-001.

Ruling of the NWPC

In its decision dated February 28, 2000,7 the NWPC upheld the validity of Section 2(A) and
Section 9(2) of Wage Order No. NCR-07. It observed that the RTWPB’s power to determine
exemptible categories was adjunct to its wage fixing function conferred by Article 122(e) of the
Labor Code, as amended by Republic Act No. 6727; that such authority of the RTWPB was also
recognized in NWPC Guidelines No. 01, Series of 1996; that APL and TNMR did not adduce
evidence to show any arbitrariness on the part of the RTWPB-NCR when it included in Wage
Order No. NCR-07 the disputed exclusionary provisions; and that the RTWPB-NCR was able to
submit strong and justifiable reasons for the inclusion of the exemptible categories in Wage
Order No. NCR-07.

With regard to the excluded sectors provided for in Section 2(A) of Wage Order No. NCR-07, the
NWPC took cognizance of the precarious situation in the Philippines in 1997 because of the
Asian economic turmoil that had prompted the RTWPB-NCR to issue Wage Order No. NCR-06 to
prescribe a staggered amount of wage increases for the agricultural workers,
cottage/handicraft industry, private hospitals with bed capacity of 100 or less, and retail/service
establishments employing 15 or less workers. It noted that the effects of that economic turmoil
were still felt in the NCR when Wage Order No. NCR-07 was issued considering that the
unemployment rate was 15.4% in July 1999; that the RTWPB-NCR thought it wise to defer the
implementation of the new wage increase until a future date; and that the non-inclusion of
some sectors from the coverage of the Wage Order No. NCR-07 was only temporary in
character.

As regards the exemption granted to the exporting firms, the NWPC considered the nature of
the business wherein the exporters would normally enter into forwarding contracts with their
principals. It held that the recent adjustment imposed by Wage Order No. NCR-07 could not
have been anticipated by the parties at the time they agreed on the price of their forward
contract; that the implementation of the wage adjustment would surely result, therefore, into
either financial loss or at the very least a marked reduction of profits on the part of the
exporters; and that the exemption given to exporting firms was not automatic because the
RTWPB-NCR had the discretion to ascertain if the exporter had complied with the
requirements, and the exemption given was only for a period of one year8

Accordingly, the NWPC denied the appeal of APL and TNMR for its lack of merit. It also denied
TNMR’s motion for reconsideration through its resolution of July 17, 2000.9

Ruling of the CA

The APL and TNMR assailed the decisions of the NWPC on certiorari in the CA (C.A.-G.R. SP No.
60833), attributing grave abuse of discretion to the NWPC in upholding Section 2(A) and Section
9(2) of Wage Order No. NCR-07, and contending that the power of the RTWPB- NCR to
determine exemptible categories was not an adjunct to its wage fixing function.

On June 15, 2001, the CA granted the petition for certiorari,10 holding that the powers and
functions of the NWPC and RTWPB-NCR as set forth in Republic Act No. 6727 did not include
the power to grant additional exemptions from the adjusted minimum wage; that an
administrative rule or regulation must be in harmony with the enabling law; and that the
statutory grant of power could not be extended by implication beyond what was necessary for
their just and reasonable execution. It disposed as follows:

WHEREFORE, the petition is GRANTED and the Decisions of the respondent Commission dated
February 28, 2000 and July 17, 2000 are hereby SET ASIDE.

Sections 2A and 9(2) of the Wage Order No. NCR-07 are hereby declared NULL and VOID.

SO ORDERED.11

The NWPC and RTWPB-NCR moved to reconsider the decision, but the CA denied their motion
in the resolution promulgated on September 11, 2001,12 ruling that notwithstanding the
pronouncement in Nasipit Lumber Company, Inc. v. National Wages and Productivity
Commission13 to the effect that the NWPC had the power not only to prescribe guidelines to
govern wage orders but also to issue exemptions therefrom, Section 2(A) and Section 9(2) of
Wage Order No. NCR-07 were invalid due to lack of approval by the NWPC.

Hence, this appeal by petition for review on certiorari by the NWPC and RTWPB-NCR.

Issues

The NWPC and RTWPB-NCR submit for resolution that:

I
SECTION 3 OF REPUBLIC ACT NO. 6727 MAY BE CONSTRUED TO AUTHORIZE THE NWPC AND
RTWPB TO PROVIDE FOR ADDITIONAL EXEMPTIONS IN THE MINIMUM WAGE ADJUSTMENTS
SUCH AS IN WAGE ORDER NO. NCR-07.

II

THE APPROVAL GIVEN BY THE NWPC WHICH WAS CONTAINED IN ITS DECISIONS DATED
FEBRUARY 28, 2000 AND JULY 17, 2000 COMPLIES WITH THE REQUIREMENT OF
REVIEW/APPROVAL REQUIRED UNDER SECTION 2 OF THE REVISED GUIDELINES ON
EXEMPTIONS FROM WAGE ORDER.14

Restated, the issues are: (a) whether or not the RTWPB-NCR had the authority to provide
additional exemptions from the minimum wage adjustments embodied in Wage Order No.
NCR-07; and (b) whether or not Wage Order No. NCR-07 complied with the requirements set by
NWPC Guidelines No. 01, Series of 1996.

Ruling

The petition for review on certiorari is meritorious.

Indisputably, the NWPC had the authority to prescribe the rules and guidelines for the
determination of the minimum wage and productivity measures, and the RTWPB-NCR had the
power to issue wage orders.

Pursuant to its statutorily defined functions, the NWPC promulgated NWPC Guidelines No. 001-
95 (Revised Rules of Procedure on Minimum Wage Fixing) to govern the proceedings in the
NWPC and the RTWPBs in the fixing of minimum wage rates by region, province and industry.
Section 1 of Rule VIII of NWPC Guidelines No. 001-95 recognized the power of the RTWPBs to
issue exemptions from the application of the wage orders subject to the guidelines issued by
the NWPC, viz:

SECTION 1. APPLICATION FOR EXEMPTION.

Whenever a wage order provides for exemption, applications for exemption shall be filed with
the appropriate Board which shall process these applications, subject to the guidelines issued
by the Commission.

The NWPC also issued NWPC Guidelines No. 01, Series of 1996, to fix the rules on the
exemption from compliance with the wage increases prescribed by the RTWPBs. Section 2 of
the Guidelines No. 01 reads:

SECTION 2. CATEGORIES OF 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 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 in areas 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.

Pursuant to the above, the following categories of establishments may be exempted upon
application with and as determined by the Board, in accordance with applicable criteria on
exemption as provided in this Guidelines; provided further that such categories are expressly
specified in the Order.

1.Distressed establishments

2.New business enterprises (NBEs)

3.Retail/Service establishments employing not more than ten (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 in the first paragraph of this
section. The concerned Regional Board shall submit strong and justifiable reason/s for
the inclusion of such categories which shall be subject to review/approval by the
Commission.

Under the guidelines, the RTWPBs could issue exemptions from the application of the wage
orders as long as the exemptions complied with the rules of the NWPC. In its rules, the NWPC
enumerated four exemptible establishments, but the list was not exclusive. The RTWPBs had
the authority to include in the wage orders establishments that belonged to, or to exclude from
the four enumerated exemptible categories. If the exempted category was one of the listed
ones, the RTWPB issuing the wage order must see to it that the requisites stated in Section 3
and Section 4 of the NWPC Guidelines No. 01, Series of 1996 were complied with before
granting fully or partially the application of an establishment seeking to avail of the exemption,
to wit:

SECTION 3. CRITERIA FOR EXEMPTION

The following criteria shall be used to determine whether the applicant-establishment is

qualified for exemption:

A. Distressed Establishments
1. For Stock Corporations/Cooperatives

a. When deficit as of the last full accounting period or interim period, if any,
immediately preceding the effectivity of the Order amounts to 20% or more of
the paid-up capital for the same period; or

b. When an establishment registers capital deficiency i.e., negative stockholders'

equity as of the last full accounting period or interim period, if any, immediately
preceding the effectivity of the Order.

2. For Single Proprietorships/Partnerships

a. Single proprietorships/partnerships operating for at least two (2) years may be

granted exemption:

a.1. When the net accumulated losses for the last two (2) full accounting
periods and interim period, if any, preceding the effectivity of the Order
amounts to 20% or more of the total invested capital at the beginning of
the period under review; or

a.2. When an establishment registers capital deficiency i.e., negative net

worth as of the last full accounting period or interim period, if any,
immediately preceding the effectivity of the Order.

b. Single proprietorships/partnerships operating for less than two (2) years may
be granted exemption when the net accumulated losses for the period
immediately preceding the effectivity of the Order amounts to 20% or more of
the total invested capital at the beginning of the period under review.

3. For Non-stock Non-profit Organizations

a.Non-stock Non-profit organizations operating for at least two (2) years may be
granted exemption:

a.1. When the net accumulated losses for the last two (2) full accounting
periods and interim period, if any, immediately preceding the effectivity
of the Order amounts to 20% or more of the fund balance/members'
contribution at the beginning of the period under review; or

a.2. When an establishment registers capital deficiency i.e.,negative fund

balance/members' contribution as of the last full accounting period or
interim period, if any, immediately preceding the effectivity of the Order.
 b.Non-stock non-profit organizations operating for less than two (2) years may
be granted exemption when the net accumulated losses for the period
immediately preceding the effectivity of the Order amounts to 20% or more of
the fund balance/members' contribution at the beginning of the period under
review.

4. For Banks and Quasi-banks

a. Under receivership/liquidation

Exemption may be granted to a bank or quasi-bank under receivership or

liquidation when there is a certification from the Bangko Sentral ng Pilipinas that
it is under receivership or liquidation as provided in Section 30 of RA 7653,
otherwise known as the New Central Bank Act.

b. Under controllership/conservatorship

A bank or quasi-bank under controllership/conservatorship may apply for

exemption as a distressed establishment under Section 3 A of this Guideline.

B. New Business Enterprises

Exemption may be granted to New Business Enterprises established outside the National
Capital Region (NCR) and Export Processing Zones within two (2) years from effectivity of the
Order, classified under any of the following:

1.Agricultural establishments whether plantation or non- plantation.

2.Establishments with total assets after financing of five million pesos (P5, 000,000.00)
and below.

C.Retail/Service Establishments Regularly Employing Not More Than Ten (10) Workers

Exemption may be granted to a retail/service establishment when:

1.It is engaged in the retail sale of goods and/or services to end users for personal or
household use; and

2.It is regularly employing not more than ten (10) workers regardless of status, except
the owner/s, for at least six (6) months in any calendar year.

D.Establishments Adversely Affected by Natural Calamities

 1.The establishment must be located in an area declared by a competent authority as
under a state of calamity.

2.The natural calamities, such as earthquakes, lahar flow, typhoons, volcanic eruptions,
fire, floods and similar occurrences, must have occurred within 6 months prior to the
effectivity of the Wage Order.

3.Losses suffered by the establishment as a result of the calamity that exceed the
insurance coverage should amount to 20% or more of the stockholders' equity as of the
last full accounting period in the case of corporations and cooperatives, total invested
capital in the case of partnerships and single proprietorships and fund
balance/members’ contribution in the case of non-stock non-profit organizations.

Only losses or damage to properties directly resulting from the calamity and not
incurred as a result of normal business operations shall be considered.

4.Where necessary, the Board or its duly-authorized representative shall conduct an

ocular inspection of the establishment or engage the services of experts to validate the
extent of damages suffered.

SECTION 4. DOCUMENTS REQUIRED

The following supporting documents shall be submitted together with the application:

For All Categories of Exemption

Proof of notice of filing of the application to the President of the union/contracting party if one
is organized in the establishment, or if there is no union, a copy of a circular giving general
notice of the filing of the application to all the workers in the establishment. The proof of
notice, which may be translated in the vernacular, shall state that the workers' representative
was furnished a copy of the application with all the supporting documents. The notice shall be
posted in a conspicuous place in the establishment.

A. For Distressed Establishments

1.For corporations, cooperatives, single proprietorships, partnerships, non-stock

non-profit organizations.

a.Audited financial statements (together with the Auditor's opinion and

the notes thereto) for the last two (2) full accounting periods preceding
the effectivity of the Order filed with and stamped "received" by the
appropriate government agency.
 b.Audited interim quarterly financial statements (together with the
Auditor's opinion and the notes thereto) for the period immediately
preceding the effectivity of the Order.

2.For Banks and Quasi-banks

a.Certification from Bangko Sentral ng Pilipinas that it is under

receivership/liquidation.

B. For New Business Enterprises

1.Affidavit from employer regarding the following:

a.Principal economic activity

b.Date of registration with appropriate government agency

c.Amount of total assets

2.Certificate of registration from the appropriate government agency.

C. For Retail/Service Establishments Employing not more than Ten (10) Workers:

1.Affidavit from employer stating the following:

a.It is a retail/service establishment.

b.It is regularly employing not more than ten (10) workers for at least six
months in any calendar year.

2.Business Permit for the current year from the appropriate government agency.

D. For Establishments Adversely Affected by Natural Calamities

1.Affidavit from the General Manager or Chief Executive Officer of the

establishment regarding the following:

a. Date and type of calamity

b.Amount of losses/damages suffered as a direct result of the calamity

c.List of properties damaged/lost together with estimated valuation

d.For properties that are not insured, a statement that the same are not
covered by insurance.
 2.Copies of insurance policy contracts covering the properties damaged, if any.

3.Adjuster's report for insured properties.

4.Audited financial statements for the last full accounting period preceding the
effectivity of the Order stamped received by the appropriate government
agency.

The Board may require the submission of other pertinent documents to support the application
for exemption.

On the other hand, if the exemption was outside of the four exemptible categories, like here,
the exemptible category should be: (1) in accord with the rationale for exemption; (2)
reviewed/approved by the NWPC; and (3) upon review, the RTWPB issuing the wage order
must submit a strong and justifiable reason or reasons for the inclusion of such category. It is
the compliance with the second requisite that is at issue here.

The CA reversed the decisions of the NWPC dated February 28, 2000 and July 17, 2000 mainly
on the ground that Wage Order No. NCR-07, specifically its Section 2(A) and Section 9(2), had
not been reviewed or approved by the NWPC. However, the NWPC stated that it had reviewed
and approved the challenged sections when it upheld the validity of Wage Order No. NCR-07 in
its decisions of February 28, 2000 and July 17, 2000.

We rule in favor of petitioners.

The wage orders issued by the RTWPBs could be reviewed by the NWPC motu proprio or upon
appeal.15 Any party aggrieved by the wage order issued by the RTWPBs could appeal. Here,
APL and TNMR appealed on October 26, 1999, submitting to the NWPC precisely the issue of
the validity of the Section 2(A) and Section 9(2) of Wage Order No. NCR-07. The NWPC, in
arriving at its decision, weighed the arguments of the parties and ruled that the RTWPB-NCR
had substantial and justifiable reasons in exempting the sectors and establishments
enumerated in Section 2(A) and

Section 9(2) based on the public hearings and consultations, meetings, social-economic data
and informations gathered prior to the issuance of Wage Order No. NCR-07. The very fact that
the validity of the assailed sections of Wage Order No. NCR-07 had been already passed upon
and upheld by the NWPC meant that the NWPC had already given the wage order its necessary
legal imprimatur. Accordingly, the requisite approval or review was complied with.

In creating the RTWPBs, Congress intended to rationalize wages, firstly, by establishing full time
boards to police wages round-the-clock, and secondly, by giving the boards enough powers to
achieve this objective. In Employers Confederation of the Phils. v. National Wages and
Productivity Commission,16 this Court all too clearly pronounced that Congress meant the
RTWPBs to be creative in resolving the annual question of wages without Labor and
Management knocking on the doors of Congress at every turn. The RTWPBs are the thinking
group of men and women guided by statutory standards and bound by the rules and guidelines
prescribed by the NWPC. In the nature of their functions, the RTWPBs investigate and study all
the pertinent facts to ascertain the conditions in their respective regions. Hence, they are
logically vested with the competence to determine the applicable minimum wages to be
imposed as well as the industries and sectors to exempt from the coverage of their wage
orders.

Lastly, Wage Order No. NCR-07 is presumed to be regularly issued in the absence of any strong
showing of grave abuse of discretion on the part of RTWPB-NCR. The presumption of validity is
made stronger by the fact that its validity was upheld by the NWPC upon review.

WHEREFORE, we GRANT the petition for review on certiorari; SET ASIDE the decision
promulgated on June 15, 2001 and resolution promulgated on September 11, 2001 by the
Court of Appeals; REINSTATE the decisions rendered on February 28, 2000 and July 17, 2000 by
the National Wages and Productivity Commission; and DIRECT the respondents to pay the costs
of suit.

SO ORDERED

G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V.

BALINANG, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and
TRUST COMPANY, respondents.

Gilbert P. Lorenzo for petitioners.

Marcial G. dela Fuente for private respondents.

VITUG, J.:

In this petition for certiorari, the Metropolitan Bank & Trust Company Employees Union-ALU-
TUCP (MBTCEU) and its president, Antonio V. Balinang, raise the issue of whether or not the
implementation by the Metropolitan Bank and Trust Company of Republic Act No. 6727,
mandating an increase in pay of P25 per day for certain employees in the private sector,
created a distortion that would require an adjustment under said law in the wages of the
latter's other various groups of employees.
On 25 May 1989, the bank entered into a collective bargaining agreement with the MBTCEU,
granting a monthly P900 wage increase effective 01 January 1989, P600 wage increase 01
January 1990, and P200 wage increase effective 01 January 1991. The MBTCEU had also
bargained for the inclusion of probationary employees in the list of employees who would
benefit from the first P900 increase but the bank had adamantly refused to accede thereto.
Consequently, only regular employees as of 01 January 1989 were given the increase to the
exclusion of probationary employees.

Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize wage
policy determination be establishing the mechanism and proper standards thereof, . . . fixing
new wage rates, providing wage incentives for industrial dispersal to the countryside, and for
other purposes," took effect. Its provisions, pertinent to this case, state:

Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all workers and
employees in the private sector, whether agricultural or non-agricultural, shall be increased by
twenty-five pesos (P25) per day, . . .: Provided, That those already receiving above the minimum
wage rates up to one hundred pesos(P100.00) shall also receive an increase of twenty-five
pesos (P25.00) per day, . . .

xxx xxx xxx

(d) If expressly provided for and agreed upon in the collective bargaining agreements, all
increase in the daily basic wage rates granted by the employers three (3) months before the
effectivity of this Act shall be credited as compliance with the increases in the wage rates
prescribed herein, provided that, where such increases are less than the prescribed increases in
the wage rates under this Act, the employer shall pay the difference. Such increase shall not
include anniversary wage increases, merit wage increase and those resulting from the
regularization or promotion of employees.

Where the application of the increases in the wage rates under this Section results in
distortions as defined under existing laws in the wage structure within an establishment and
gives rise to a dispute therein, such dispute shall first be settled voluntarily between the parties
and in the event of a deadlock, the same shall be finally resolved through compulsory
arbitration by the regional branches of the National Labor Relations Commission (NLRC) having
jurisdiction over the workplace.

It shall be mandatory for the NLRC to conduct continous hearings and decide any dispute
arising under this Section within twenty (20) calendar days from the time said dispute is
formally submitted to it for arbitration. The pendency of a dispute arising from a wage
distortion shall not in any way delay the applicability of the increase in the wage rates
prescribed under this Section.

Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to
its probationary employees and to those who had been promoted to regular or permanent
status before 01 July 1989 but whose daily rate was P100 and below. The bank refused to give
the same increase to its regular employees who were receiving more than P100 per day and
recipients of the P900 CBA increase.

Contending that the bank's implementation of Republic Act 6727 resulted in the categorization
of the employees into (a) the probationary employees as of 30 June 1989 and regular
employees receiving P100 or less a day who had been promoted to permanent or regular status
before 01 July 1989, and (b) the regular employees as of 01 July 1989, whose pay was over
P100 a day, and that, between the two groups, there emerged a substantially reduced salary
gap, the MBTCEU sought from the bank the correction of the alleged distortion in pay. In order
to avert an impeding strike, the bank petitioned the Secretary of Labor to assume jurisdiction
over the case or to certify the same to the National Labor Relations Commission (NLRC) under
Article 263 (g) of the Labor Code.1 The parties ultimately agreed to refer the issue for
compulsory arbitration to the NLRC.

The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05 February 1991,
the labor arbiter disregard with the bank's contention that the increase in its implementation of
Republic Act 6727 did not constitute a distortion because "only 143 employees or 6.8% of the
bank's population of a total of 2,108 regular employees" benefited. He stressed that "it is not
necessary that a big number of wage earners within a company be benefited by the mandatory
increase before a wage distortion may be considered to have taken place," it being enough, he
said, that such increase "result(s) in the severe contraction of an intentional quantitative
difference in wage between employee groups."

The labor arbiter concluded that since the "intentional quantitative difference" in wage or
salary rates between and among groups of employees is not based purely on skills or length of
service but also on "other logical bases of differentiation, a P900.00 wage gap intentionally
provided in a collective bargaining agreement as a quantitative difference in wage between
those who WERE regular employees as of January 1, 1989 and those who WERE NOT as of that
date, is definitely a logical basis of differentiation (that) deserves protection from any distorting
statutory wage increase." Otherwise, he added, "a minimum wage statute that seek to uplift
the economic condition of labor would itself destroy the mechanism of collective bargaining
which, with perceived stability, has been labor's constitutional and regular source of wage
increase for so long a time now." Thus, since the "subjective quantitative difference" between
wage rates had been reduced from P900.00 to barely P150.00, correction of the wage
distortion pursuant to Section 4(c) of the Rules Implementing Republic Act 6727 should be
made.

The labor arbiter disposed of the case, thus:

WHEREFORE, premises considered, the respondent is hereby directed to restore to

complainants and their members the Nine Hundred (P900.00) Pesos CBA wage gap they used to
enjoy over non-regular employees as of January 1, 1989 by granting them a Seven Hundred
Fifty (P750.00) Pesos monthly increase effective July 1, 1989.
SO ORDERED.2

The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a vote of 2 to 1,
reversed the decision of the Labor Arbiter. Speaking, through Commissioners Rustico L. Diokno
and Domingo H. Zapanta, the NLRC said:

. . . a wage distortion can arise only in a situation where the salary structure is characterized by
intentional quantitative differences among employee groups determined or fixed on the basis
of skills, length of service, or other logical basis of differentiation and such differences or
distinction are obliterated (In Re: Labor Dispute at the Bank of the Philippine Islands, NCMB-RB-
7-11-096-89, Secretary of Labor and Employment, February 18, 1991).

As applied in this case, We noted that in the new wage salary structure, the wage gaps between
Level 6 and 7 levels 5 and 6, and levels 6 and 7 (sic) were maintained. While there is a
noticeable decrease in the wage gap between levels 2 and 3, Levels 3 and 4, and Levels 4 and 5,
the reduction in the wage gaps between said levels is not significant as to obliterate or result in
severe contraction of the intentional quantitative differences in salary rates between the
employees groups. For this reason, the basis requirement for a wage in this case. Moreover,
there is nothing in the law which would justify an across-the-board adjustment of P750.00 as
ordered by the labor Arbiter.

WHEREFORE, premises considered, the appealed decision is hereby set aside and a new
judgment is hereby entered, dismissing the complaint for lack of merit.

SO ORDERED.3

In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of said quantitative distinction/difference

aforecited but clearly there is a contraction. Would such contraction be severe as to warrant
the necessary correction sanctioned by the law in point, RA 6727? It is may considered view
that the quantitative intended distinction in pay between the two groups of workers in
respondent company was contracted by more than fifty (50%) per cent or in particular by more
or less eighty-three (83%) per cent hence, there is no doubt that there is an evident severe
contraction resulting in the complained of wage distortion.

Nonetheless, the award of P750.00 per month to all of herein individual complainants as
ordered by the Labor Arbiter below, to my mind is not the most equitable remedy at bar, for
the same would be an across the board increase which is not the intention of RA 6727. For that
matter, herein complainants cannot by right claim for the whole amount of P750.00 a month or
P25.00 per day granted to the workers covered by the said law in the sense that they are not
covered by the said increase mandated by RA 6727. They are only entitled to the relief granted
by said law by way of correction of the pay scale in case of distortion in wages by reason
thereof.
Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on 21 May 1991
by the Regional Tripartite Wages and Productivity Commission for correction of pay scale
structures in case of wage distortion as in the case at bar which is:

Minimum Wage = % x Prescribed = Distortion

—————— Increased Adjustment

Actual Salary

would be the most equitable and fair under the circumstances obtaining in this case.

For this very reason, I register my dissent from the majority opinion and opt for the
modification of the Labor Arbiter's decision as afore-discussed.4

The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been
denied, the MBTCEU and its president filed the instant petition for certiorari, charging the NLRC
with gave abuse of discretion by its refusal (a) "to acknowledge the existence of a wage
distortion in the wage or salary rates between and among the employee groups of the
respondent bank as a result of the bank's partial implementation" of Republic Act 6727 and (b)
to give due course to its claim for an across-the-board P25 increase under Republic Act No.
6727.5

We agree with the Solicitor General that the petition is impressed with merit.6

The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:

(p) Wage Distortion means a situation where an increase in prescribed wage rates results in the
elimination or severe contradiction of intentional quantitative differences in wage or salary
rates 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 logical
bases of differentiation.

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage
increase to certain employees, we agree, is, by and large, a question of fact the determination
of which is the statutory function of the NLRC.7 Judicial review of labor cases, we may add,
does not go beyond the evaluation of the sufficiency of the evidence upon which the labor
official's findings rest.8 As such, factual findings of the NLRC are generally accorded not only
respect but also finality provided that its decision are supported by substantial evidence and
devoid of any taint of unfairness of arbitrariness.9 When, however, the members of the same
labor tribunal are not in accord on those aspects of a case, as in this case, this Court is well
cautioned not to be as so conscious in passing upon the sufficiency of the evidence, let alone
the conclusions derived therefrom.
In this case, the majority of the members of the NLRC, as well as its dissenting member, agree
that there is a wage distortion arising from the bank's implementation of the P25 wage
increase; they do differ, however, on the extent of the distortion that can warrant the adoption
of corrective measures required by law.

The definition of "wage distortion," 10 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 logical
bases of differentiation." In mandating an adjustment, the law did not require that there be an
elimination or total abrogation of quantitative wage or salary differences; a severe contraction
thereof is enough. As has been aptly observed by Presiding Commissioner Edna Bonto-Perez in
her dissenting opinion, the contraction between personnel groupings comes close to eighty-
three (83%), which cannot, by any stretch of imagination, be considered less than severe.

The "intentional quantitative differences" in wage among employees of the bank has been set
by the CBA to about P900 per month as of 01 January 1989. It is intentional as it has been
arrived at through the collective bargaining process to which the parties are thereby concluded.
11 The Solicitor General, in recommending the grant of due course to the petition, has correctly
emphasized that the intention of the parties, whether the benefits under a collective bargaining
agreement should be equated with those granted by law or not, unless there are compelling
reasons otherwise, must prevail and be given effect. 12

In keeping then with the intendment of the law and the agreement of the parties themselves,
along with the often repeated rule that all doubts in the interpretation and implementation of
labor laws should be resolved in favor of labor, 13 we must approximate an acceptable
quantitative difference between and among the CBA agreed work levels. We, however, do not
subscribe to the labor arbiter's exacting prescription in correcting the wage distortion. Like the
majority of the members of the NLRC, we are also of the view that giving the employees an
across-the-board increase of P750 may not be conducive to the policy of encouraging
"employers to grant wage and allowance increases to their employees higher than the
minimum rates of increases prescribed by statute or administrative regulation," particularly in
this case where both Republic Act 6727 and the CBA allow a credit for voluntary compliance. As
the Court, through Associate Justice Florentino Feliciano, also pointed out in Apex Mining
Company, Inc. v. NLRC: 14

. . . . (T)o compel employers simply to add on legislated increases in salaries or allowances

without regard to what is already being paid, would be to penalize employers who grant their
workers more than the statutorily prescribed minimum rates of increases. Clearly, this would be
counter-productive so far as securing the interests of labor is concerned. . . .

We find the formula suggested then by Commissioner Bonto-Perez, which has also been the
standard considered by the regional Tripartite Wages and Productivity Commission for the
correction of pay scale structures in cases of wage distortion, 15 to well be the appropriate
measure to balance the respective contentions of the parties in this instance. We also view it as
being just and equitable.

WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE
PROCESS, the questioned NLRC decision is hereby SET ASIDE and the decision of the labor
arbiter is REINSTATED subject to the MODIFICATION that the wage distortion in question be
corrected in accordance with the formula expressed in the dissenting opinion of Presiding
Commissioner Edna Bonto-Perez. This decision is immediately executory.

SO ORDERED

G.R. No. 131247 January 25, 1999

PRUBANKERS ASSOCIATION, petitioner,

vs.
PRUDENTIAL BANK & TRUST COMPANY, respondent.

PANGANIBAN, J.:

Wage distortion presupposes an increase in the compensation of the lower ranks in an office
hierarchy wirhout a corresponding raise for higher-tiered employees in the same region of the
country, resulting in the elimination or the severe diminution of the distinction between the
two groups. Such distortion does not arise when a wage order gives employees in one branch of
a bank higher compensation than that given to their counterparts in other regions occupying
the same pay scale, who are not covered by said wage order. In short, the implementation of
wage orders in one region but not in others does not in itself necessarily result in wage
distortion.

The Case

Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision 1 of
the Court of Appeals in CA-GR SP No. 42525. The dispositive portion of the challenged Decision
reads:

WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary Arbitration
Committee dated June 18, 1996 is hereby REVERSED and SET ASIDE for having been issued with
grave abuse of discretion tantamount to lack of or excess of jurisdiction, and a new judgment is
rendered finding that no wage distortion resulted from the petitioner's separate and regional
implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario.
The June 18, 1996 Decision of the Voluntary Arbitration Commitee, 2 which the Court of
Appeals reversed and set aside, disposed as follows:

WHEREFORE, it is hereby ruled that the Bank's separate and regional implementation of Wage
Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches created a wage distortion in
the Bank nationwide which should be resolved in accordance with Art. 124 of the Labor Code. 3

The Facts

The facts of the case are summarized by the Court of Appeals thus:

On November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V
issued Wage Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to
workers in the private sector who ha[d] rendered service for at least three (3) months before its
effectivity, and for the same period [t]hereafter, in the following categories: SEVENTEEN PESOS
AND FIFTY CENTAVOS (P17.50) in the cities of Naga and Legaspi; FIFTEEN PESOS AND FIFTY
CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga, Pili and the city of Iriga; and TEN
PESOS (P10.00) for all other areas in the Bicol Region.

Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity Board of
Region VII issued Wage Order No. RB VII-03, which directed the integration of the COLA
mandated pursuant to Wage Order No. RO VII-02-A into the basic pay of all workers. It also
established an increase in the minimum wage rates for all workers and and employees in the
private sector as follows: by Ten Pesos (P10.00) in the cities of Cebu, Mandaue and Lapulapu;
Five Pesos (P5.00) in the municipalities of Compostela, Liloan, Consolacion, Cordova, Talisay,
Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon and Tagbilaran.

The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch, the only
branch covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into
the basic pay of its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches,
the branches covered by Wage Order No. RB VII-03.

On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the
Labor Management Committee be immediately convened to discuss and resolve the alleged
wage distortion created in the salary structure upon the implementation of the said wage
orders. Respondent Association then demanded in the Labor Management Committee
meetings that the petitioner extend the application of the wage orders to its employees outside
Regions V and VII, claiming that the regional implementation of the said orders created a wage
distortion in the wage rates of petitioner's employees nationwide. As the grievance could not
be settled in the said meetings, the parties agreed to submit the matter to voluntary
arbitration. The Arbitration Committee formed for that purpose was composed of the
following: public respondent Froilan M. Bacungan as Chairman, with Attys. Domingo T.
Anonuevo and Emerico O. de Guzman as members. The issue presented before the Committee
was whether or not the bank's separate and regional implementation of Wage Order No. 5-03
at its Naga Branch and Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches,
created a wage distortion in the bank nationwide.

The Arbitration Committee on June 18, 1996 rendered questioned decision. 4

Ruling of the Court of Appeals

In ruling that there was no wage distortion, the Court of Appeals held that the variance in the
salary rates of employees in different regions of the country was justified by RA 6727. It noted
that "the underlying considerations in issuing the wage orders are diverse, based on the
distinctive situations and needs existing in each region. Hence, there is no basis to apply the
salary increases imposed by Wage Order No. VII-03 to employees outside of Region VII."
Furthermore, the Court of Appeals ruled that "the distinctions between each employee group
in the region are maintained, as all employees were granted an increase in minimum wage rate.
5

The Issues

In its Memorandum, petitioner raises the following issues: 6

Whether or not the Court of Appeals departed from the usual course of judicial procedure
when it disregarded the factual findings of the Voluntary Arbitration Committee as to the
existence of wage distortion.

II

Whether or not the Court of Appeals committed grave error in law when it ruled that wage
distortion exists only within a region and not nationwide.

III

Whether or not the Court of Appeals erred in implying that the term "establishment" as used in
Article 125 of the Labor Code refers to the regional branches of the bank and not to the bank as
a whole.

The main issue is whether or not a wage distortion resulted from respondent's implementation
of the aforecited Wage Orders. As a preliminary matter, we shall also take up the question of
forum-shopping.

The Court's Ruling

The petition is devoid of merit. 7

Preliminary Issue: Forum-Shopping

Respondent asks for the dismissal of the petition because petitioner allegedly engaged in
forum-shopping. It maintains that petitioner failed to comply with Section 2 of Rule 42 of the
Rules of Court, which requires that parties must certify under oath that they have not
commenced any other action involving the same issues in the Supreme Court, the Court of
Appeals, or different divisions thereof, or any other tribunal or agency; if there is such other
action or proceeding, they must state the status of the same; and if they should thereafter
learn that a similar action or proceeding has been filed or is pending before the said courts,
they should promptly inform the aforesaid courts or any other tribunal or agency within five
days therefrom. Specifically, petitioner accuses respondent of failing to inform this Court of the
pendency of NCMB-NCR-RVA-O4-012-97 entitled "In Re: Voluntary Arbitration between
Prudential Bank and Prubankers Association" (hereafter referred to as "voluntary arbitration
case"), an action involving issues allegedly similar to those raised in the present controversy.

In its Reply, petitioner effectively admits that the voluntary arbitration case was already
pending when it filed the present petition. However, it claims no violation of the rule against
forum-shopping, because there is no identity of causes of action and issues between the two
cases.

We sustain the respondent. The rule on forum-shopping was first included in Section 17 of the
Interim Rules and Guidelines issued by this Court on January 11, 1983, which imposed a
sanction in this wise: "A violation of the rule shall constitute contempt of court and shall be a
cause for the summary dismissal of both petitions, without prejudice to the taking of
appropriate action against the counsel or party concerned." Thereafter, the Court restated the
rule in Revised Circular No. 28-91 and Administrative Circular No. 04-94. Ultimately, the rule
was embodied in the 1997 amendments to the Rules of Court.

As explained by this Court in First Philippine International Bank v. Court of Appeals, 8 forum-
shopping exists where the elements of litis pendentia are present, and where a final judgment
in one case will amount to res judicata in the other. Thus, there is forum-shopping when,
between an action pending before this Court and another one, there exist: "a) identity of
parties, or at least such parties as represent the same interests in both actions, b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts, and c) the
identity of the two preceding particulars is such that any judgement rendered in the other
action, will, regardless of which party is successful amount to res judicata in the action under
consideration; said requisites also constitutive of the requisites for auter action pendant or lis
pendens." 9 Another case elucidates the consequence of forum-shopping: "[W]here a litigant
sues the same party against whom another action or actions for the alleged violation of the
same right and the enforcement of the same relief is/are still pending, the defense of litis
pendentia in one case is a bar to the others; and, a final judgment in one would constitute res
judicata and thus would cause the dismissal of the rest." 10
The voluntary arbitration case involved the issue of whether the adoption by the Bank of
regionalized hiring rates was valid and binding. On the other hand, the issue now on hand
revolves around the existence of a wage distortion arising from the Bank's separate and
regional implementation of the two Wage Orders in the affected branches. A closer look would
show that, indeed, the requisites of forum-shopping are present.

First, there is identity of parties. Both cases are between the Bank and the Association acting on
behalf of all its members. Second, although the respective issues and reliefs prayed for in the
two cases are stated differently, both actions boil down to one single issue: the validity of the
Bank's regionalization of its wage structure based on RA 6727. Even if the voluntary arbitration
case calls for striking, down the Bank's regionalized hiring scheme while the instant petition
calls for the correction of the alleged wage distortion caused by the regional implementation of
Wage Order No. VII-03, the ultimate relief prayed for in both cases is the maintenance of the
Bank's national wage structure. Hence, the final disposition of one would constitute res judicata
in the other. Thus, forum-shopping is deemed to exist and, on this basis, the summary dismissal
of both actions is indeed warranted.

Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its
importance.

Main Issue: Wage Distortion

The statutory definition of wage distortion is found in Article 124 of the Labor Code, as
amended by Republic Act No. 6727, which reads:

Art. 124. Standards/Criteria for Minimum Wage Fixing — . . .

As used herein, a wage distortion shall mean a situation where an increase in prescribed wage
results in the elimination of 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 embodied in such wage structure based on skills, length of service, or
other logical bases of differentiation.

Elaborating on this statutory definition, this Court ruled: "Wage distortion presupposes a
classification of positions and ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in terms of wages and other
emoluments. Where a significant change occurs at the lowest level of positions in terms of
basic wage without a corresponding change in the other level in the hierarchy of positions,
negating as a result thereof the distinction between one level of position from the next higher
level, and resulting in a parity between the lowest level and the next higher level or rank,
between new entrants and old hires, there exists a wage distortion. . . . . The concept of a wage
distortion assumes an existing grouping or classification of employees which establishes
distinctions among such employees on some relevant or legitimate basis. This classification is
reflected in a differing wage rate for each of the existing classes of employees" 11
Wage distortion involves four elements:

1. An existing hierarchy of positions with corresponding salary rates

2. A significant change in the salary rate of a lower pay class without a concomitant increase in
the salary rate of a higher one

3. The elimination of the distinction between the two levels

4. The existence of the distortion in the same region of the country

In the present case, it is clear that no wage distortion resulted when respondent implemented
the subject Wage Orders in the covered branches. In the said branches, there was an increase
in the salary rates of all pay classes. Furthermore, the hierarchy of positions based on skills,
lengh of service and other logical bases of differentiation was preserved. In other words, the
quantitative difference in compensation between different pay classes remained the same in all
branches in the affected region. Put differently, the distinction between Pay Class 1 and Pay
Class 2, for example, was not eliminated as a result of the implementation of the two Wage
Orders in the said region. Hence, it cannot be said that there was a wage distortion.

Petitioner argues that a wage distortion exists, because the implementation of the two Wage
Orders has resulted in the discrepancy in the compensation of employees of similar pay
classification in different regions. Hence, petitioner maintains that, as a result of the two Wage
Orders, the employees in the affected regions have higher compensation than their
counterparts of the same level in other regions. Several tables are presented by petitioner to
illustrate that the employees in the regions covered by the Wage Orders are receiving more
than their counterparts in the same pay scale in other regions.

The Court is not persuaded. A wage parity between employees in different rungs, is not at issue
here, but a wage disparity between employees in the same rung but located in different regions
of the country.

Contrary to petitioner's postulation, a disparity in wages between employees holding similar

positions but in different regions does not constitute wage distortion as contemplated by law.
As previously enunciated, it is the hierarchy of positions and the disparity of their
corresponding wages and other emoluments that are sought to be preserved by the concept of
wage distortion. Put differently, a wage distortion arises when a wage order engenders wage
parity between employees in different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves a parity in the salary rates of
different pay classes which, as a result, eliminates the distinction between the different ranks in
the same region.

Different Regional Wages

Mandated by RA 6727

Petitioner's claim of wage distortion must also be denied for one other reason. The difference
in wages between employees in the same pay scale in different regions is not the mischief
sought to be banished by the law. In fact, Republic Act No. 6727 (the Wage Rationalization Act),
recognizes "existing regional disparities in the cost of living." Section 2 of said law provides:

Sec 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages
and to promote productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the rights of labor to its just
share in the fruits of production; to enhance employment generation in the countryside
through industry dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth.

The State shall promote collective bargaining as the primary mode of settling 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
of living and other socio-economic factors and the national economic and social development
plans.

RA 6727 also amended Article 124 of the Labor Code, thus:

Art. 124. Standards/Criteria for Minimum Wage Fixing. — The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the health, efficiency and general well-
being of the employees within the frame work of the national economic and social
development program. In the determination of such regional minimum wages, the Regional
Board shall, among other relevant factors, consider the following:

a. The demand for living wages;

b. Wage adjustment vis-a-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

II. The equitable distribution of income and wealth along the imperatives of social
and economic development.

From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in
wages between employees with similar positions in different regions is necessarily expected. In
insisting that the employees of the same pay class in different regions should receive the same
compensation, petitioner has apparently misunderstood both the meaning of wage distortion
and the intent of the law to regionalize wage rates.

It must be understood that varying in each region of the country are controlling factors such as
the cost of living; supply and demand of basic goods, services and necessities; and the
purchasing power of the peso. Other considerations underscore the necessity of the law.
Wages in some areas may be increased in order to prevent migration to the National Capital
Region and, hence, to decongest the metropolis. Therefore, what the petitioner herein bewails
is precisely what the law provides in order to achieve its purpose.

Petitioner claims that it "does not insist that the Regional Wage Boards created pursuant to RA
6727 do not have the authority to issue wage orders based on the distinctive situations and
needs existing in each region. So also, . . . it does not insist that the [B]ank should not
implement regional wage orders. Neither does it seek to penalize the Bank for following Wage
Order VII-03. . . . What it simply argues is that it is wrong for the Bank to peremptorily abandon
a national wage structure and replace the same with a regionalized structure in violation of the
principle of equal pay for equal work. And, it is wrong to say that its act of abandoning its
national wage structure is mandated by law."

As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not
objecting, on the one hand, to the right of the regional wage boards to impose a regionalized
wage scheme; while insisting, on the other hand, on a national wage structure for the whole
Bank. To reiterate, a uniform national wage structure is antithetical to the purpose of RA 6727.

The objective of the law also explains the wage disparity in the example cited by petitioner:
Armae Librero, though only in Pay Class 4 in Mabolo, was, as a result of the Wage Order,
receiving more than Bella Cristobal, who was already in Pay Class 5 in Subic. 12 RA 6727
recognizes that there are different needs for the different situations in different regions of the
country. The fact that a person is receiving more in one region does not necessarily mean that
he or she is better off than a person receiving less in another region. We must consider, among
others, such factors as cost of living, fulfillment of national economic goals, and standard of
living. In any event, this Court, in its decisions, merely enforces the law. It has no power to pass
upon its wisdom or propriety.

Equal Pay for Equal Work

Petitioner also avers that the implementation of the Wage Order in only one region violates the
equal-pay-for-equal-work principle. This is not correct. At the risk of being repetitive, we stress
that RA 6727 mandates that wages in every region must be set by the particular wage board of
that region, based on the prevailing situation therein. Necessarily, the wages in different
regions will not be uniform. Thus, under RA 6727, the minimum wage in Region 1 may be
different from that in Region 13, because the socioeconomic conditions in the two regions are
different.
Meaning of "Establishment"

Petitioner further contends that the Court of Appeals erred in interpreting the meaning of
"establishment" in relation to wage distortion. It quotes the RA 6727 Implementing Rules,
specifically Section 13 thereof which speaks of "workers working in branches or agencies of
establishments in or outside the National Capital Region." Petitioner infers from this that the
regional offices of the Bank do not themselves constitute, but are simply branches of, the
establishment which is the whole bank. In effect, petitioner argues that wage distortion covers
the pay scales even of employees in different regions, and not only those of employees in the
same region or branch. We disagree.

Sec. 13 provides that the "minimum wage rates of workers working in branches or agencies of
establishments in or outside the National Capital Region shall be those applicable in the place
where they are sanctioned" The last part of the sentence was omitted by petitioner in its
argument. Given the entire phrase, it is clear that the statutory provision does not support
petitioner's view that "establishment" includes all branches and offices in different regions.

Further negating petitioner's theory is NWPC Guideline No. 1 (S. 1992) entitled "Revised
Guidelines on Exemption From Compliance With the Prescribed Wage/Cost of Living Allowance
Increases Granted by the Regional Tripartite Wages and Productivity Board," which states that
"establishment" "refers to an economic unit which engages in one or predominantly one kind of
economic activity with a single fixed location."

Management Practice

Petitioner also insists that the Bank has adopted a uniform wage policy, which has attained the
status of an established management practice; thus, it is estopped from implementing a wage
order for a specific region only. We are not persuaded. Said nationwide uniform wage policy of
the Bank had been adopted prior to the enactment of RA 6727. After the passage of said law,
the Bank was mandated to regionalize its wage structure. Although the Bank implemented
Wage Order Nos. NCR-01 and NCR-02 nationwide instead of regionally even after the effectivity
of RA 6727, the Bank at the time was still uncertain about how to follow the new law. In any
event, that single instance cannot be constitutive of "management practice."

WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against
petitioner.1âwphi1.nêt

SO ORDERED

G.R. No. 140689 February 17, 2004

BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC., respondents.

DECISION

CARPIO MORALES, J.:

The present Petition for Review on Certiorari under Rule 45 of the Rules of Court raises the issue of
whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring
rates of new employees without increasing the salary rates of old employees resulted in wage distortion
within the contemplation of Article 124 of the Labor Code.

Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV, and
Level V. On May 28, 1993, its Board of Directors approved a "New Salary Scale", made retroactive to
April 1, 1993, for the purpose of making its hiring rate competitive in the industry’s labor market. The
"New Salary Scale" increased the hiring rates of new employees, to wit: Levels I and V by one thousand
pesos (P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00). Accordingly, the salaries of
employees who fell below the new minimum rates were also adjusted to reach such rates under their
levels.

Bankard’s move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive
bargaining agent of the regular rank and file employees of Bankard, to press for the increase in the
salary of its old, regular employees.

Bankard took the position, however, that there was no obligation on the part of the management to
grant to all its employees the same increase in an across-the-board manner.

As the continued request of petitioner for increase in the wages and salaries of Bankard’s regular
employees remained unheeded, it filed a Notice of Strike on August 26, 1993 on the ground of
discrimination and other acts of Unfair Labor Practice (ULP).

A director of the National Conciliation and Mediation Board treated the Notice of Strike as a "Preventive
Mediation Case" based on a finding that the issues therein were "not strikeable".

Petitioner filed another Notice of Strike on October 8, 1993 on the grounds of refusal to bargain,
discrimination, and other acts of ULP - union busting. The strike was averted, however, when the
dispute was certified by the Secretary of Labor and Employment for compulsory arbitration.

The Second Division of the NLRC, by Order of May 31, 1995, finding no wage distortion, dismissed the
case for lack of merit.

Petitioner’s motion for reconsideration of the dismissal of the case was, by Resolution of July 28, 1995,
denied.
Petitioner thereupon filed a petition for certiorari before this Court, docketed as G.R. 121970. In
accordance with its ruling in St. Martin Funeral Homes v. NLRC,1 the petition was referred to the Court of
Appeals which, by October 28, 1999, denied the same for lack of merit.

Hence, the present petition which faults the appellate court as follows:

(1) It misapprehended the basic issues when it concluded that under Bankard’s new wage structure, the
old salary gaps between the different classification or level of employees were "still reflected" by the
adjusted salary rates2; and

(2) It erred in concluding that "wage distortion does not appear to exist", which conclusion is manifestly
contrary to law and jurisprudence.3

Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others, Article
124 of the Labor Code) on June 9, 1989, the term "wage distortion" was explicitly defined as:

... 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 embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation.4

Prubankers Association v. Prudential Bank and Trust Company5 laid down the four elements of wage
distortion, to wit: (1.) An existing hierarchy of positions with corresponding salary rates; (2) A significant
change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a
higher one; (3) The elimination of the distinction between the two levels; and (4) The existence of the
distortion in the same region of the country.

Normally, a company has a wage structure or method of determining the wages of its employees. In a
problem dealing with "wage distortion," the basic assumption is that there exists a grouping or
classification of employees that establishes distinctions among them on some relevant or legitimate
bases.6

Involved in the classification of employees are various factors such as the degrees of responsibility, the
skills and knowledge required, the complexity of the job, or other logical basis of differentiation. The
differing wage rate for each of the existing classes of employees reflects this classification.

Petitioner maintains that for purposes of wage distortion, the classification is not one based on "levels"
or "ranks" but on two groups of employees, the newly hired and the old, in each and every level, and
not between and among the different levels or ranks in the salary structure.

Public respondent National Labor Relations Commission (NLRC) refutes petitioner’s position, however.
It, through the Office of the Solicitor General, essays in its Comment of April 12, 2000 as follows:
To determine the existence of wage distortion, the "historical" classification of the employees prior to
the wage increase must be established. Likewise, it must be shown that as between the different
classification of employees, there exists a "historical" gap or difference.

xxx

The classification preferred by petitioner is belied by the wage structure of private respondent as shown
in the new salary scale it adopted on May 28, 1993, retroactive to April 1, 1993, which provides, thus:

Hiring Minimum Maximum

Level From To From To From To

I 3,100 4,100 3,200 4,200 7,200 9,250

II 3,200 4,100 3,300 4,200 7,500 9,500

III 3,300 4,200 3,400 4,300 8,000 10,000

IV 3,500 4,400 3,600 4,500 8,500 10,500

V 3,700 4,700 3,800 4,800 9,000 11,000

Thus the employees of private respondent have been "historically" classified into levels, i.e. I to V, and
not on the basis of their length of service. Put differently, the entry of new employees to the company
ipso facto place[s] them under any of the levels mentioned in the new salary scale which private
respondent adopted retroactive [to] April 1, 1993. Petitioner cannot make a contrary classification of
private respondent’s employees without encroaching upon recognized management prerogative of
formulating a wage structure, in this case, one based on level.7 (Emphasis and underscoring supplied)

The issue of whether wage distortion exists being a question of fact that is within the jurisdiction of
quasi-judicial tribunals,8 and it being a basic rule that findings of facts of quasi-judicial agencies, like the
NLRC, are generally accorded not only respect but at times even finality if they are supported by
substantial evidence, as are the findings in the case at bar, they must be respected. For these agencies
have acquired expertise, their jurisdiction being confined to specific matters.9

It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of
Bankard, hence, the first element of wage distortion provided in Prubankers is wanting.lawphi1.nêt
While seniority may be a factor in determining the wages of employees, it cannot be made the sole basis
in cases where the nature of their work differs.

Moreover, for purposes of determining the existence of wage distortion, employees cannot create their
own independent classification and use it as a basis to demand an across-the-board increase in salary.

As National Federation of Labor v. NLRC, et al.10 teaches, the formulation of a wage structure through
the classification of employees is a matter of management judgment and discretion.

[W]hether or not a new additional scheme of classification of employees for compensation purposes
should be established by the Company (and the legitimacy or viability of the bases of distinction there
embodied) is properly a matter of management judgment and discretion, and ultimately, perhaps, a
subject matter for bargaining negotiations between employer and employees. It is assuredly something
that falls outside the concept of "wage distortion."11 (Emphasis and underscoring supplied)

As did the Court of Appeals, this Court finds that the third element provided in Prubankers is also
wanting. For, as the appellate court explained:

In trying to prove wage distortion, petitioner union presented a list of five (5) employees allegedly
affected by the said increase:

Pay of Old/ Pay of Newly Difference

Regular Employees Hired Employees

A. Prior to April 1, 1993

Level I P4,518.75 P3,100 P1,418.75

(Sammy Guce)

Level II P6,242.00 P3,200 P3,042.00

(Nazario Abello)

Level III P4,850.00 P3,300 P1,550.00

(Arthur Chavez)

Level IV P5,339.00 P3,500 P1,839.00

Melissa Cordero)
 Level V P7,090.69 P3,700 P3,390.69
(Ma. Lourdes Dee)

B. Effective April 1, 1993

Level I P4,518.75 P4,100 P418.75

Sammy Guce)

Level II P6,242.00 P4,100 P2,142.00

(Nazario Abello)

Level III P4,850.00 P4,200 P650.00

(Arthur Chavez)

Level IV P5,330.00 P4,400 P939.00

(Melissa Cordero)

Level V P7,090.69 P4,700 P2,390.69

(Ma. Lourdes Dee)

Even assuming that there is a decrease in the wage gap between the pay of the old employees and the
newly hired employees, to Our mind said gap is not significant as to obliterate or result in severe
contraction of the intentional quantitative differences in the salary rates between the employee group.
As already stated, the classification under the wage structure is based on the rank of an employee, not
on seniority. For this reason, ,wage distortion does not appear to exist.12 (Emphasis and underscoring
supplied)

Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of wage
distortion are absent, petitioner cannot legally obligate Bankard to correct the alleged "wage distortion"
as the increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage
order.

The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of wage
adjustments, then the language of the law should have been broad, not restrictive as it is currently
phrased:

Article 124. Standards/Criteria for Minimum Wage Fixing.

xxx

Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and
the union shall negotiate to correct the distortions. Any dispute arising from the wage distortions shall
be resolved through the grievance procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration.

x x x (Italics and emphasis supplied)

Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is found in CHAPTER V on
"WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION" which principally deals with the
fixing of minimum wage. Article 124 should thus be construed and correlated in relation to minimum
wage fixing, the intention of the law being that in the event of an increase in minimum wage, the
distinctions embodied in the wage structure based on skills, length of service, or other logical bases of
differentiation will be preserved.

If the compulsory mandate under Article 124 to correct "wage distortion" is applied to voluntary and
unilateral increases by the employer in fixing hiring rates which is inherently a business judgment
prerogative, then the hands of the employer would be completely tied even in cases where an increase
in wages of a particular group is justified due to a re-evaluation of the high productivity of a particular
group, or as in the present case, the need to increase the competitiveness of Bankard’s hiring rate. An
employer would be discouraged from adjusting the salary rates of a particular group of employees for
fear that it would result to a demand by all employees for a similar increase, especially if the financial
conditions of the business cannot address an across-the-board increase.

Petitioner cites Metro Transit Organization, Inc. v. NLRC13 to support its claim that the obligation to
rectify wage distortion is not confined to wage distortion resulting from government decreed law or
wage order.

Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage distortion
was not by virtue of Article 124 of the Labor Code, but on account of a then existing "company practice"
that whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory
employees were, as a matter of practice, also paid the same amount plus an added premium. Thus this
Court held in said case:

We conclude that the supervisory employees, who then (i.e., on April 17, 1989) had, unlike the rank-
and-file employees, no CBA governing the terms and conditions of their employment, had the right to
rely on the company practice of unilaterally correcting the wage distortion effects of a salary increase
given to the rank-and-file employees, by giving the supervisory employees a corresponding salary
increase plus a premium. . . .14 (Emphasis supplied)

Wage distortion is a factual and economic condition that may be brought about by different causes. In
Metro Transit, the reduction or elimination of the normal differential between the wage rates of rank-
and-file and those of supervisory employees was due to the granting to the former of wage increase
which was, however, denied to the latter group of employees.
The mere factual existence of wage distortion does not, however, ipso facto result to an obligation to
rectify it, absent a law or other source of obligation which requires its rectification.

Unlike in Metro Transit then where there existed a "company practice," no such management practice is
herein alleged to obligate Bankard to provide an across-the-board increase to all its regular employees.

Bankard’s right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust
the rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of Living
Allowance) of the parties’ Collective Bargaining Agreement (CBA), to wit:

Section 2. Any salary increase granted under this Article shall be without prejudice to the right of the
Company to establish such minimum salaries as it may hereafter find appropriate for specific jobs, and to
adjust the rates of the employees thereby affected to such minimum salaries thus established.15 (Italics
and underscoring supplied)

This CBA provision, which is based on legitimate business-judgment prerogatives of the employer, is a
valid and legally enforceable source of rights between the parties.

In fine, absent any indication that the voluntary increase of salary rates by an employer was done
arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate
purpose other than to discriminate against the regular employees, this Court will not step in to interfere
with this management prerogative. Employees are of course not precluded from negotiating with its
employer and lobby for wage increases through appropriate channels, such as through a CBA.

This Court, time and again, has shown concern and compassion to the plight of workers in adherence to
the Constitutional provisions on social justice and has always upheld the right of workers to press for
better terms and conditions of employment. It does not mean, however, that every dispute should be
decided in favor of labor, for employers correspondingly have rights under the law which need to be
respected.

WHEREFORE, the present petition is hereby DENIED.

SO ORDERED

C. Payment of Wages

Labor Code: Articles 102-105, 112-119 (check Art. 259 – Agency Fees, in relation to Art. 112)

Omnibus Rules: Book III, Rule VIII

G.R. No. 95844 July 20, 1992

COMMANDO SECURITY AGENCY, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NEMESIO DECIERDO, respondents.

GRIÑO-AQUINO, J.:

Petitioner assails the resolutions of the National Labor Relations Commission dated May 26, 1989 and
September 25, 1990, affirming with modification the decision of the Labor Arbiter in NLRC Case No. 11-
0200075-88.

Private respondent Nemesio Decierdo was a security guard of the petitioner since February 1981. In
April 1987, petitioner entered into a contract to provide guarding services to the Alsons Development
and Investment Corporation (ALSONS for brevity) at its Aldevinco Building on Claro M. Recto Avenue,
Davao City, for a period of one year, i.e., from April 11, 1987 to April 10, 1988, unless renewed under
such terms and conditions as may be mutually acceptable. The number of guards to be assigned by the
petitioner would depend on ALSON's demand, sometimes two (2) guards on a daily shift, and sometimes
four (4) guards. Decierdo was one of the guards assigned to the Aldevinco Building by the petitioner.

On February 9, 1988, Maria Mila D. Samonte, Properties Administration Head of ALSONS, requested the
petitioner for a "periodic reshuffling" of guards. The pertinent portion of her letter reads:

Our corporation offers spaces to tenants including services of maintenance and security. The latter
causes us to hire your agency's services. It is therefore clearly understood that Aldevinco assures tenants
of security of their properties found in Aldevinco's compound, and likewise Commando Security Service
Agency assures Aldevinco the same.

We hope that the above shall be clearly explained to the incoming guards, we requested for a period
reshuffling. We do extend our gratitude to your immediate services in response to our request in the
past. (pp. 45-A-46, Rollo.)

Pursuant to that reasonable request of its client, petitioner on February 10, 1988 served the following
recall order on Decierdo:

Report to this HQs for instruction. You are hereby recalled from your present post at Aldevinco Bldg. as
per Rotation Policy Order by the management effective 11 February 1988. (p. 46. Rollo.)

On the same date, February 10, 1988, Detail Order 02-016 was issued to Decierdo assigning him to the
Pacific Oil Company in Bunawan, Davao City, with instruction to report to the manager, but Decierdo
refused to accept the assignment as shown by the annotation at the bottom of the Order, viz:

Refused to accept assignment he is going to rest for a while. (p. 54, Rollo.)
On February 11, 1988, which was the effective date of the detail order, Decierdo filed a complaint for
illegal dismissal, unfair labor practice, underpayment of wages, overtime pay, night premium, 13th
month pay, holiday pay, rest day pay and incentive leave pay.

On June 28, 1988, the Executive Labor Arbiter rendered a decision, the dispositive portion of which
reads as follows:

WHEREFORE, in consideration of all the foregoing, judgment is hereby rendered:

1. Ordering respondent Commando Security Agency to pay complainant Nemesio Decierdo the total
amount of THIRTY-THREE THOUSAND EIGHT HUNDRED SEVENTY-SEVEN AND 92/100 PESOS
(P33,877.92), as salary, holiday and rest day pay differentials, 13th month pay differentials and service
incentive leave pay; and

2. Dismissing the complaint for illegal dismissal, unfair labor practice, overtime pay and night premium
for lack of merit. (pp. 19-20, Rollo.)

Petitioner appealed to the NLRC which on May 26, 1989, affirmed with modification the decision of the
Labor Arbiter, to wit:

WHEREFORE, the appealed Decision is hereby AFFIRMED with the modification that the amount of
P1,498.39 representing complainant's accountability with (sic) respondent is hereby ordered deducted
from the total award. (p. 58, Rollo.)

Hence, this petition for certiorari alleging that the NLRC gravely abused its discretion;

1. in failing to make a clear pronouncement that Decierdo had abandoned his employment as he went
on AWOL and therefore is considered resigned;

2. in denying petitioner due process of law, or a right to be heard;

3. in not considering that Decierdo is in estoppel; and

4. in not holding that petitioner is entitled to a 25% share of his monthly salary as agreed between them.

The petition for certiorari is without merit.

The first ground of the petition is not well taken for the NLRC did find that Decierdo had given up his job
and chose separation pay in lieu of reinstatement.

Anent the first issue, suffice it to state that there was no need for the Executive Labor Arbiter to fix a
period within which to require complainant to report for work considering that the latter is no longer
interested in his job and had claimed for separation benefits in lieu of reinstatement. Why respondent
has begrudged the Labor Arbiter's "failure" to fix a return-to-work period escapes us considering that
the Labor Arbiter practically found complainant to have abandoned his job and, besides, complainant's
claims for separation pay was not granted. If there was anyone who should have been interested in
being recalled to work, it should have been complainant himself and not respondent. (pp. 54-55, Rollo.)
As a result, the NLRC dismissed the charge of illegal dismissal and unfair labor practice against the
petitioner and denied Decierdo's claim for separation pay.

Regarding the petitioner's allegation that it was denied due process, we have time and again pointed
out that procedural due process merely requires notice and opportunity to be heard (Var Orient
Shopping Company vs. Achacoso, 161 SCRA 732; Bermejo vs. Barrios, 31 SCRA 764) which the petitioner
was given then it filed its position paper. The petitioner was properly notified and even took part in the
conciliation conference for the amicable settlement of the case. It was made aware of the nature and
specifics of the charges against it but failed to refute them expecting that a hearing would be called.
However, the Labor Arbiter proceeded to decide the case based on the parties' position papers, the
records submitted by petitioner, and the report and the computations made by the Corporate Auditing
Examiner regarding the sums which Decierdo was entitled to recover. That procedure complied with the
Revised Rules of the NLRC, particularly Sections 2 and 3, which provide:

Sec. 2. Submission of position papers. — During the initial conference/hearing, or immediately

thereafter. the Labor Arbiter shall require the parties to simultaneously submit to him their respective
verified position papers, which shall cover only the issues raised in the complaint, accompanied by all
supporting documents then available to them and the affidavits of their witnesses which shall take the
place of their direct testimony. The parties shall thereafter not be allowed to allege, or present evidence
to prove, facts not referred to and any cause or causes of action not included in their complaint or
position papers, affidavits and other documents. The parties shall furnish each other with copies of the
position papers, together with the supporting affidavits and documents submitted by them.

Sec. 3. Determination of necessity of hearing. — Immediately after the submission by the parties of their
position papers and supporting proofs, the Labor Arbiter shall determine whether there is a need for a
formal hearing or investigation. At this state, he may, in his discretion, and for the purpose of making
such determination, elicit pertinent facts or information, including documentary evidence, if any, from
any party or witness to complete, as far as possible, the facts of the case. Facts or information so elicited
may serve as basis for his clarification or simplication and limitation of the issues in the case,
encouraging for this purpose the submission by the parties of admissions and stipulations of fact to
abbreviate the proceedings. He shall participate actively in the preparation of such stipulations, making
suggestions on what facts the parties need not prove. (Emphasis supplied)

The NLRC correctly held that:

. . . the Executive Labor Arbiter did not err when she dispensed with a full blown hearing there being no
necessity for one. Under Section 3 of the same rule as above-cited, the Labor Arbiter may, in his sound
discretion, dispense with a hearing and require, instead, the parties to file their respective position
papers together with all the supporting proofs. . . . all that respondent had to do was present its payrolls
and other records which it is required to keep and maintain (see Sec. 6-12, Rule X, Book III of Omnibus
Rules Implementing the Labor Code) and it could already be determined on the face thereof if
complainant's monetary claims had actually been paid or not . . . complainant's entitlements were
computed by the Corporate Auditing Examiner (p. 63, Records) on the basis of respondent's records
which was secured by virtue of a subpoena duces tecum (p. 43, record). Respondent should have met
bead-on the accuracy of correctness of the computations and not skirt the issue by dwelling merely on
technicalities by complaining that the records were irregularly procured. (p. 56, Rollo.)

Petitioner's contention that Decierdo is estopped from complaining about the 25% deduction from his
salary representing petitioner's share in procuring job placement for him, is not well taken. That
provision of the employment contract was illegal and inequitous, hence, null and void.

The constitutional provisions on social justice (Sections 9 and 10,

Article II) and protection to labor (Sec. 18, Article II) in the declaration of Principles and State Policies,
impose upon the courts the duty to be ever vigilant in protecting the rights of workers who are placed in
a contractually disadvantaged position and who sign waivers or provisions contrary to law and public
policy (Mercury Drug Co. Inc. vs. Dayao, 117 SCRA 99, 116). We affirm the NLRC's ruling that:

It goes without saying that respondent may not deduct its so-called "share" from the salaries of its
guards without the latter's express consent and if such deductions are not allowed by law. This is
notwithstanding any previous agreement or understanding between them. Any such agreement or
contract is void ab initio being contrary to law and public policy (Mercury Drug Co. vs. Nardo Dayao, G.R.
No. 30432, September 30, 1982). (pp. 57-58, Rollo.)

WHEREFORE, finding no abuse of discretion on the part of the National Labor Relations Commission in
rendering the assailed decision, the petition for certiorari is DISMISSED for lack at merit.

SO ORDERED

G.R. No. 118506 April 18, 1997

NORMA MABEZA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL SUPREME, respondents.

KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation
of the constitutionally enshrined rights of the working class. Without the protection accorded by our
laws and the tempering of courts, the natural and historical inclination of capital to ride roughshod over
the rights of labor would run unabated.

The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent,
are illustrative.
Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees
at the Hotel Supreme in Baguio City were asked by the hotel's management to sign an instrument
attesting to the latter's compliance with minimum wage and other labor standard provisions of law. 1
The instrument provides: 2

JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA NONOG,
NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and residents of
Baguio City, under oath, depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave.,
Baguio City.

2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;

3. That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we are paid
accordingly and that we are treated well.

5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose
of informing the authorities concerned and to dispute the alleged report of the Labor Inspector of the
Department of Labor and Employment conducted on the said establishment on February 2, 1991.

IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.

(Sgd.) (Sgd.) (Sgd.)

SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd.) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA.

(Sgd.) (Sgd.)
JONATHAN PICART JOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.

Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity
and contents of the affidavit as instructed by management. The affidavit was nevertheless submitted on
the same day to the Regional Office of the Department of Labor and Employment in Baguio City.
As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting
findings of the Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2,
1991) apparently adverse to the private respondent. 3

After she refused to proceed to the City Prosecutor's Office — on the same day the affidavit was
submitted to the Cordillera Regional Office of DOLE — petitioner avers that she was ordered by the
hotel management to turn over the keys to her living quarters and to remove her belongings from the
hotel
premises. 4 According to her, respondent strongly chided her for refusing to proceed to the City
Prosecutor's Office to attest to the affidavit. 5 She thereafter reluctantly filed a leave of absence from
her job which was denied by management. When she attempted to return to work on May 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead, continue
with her unofficial leave of absence. Consequently, on May 13, 1991, three days after her attempt to
return to work, petitioner filed a complaint for illegal dismissal before the Arbitration Branch of the
National Labor Relations Commission — CAR Baguio City. In addition to her complaint for illegal
dismissal, she alleged underpayment of wages, non-payment of holiday pay, service incentive leave pay,
13th month pay, night differential and other benefits. The complaint was docketed as NLRC Case No.
RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job)
without notice to the management" 6 and that she actually abandoned her work. He maintained that
there was no basis for the money claims for underpayment and other benefits as these were paid in the
form of facilities to petitioner and the hotel's other employee. 7 Pointing to the Affidavit of May 7, 1991,
the private respondent asserted that his employees actually have no problems with management. In a
supplemental answer submitted eleven (11) months after the original complaint for illegal dismissal was
filed, private respondent raised a new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of the City of Baguio against
petitioner on July 4, 1991. 8

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground
of loss of confidence. His disquisitions in support of his conclusion read as follows:

It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1
piece bedsheet, 1 piece thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and "10" pages 12-14
TSN, December 1, 1992).

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant
for qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant
committed the crime of qualified theft issued a resolution for its filing in court but dismissing the charge
of perjury (Exhibit "4" for respondent and Exhibit "B-7" for complainant). As a consequence,
complainant was charged in court for the said crime (Exhibit "5" for respondent and Exhibit "B-6" for the
complainant).
With these pieces of evidence, complainant committed serious misconduct against her employer which
is one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor
Code as amended). 9

On April 28, 1994, respondent NLRC promulgated its assailed

Resolution 10 — affirming the Labor Arbiter's decision. The resolution substantially incorporated the
findings of the Labor Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil action for
certiorari under Rule 65 of the Rules of Court on the following grounds: 12

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS FAILURE TO
CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE
PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE
COMPLAINANT FROM HER EMPLOYMENT;

2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ADOPTING THE
RULING OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES AND BENEFITS ON
THE BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY
RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE
PAYMENT OF WAGES AND BENEFITS;

3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN FAILING TO CONSIDER
THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE
COMMITTED BY THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent's principal claims and defenses and urges this Court to set aside the public respondent's
assailed resolution. 13

We agree.

It is settled that in termination cases the employer bears the burden of proof to show that the dismissal
is for just cause, the failure of which would mean that the dismissal is not justified and the employee is
entitled to reinstatement. 14

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she
failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that there
existed sufficient cause for the termination of petitioner, he belatedly included a complaint for loss of
confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and two
towels from the hotel. 15 Appended to his last complaint was a suit for qualified theft filed with the
Baguio City prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances upon which private respondent
anchored his claim that petitioner "abandoned" her job were not enough to constitute just cause to
sanction the termination of her services under Article 283 of the Labor Code. For abandonment to arise,
there must be concurrence of two things: 1) lack of intention to work; 16 and 2) the presence of overt
acts signifying the employee's intention not to work. 17

In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence
when she learned that the hotel management was displeased with her refusal to attest to the affidavit.
The fact that she made this attempt clearly indicates not an intention to abandon but an intention to
return to work after the period of her leave of absence, had it been granted, shall have expired.

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The overt act
(absence) ought
to unerringly point to the fact that the employee has no intention to return to work, 18 which is patently
not the case here. In fact, several days after she had been advised to take an informal leave, petitioner
tried to resume working with the hotel, to no avail. It was only after she had been repeatedly rebuffed
that she filed a case for illegal dismissal. These acts militate against the private respondent's claim that
petitioner abandoned her job. As the Solicitor General in his manifestation observed:

Petitioner's absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see
her in the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify
her employment status, she again reported for work. However, she was prevented from working by
private respondents. 19

We now come to the second cause raised by private respondent to support his contention that
petitioner was validly dismissed from her job.

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank
check for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if
unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of
the constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally
apply only to cases involving employees occupying positions of trust and confidence or to those
situations where the employee is routinely charged with the care and custody of the employer's money
or property. To the first class belong managerial employees, i.e., those vested with the powers or
prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such managerial actions; and to the
second class belong cashiers, auditors, property custodians, etc., or those who, in the normal and
routine exercise of their functions, regularly handle significant amounts of money or property. Evidently,
an ordinary chambermaid who has to sign out for linen and other hotel property from the property
custodian each day and who has to account for each and every towel or bedsheet utilized by the hotel's
guests at the end of her shift would not fall under any of these two classes of employees for which loss
of confidence, if ably supported by evidence, would normally apply. Illustrating this distinction, this
Court in Marina Port Services, Inc. vs. NLRC, 20 has stated that:

To be sure, every employee must enjoy some degree of trust and confidence from the employer as that
is one reason why he was employed in the first place. One certainly does not employ a person he
distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only
because he is the one who opens the office in the morning and closes it at night and in this sense is
entrusted with the care or protection of the employer's property. The keys he holds are the symbol of
that trust and confidence.

By the same token, the security guard must also be considered as enjoying the trust and confidence of
his employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too,
is charged with its care and protection.

Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting
that property. The employer's trust and confidence in him is limited to that ministerial function. He is
not entrusted, in the Labor Arbiter's words, with the duties of safekeeping and safeguarding company
policies, management instructions, and company secrets such as operation devices. He is not privy to
these confidential matters, which are shared only in the higher echelons of management. It is the
persons on such levels who, because they discharge these sensitive duties, may be considered holding
positions of trust and confidence. The security guard does not belong in such category. 21

More importantly, we have repeatedly held that loss of confidence should not be simulated in order to
justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used
as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere
afterthought to justify an earlier action taken in bad faith." 22

In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against
petitioner long after the latter exposed the hotel's scheme (to avoid its obligations as employer under
the Labor Code) by her act of filing illegal dismissal charges against the private respondent would hardly
warrant serious consideration of loss of confidence as a valid ground for dismissal. Notably, the Solicitor
General has himself taken a position opposite the public respondent and has observed that:

If petitioner had really committed the acts charged against her by private respondents (stealing supplies
of respondent hotel), private respondents should have confronted her before dismissing her on that
ground. Private respondents did not do so. In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against
petitioner, in an obvious attempt to build a case against her.

The manipulations of private respondents should not be countenanced. 23

Clearly, the efforts to justify petitioner's dismissal — on top of the private respondent's scheme of
inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code —
taints with evident bad faith and deliberate malice petitioner's summary termination from employment.

Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.

The answer in this case must inevitably be in the affirmative.

The pivotal question in any case where unfair labor practice on the part of the employer is alleged is
whether or not the employer has exerted pressure, in the form of restraint, interference or coercion,
against his employee's right to institute concerted action for better terms and conditions of
employment. Without doubt, the act of compelling employees to sign an instrument indicating that the
employer observed labor standards provisions of law when he might have not, together with the act of
terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair
labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and
conditions of employment through concerted action.

We agree with the Solicitor General's observation in his manifestation that "[t]his actuation . . . is
analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" 24 which
distinctly makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or discriminate
against an employee for having given or being about to give testimony" 25 under the Labor Code. For in
not giving positive testimony in favor of her employer, petitioner had reserved not only her right to
dispute the claim and proffer evidence in support thereof but also to work for better terms and
conditions of employment.

For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an
example to all of the hotel's employees, that they could only cause trouble to management at great
personal inconvenience. Implicit in the act of petitioner's termination and the subsequent filing of
charges against her was the warning that they would not only be deprived of their means of livelihood,
but also possibly, their personal liberty.

This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same
are ably supported by the evidence on record. However, where such conclusions are based on a
misperception of facts or where they patently fly in the face of reason and logic, we will not hesitate to
set aside those conclusions. Going into the issue of petitioner's money claims, we find one more salient
reason in this case to set things right: the labor arbiter's evaluation of the money claims in this case
incredibly ignores existing law and jurisprudence on the matter. Its blatant one-sidedness simply raises
the suspicion that something more than the facts, the law and jurisprudence may have influenced the
decision at the level of the Arbiter.

Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the
monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage was
because petitioner did not factor in the meals, lodging, electric consumption and water she received
during the period in her computations. 26 Granting that meals and lodging were provided and indeed
constituted facilities, such facilities could not be deducted without the employer complying first with
certain legal requirements. Without satisfying these requirements, the employer simply cannot deduct
the value from the employee's ages. First, proof must be shown that such facilities are customarily
furnished by the trade. Second, the provision of deductible facilities must be voluntarily accepted in
writing by the employee. Finally, facilities must be charged at fair and reasonable value. 27

These requirements were not met in the instant case. Private respondent "failed to present any
company policy or guideline to show that the meal and lodging . . . (are) part of the salary;" 28 he failed
to provide proof of the employee's written authorization; and, he failed to show how he arrived at the
valuations. 29

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were
figures furnished by the private respondent's own accountant, without corroborative evidence. On the
pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he could have, as has been
pointed out in the Solicitor General's manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR." 30

More significantly, the food and lodging, or the electricity and water consumed by the petitioner were
not facilities but supplements. A benefit or privilege granted to an employee for the convenience of the
employer is not a facility. The criterion in making a distinction between the two not so much lies in the
kind (food, lodging) but the purpose. 31 Considering, therefore, that hotel workers are required to work
different shifts and are expected to be available at various odd hours, their ready availability is a
necessary matter in the operations of a small hotel, such as the private respondent's hotel.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages
equivalent to the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the
private respondent has never been able to adduce proof that petitioner was paid the aforestated
benefits.

However, the claims covering the period of October 1987 up to the time of filing the case on May 13,
1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money
claims arising out of employer-employee relationship to three (3) years from the time the cause of
action accrues. 32

We depart from the settled rule that an employee who is unjustly dismissed from work normally should
be reinstated without loss of seniority rights and other privileges. Owing to the strained relations
between petitioner and private respondent, allowing the former to return to her job would only subject
her to possible harassment and future embarrassment. In the instant case, separation pay equivalent to
one month's salary for every year of continuous service with the private respondent would be proper,
starting with her job at the Belfront Hotel.

In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik
Bustamante, et al. vs. National Labor Relations Commission, 33 petitioner is entitled to full backwages
from the time of her illegal dismissal up to the date of promulgation of this decision without
qualification or deduction.

Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be
terminated from employment with two written notices before the same may be legally effected. The
first is a written notice containing a statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate him stating the basis of the dismissal.
During the process leading to the second notice, the employer must give the employee ample
opportunity to be heard and defend himself, with the assistance of counsel if he so desires.

Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy
that the private respondent never even bothered to inform petitioner of the charges against her.
Neither was petitioner given the opportunity to explain the loss of the articles. It was only almost two
months after petitioner had filed a complaint for illegal dismissal, as an afterthought, that the loss was
reported to the police and added as a supplemental answer to petitioner's complaint. Clearly, the
dismissal of petitioner without the benefit of notice and hearing prior to her termination violated her
constitutional right to due process. Under the circumstance an award of One Thousand Pesos
(P1,000.00) on top of payment of the deficiency in wages and benefits for the period aforestated would
be proper.

WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated
April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the
petitioner are hereby summarized as follows:

1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's illegal
dismissal;

2) Service incentive leave pay; night differential pay and 13th month pay for the same period;

3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the
private respondent starting with her job at the Belfront Hotel;

4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to
the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC. 34

5) P1,000.00.

ORDERED