41. MILLARES VS.

NATIONAL LABOR RELATIONS COMMISSION, 305 SCRA 500 (1999) (LABOR STANDARDS WAGES, CUSTOMARY FACILITIES) FACTS: Article 97, par. (f), of the Labor Code defined wage as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. 116 employees of Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur were terminated under a retrenchment program as a solution to a major financial setback. Aside from their one month basic pay, petitioners believe that the allowances they allegedly regularly received on a monthly basis should have also been included in the computation of their separation. PICOP grants the following allowances: 1. Staff allowance/managers allowance to those who live in rented houses near the mill site which ceases whenever a vacancy occurs in the companys free housing facilities. 2. Transportation allowance in the form of advances for actual transportation expenses subject to liquidation is given to key officers and managers who use their own vehicles in the performance of their duties. This privilege is discontinued when the conditions no longer obtain. 3. Bislig allowance is given to managers and officers on account of the hostile environment prevailing therein. Once the recipient is transferred elsewhere, the allowance ceases. Applying Art. 97, par (f) of the Labor Code which defines wage, the Executive Labor Arbiter opined that the subject allowances, being customarily furnished by respondent PICOP and regularly received by petitioners, formed part of the latters wage. However, the NLRC decreed that the allowances did not form part of the salary base used in computing separation pay since the same were contingency-based. ISSUE: Whether or not the allowances in question are considered facilities customarily furnished? HELD: No. Customary is founded on long established and constant practice connoting regularity. The receipt of allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a factor worth considering. The subject allowances were temporarily, not regularly received by petitioners because once the conditions for the availment ceased to exist, the allowance reached the cutoff point. The petitioners continuous enjoyment of the disputed allowances was based on contingencies the occurrence of which wrote finis to such enjoyment. 42. SONGCO VS. NLRC [G.R. NO. L-50999 MARCH 23, 1990] FACTS: Zuellig (M) Inc. filed with the Department of Labor (Regional Office No. 4) a clearance to terminate the services of petitioners Jose Songco, Romeo Cipres and Amancio Manuel due to alleged financial losses. However, the petitioners argued that the company is not suffering any losses and the real reason for their termination was their membership in the union. Later, petitioners manifested that they no longer contesting their dismissal, however, they argued that they should be granted a separation pay. Each of the petitioners was receiving a monthly salary of P40, 000.00 plus commissions for every sale they made. Under the CBA entered by the Zuellig Inc. and the petitioners, in Article XIV, Section 1(a), Any employee, who is separated from employment due to old age, sickness, death or permanent lay-off not due to the fault of said employee shall receive from the company a retirement gratuity in an amount equivalent to one months salary per year of service. One month of salary as used in this paragraph shall be deemed equivalent to the salary at date of retirement; years of service shall be deemed equivalent to total service credits, a fraction of at least six months being considered one year, including probationary employment. Other basis for petitioners contention are Article 284 of the Labor Code with regard to reduction of personnel and Sections 9(b) and 10 of Rule 1, Book VI of the Rules Implementing the Labor Code. The Labor Arbiter rendered his decision directing the company to pay the complainants separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service that they have worked with the company. The petitioners appealed to the NLRC but it was denied. Petitioner Romeo Cipres filed a Notice of Voluntary Abandonment and Withdrawal of petition contending that he had received, to his full and complete satisfaction, his separation pay. Hence, this petition. ISSUE: Whether or not earned sales commissions and allowances should be included in the monthly salary of petitioners for the purpose of computation of their separation pay? HELD: It has been settled in the case of Santos vs. NLRC that the computation of backwages and separation pay, account must be taken not only of the basic salary of petitioner but also of her transportation and emergency living allowances. In the issue of whether commission should be included in the computation of their separation pay. Commission is define as the recompensed, compensation or reward of an agent, salesman, executor, trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on

the profit to the principal (Blacks Law Dictionary).The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that the commission are part of petitioners wage and salary. Some salesmen do not receive any basic salary but depend on commission and allowances or commissions alone, are part of petitioners wage and salary. Some salesman do not received any basic salary but depend on commission and allowances or commissions alone, although an employer-employee relationship exist. In Soriano v. NLRC, it is ruled then that, the commissions also claimed by petitioner (override commission plus net deposit incentive) are not properly includible in such base figure since such commissions must be earned by actual market transactions attributable to petitioner. Applying this by analogy, since the commissions in the present case were earned by actual market transactions attributable to petitioners, these should be included in their separation pay. In the computation thereof, what should be taken into account is the average commissions earned during their last year of employment. 43. PNB V PNB EMPLOYEES ASSOCIATION115 SCRA 507| July 30, 1982 FACTS: PNB and PNB Employees Association (PEMA) had a dispute regarding the proper computation of overtime pay. PEMA wanted the cost of living allowance (granted in 1958) and longevity pay (granted in 1961) to be included in the computation. PNB disagreed and the 2 parties later went before the CIR to resolve the dispute. CIR decided in favor of PEMA and held that PNB should compute the overtime pay of its employees on the basis of the sum total of the employees basic salary or wage plus cost of living allowance and longevity pay. The CIR relied on the ruling in NAWASA v NAWASA Consolidated Unions, which held that for purposes of computing overtime compensation, regular wage includes all payments which the parties have agreed shall be received during the work week, including differentiated payments for working at undesirable times, such as at night and the board and lodging customarily furnished the employee. This prompted PNB to appeal, hence this case. ISSUE: Whether or not the cost of living allowance and longevity pay should be included in the computation of overtime pay as held by the CIR? HELD: No. Overtime Pay as defined by C.A. 444, now Art. 87 Labor Code, is the additional pay for service or work rendered or performed in excess of 8 hours a day by employees or laborers in employment covered by the 8 hour Labor Law and not exempt from its requirements. It is computed by multiplying the overtime hourly rate by the number of hours worked in excess of eight. Overtime pay is for extra effort beyond that contemplated in the employment contract. Additional pay given for any other purpose cannot be included in the basis for the computation of overtime pay. Absent a specific provision in the CBA, the bases for the computation of overtime pay are two (2) computations, namely: 1. Whether or not the additional pay is for extra work done or service rendered; and 2. Whether or not the same is intended to be permanent and regular, not contingent nor temporary as a given only to remedy a situation which can change any time. Longevity pay cannot be included in the computation of overtime pay for the very simple reason that the contrary is expressly stipulated in the CBA, which constitutes the law between the parties. As regards cost of living allowance, there is nothing in Commonwealth Act 444 [or the 8-hour Labor Law, now Art. 87 Labor Code] that could justify PEMAs posture that it should be added to the regular wage in computing overtime pay. CA 444 prescribes that overtime work shall be paid at the same rate as th eir regular wages or salary, plus at least 25% additional. The law did not define what is a regular wage or salary. What the law emphasized is that in addition to regular wage, there must be paid an additional 25% of that regular wage to constitute ov ertime rate of pay. Parties were thus allowed to agree on what shall be mutually considered regular pay from or upon which a 25% premium shall be based and added to makeup overtime compensation. No rule of universal application to other cases may be justifiably extracted from the NAWASA case. CIR relies on the part of the NAWASA decision where the SC cited American decisions whose legislation on overtime is at variance with the law in this jurisdiction. The US legislation considers work in excess of forty hours a week as overtime; whereas, what is generally considered overtime in the Philippines is work in excess of the regular 8 hours a day. It is understandably material to refer to precedents in the US for purposes of computing weekly wages under a 40-hour week rule, since the particular issue involved in NAWASA is the conversion of prior weekly regular earnings into daily rates without allowing diminution or addition. To apply the NAWASA computation would require a different formula for each and every employee. It would require reference to and continued use of individual earnings in the past, thus multiplying the administrative difficulties of the Company. It would be cumbersome and tedious a process to compute overtime pay and this may again cause delays in payments, which in turn could lead to serious disputes. To apply this mode of computation would retard and stifle the growth of unions themselves as Companies would be irresistibly drawn into denying, new and additional fringe benefits, if not those already existing, for fear of bloating their overhead expenses through overtime which, by reason of being unfixed, becomes instead a veritable source of irritant in labor relations. As to the question why is a laborer or employee who works beyond the regular hours of work entitled to extra compensation called, in this enlightened time, overtime pay, the answer is that: there can be no other reason than that he is made to work longer than what is commensurate with his agreed compensation for the statutorily fixed or voluntarily agreed hours of labor he is supposed to do. When he thus spends additional time to his work, the effect

upon him is multi- faceted; he puts in more effort, physical and/or mental; he is delayed in going home to his family to enjoy the comforts thereof; he might have no time for relaxation, amusement or sports; he might miss important pre-arranged engagements; etc. It is thus the additional work, labor or service employed and the adverse effects just mentioned of his longer stay in his place of work that justify and are the real reasons for the extra compensation that is called overtime pay. 44. PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION (PACIWU)-TUCP, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT, INC., respondents. G.R. No. 107994 August 14, 1995 FACTS: Philippine Agricultural Commercial and Agricultural Workers Union TUCP is the exclusive bargaining agent of the rank and file employees of Vallacar Transit, Inc. The union instituted a complaint with NLRC for payment of 13th month pay in behalf of the drivers and conductors of respondent company's Visayan operation on the ground that although said drivers and conductors are compensated on a "purely commission" basis as described in their Collective Bargaining Agreement (CBA), they are automatically entitled to the basic minimum pay mandated by law should said commission be less than their basic minimum for eight (8) hours work. Labor Arbiter and NLRC dismissed the petition. Hence, this motion for reconsideration. ISSUE: Whether or not the bus drivers and conductors are entitled to 13th month pay HELD: Yes. P.D. 851, otherwise known as the "13th Month Pay" Law prescribed payment of 13th month pay. 13th month pay means one-twelfth (1/12) of the basic salary of an employee within a calendar year and that basic salary shall include all remunerations or earnings paid by an employer to an employer for services rendered. In Memorandum Order No. 28 issued by President Corazon C. Aquino, it provides that all employers are required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year. Later, Minister of Labor and Employment issued MOLE Explanatory Bulletin which provides that employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay, based on their total earning(s) during the calendar year. Commission is the recompense, compensation, reward of an employee, agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit of the principal. Hence, every employee receiving a commission in addition to a fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and file employees a 13th month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the bottom line is that they receive a guaranteed wage. While the bus drivers and conductors are considered as being compensated on a commission basis, they are not paid purely by what they receive as commission. Thus, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed minimum wage in case their commissions be less than the statutory minimum, and commissions only in case where the same is over and above the statutory minimum, must be equivalent to one-twelfth (1/12) of their total earnings during the calendar year. 45. NASIPIT LUMBER COMPANY, INC., and PHILIPPINE WALLBOARD CORPORATION, petitioners, vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION, WESTERN AGUSAN WORKERS UNION (WAWU-ULGWP LOCAL 101), TUNGAO LUMBER WORKERS UNION (TULWU-ULGWP LOCAL 102) and UNITED WORKERS UNION (UWU-ULGWP LOCAL 103), respondents. G.R. No. 113097 April 27, 1998 The Labor Code, as amended by RA 6727 (the Wage Rationalization Act), grants the National Wages and Productivity Commission (NWPC) the power to prescribe rules and guidelines for the determination of appropriate wages in the country. Hence, "guidelines" issued by the Regional Tripartite Wages and Productivity Boards (RTWPB) without the approval of or, worse, contrary to those promulgated by the NWPC are ineffectual, void and cannot be the source of rights and privileges. FACTS: The Region X [Tripartite Wages and Productivity] Board issued Wage Order No. RX-01 which provides the increase in minimum wage rates applicable to workers and employees in the private sector in Northern Mindanao (Region X) (P13.00/day for Agusan del Norte, Bukidnon, Misamis Oriental, and the Cities of Butuan, Gingoog, and Cagayan de Oro; P11.00/day for Agusan del Sur, Surigao del Norte and Misamis Occidental, and the Cities of Surigao Oroquieta, Ozamis and Tangub; and P9.00/dayfor Camiguin) Nasipit Lumber Company, Inc. (NALCO), Philippine Wallboard Corporation (PWC), and Anakan Lumber Company (ALCO), claiming to be separate and distinct from each other but for expediency and practical purposes, jointly filed an application for exemption from the Wage Orders as distressed establishments an based the exemption on Guidelines No. 3 issued by the herein Board but did not pass the approval of the Commission.

ISSUE: Whether or not the guideline issued by an RTWPB without the approval of or, worse, contrary to the guidelines promulgated by the NWPC valid? HELD: Not valid. Article 121 of the Labor Code lists the powers and functions of the NWPC. Which includes that the Commission has the power to (c) To prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels ; (d) To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards to determine if these are in accordance with prescribed guidelines and national development plans; among others. Article 122 of the Labor Code, on the other hand, prescribes the powers of the RTWPB, one of which is (b) To determine and fix minimum wage rates applicable in their region, provinces or industries therein and to issue the corresponding wage orders, subject to guidelines issued by the Commission. The foregoing clearly grants the NWPC, not the RTWPB, the power to "prescribe the rules and guidelines" for the determination of minimum wage and productivity measures. While the RTWPB has the power to issue wage orders under Article 122 (b) of the Labor Code, such orders are subject to the guidelines prescribed by the NWPC. Significantly, the NWPC authorized the RTWPB to issue exemptions from wage orders, but subject to its review and approval. Since the NWPC never assented to Guideline No. 3 of the RTWPB, the said guideline is inoperative and cannot be used by the latter in deciding or acting on petitioners' application for exemption. To allow RTWPB Guideline No. 3 to take effect without the approval of the NWPC is to arrogate unto RTWPB a power vested in the NWPC by Article 121 of the Labor Code, as amended by RA 6727. If a discrepancy occurs "between the basic law and an implementing rule or regulation, it is the former that prevails." This is so because the law cannot be broadened by a mere administrative issuance. It is axiomatic that "[a]n administrative agency cannot amend an act of Congress." Article 122 (e) of the Labor Code cannot be construed to enable the RTWPB to decide applications for exemption on the basis of its own guidelines which were not reviewed an approved by the NWPC, for the simple reason that a statutory grant of "powers should not be extended by implication beyond what may be necessary for their just and reasonable execution. Official powers cannot be merely assumed by administrative officers, nor can they be created by the courts in the exercise of their judicial functions." 46. Employees Confederation of the Philippines (ECOP) vs. NWPC201 SCRA 759 (1991) Facts: Petitioners ECOP questioned the validity of the wage order issued by the RTWPB dated October 23, 1990 pursuant to the authority granted by RA 6727. The wage order increased the minimum wage by P17.00 daily in the National Capital Region. The wage order is applied to all workers and employees in the private sector of an increase of P 17.00 including those who are paid above the statutory wage rate. ECOP appealed with the NWPC but dismissed the petition. The Solicitor General in its comment posits that the Board upon the issuance of the wage order fixed minimum wages according to the salary method. Petitioners insist that the power of RTWPB was delegated, through RA 6727, to grant minimum wage adjustments and in the absence of authority, it can only adjust floor wages. Issue: Whether or not the wage order issues by RTWPB dated October 23, 1990 is valid. Ruling: The Court agrees with the Solicitor General. It noted that there are two ways in the determination of wage, these are floor wage method and salary ceiling method. The floor wage method involves the fixing of determinate amount that would be added to the prevailing statutory minimum wage while the salary ceiling method involves where the wage adjustment is applied to employees receiving a certain denominated salary ceiling. RA 6727 gave statutory standards for fixing the minimum wage. 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 framework 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 of employment generation and family income; and (j) The equitable distribution of income and wealth along the imperatives of economic and social development."

The wage order was not acted in excess of boards authority. The law gave reasonable limitations to the delegated power of the board 47. APEX MINING COMPANY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and SANDIGAN NG MANGGAGAWANG PILIPINO, represented by RANULFO PEDRERA, President, respondents. G.R. No. 86200 February 25, 1992 FACTS: Sandigan ng Manggagawang Pilipino ("Sandigan") filed before the Labor Arbiter a claim for Emergency Cost of Living Allowance ("ECOLA") differential against petitioner Apex Mining Company, Inc. ("Apex") alleging that Apex had paid its employees an aggregate cumulative daily ECOLA of only P15.00 which was P2.00 below the cumulative minimum ECOLA of P17.00 (for non-agricultural workers) established under Wage Order No. 6; and that petitioner had belatedly granted the additional P2.00. Apex denied having failed to comply with Wage Order No. 6, contending that it had, by previous agreement, incorporated the alleged P2.00 deficiency into the basic salary of its employees. In turn, Sandigan denies that such an agreement had been made, but conceded that a P2.00 increase in basic salary had been made by Apex, in compliance with a provision of the Collective Bargaining Agreement ("CBA") then in force between Apex and Sandigan, and not in fulfillment of Apex's obligation under Wage Order No. 6. Sandigan pointed out that Wage Order No. 6 had taken effect on 1 November 1984, several months after the P2.00 had been integrated by Apex into the basic salary of its employees. ISSUE: Whether or not the P2.00 per day increase in basic salary granted by Apex pursuant to the CBA, was lawfully credited towards compliance with increases in ECOLA required under Wage Orders Nos. 5 and 6? HELD: Yes. The P2.00 increase integrated in the basic salary of Apex's, employees was concededly given under the provisions of the CBA. Both Wage Order No. 5 and Wage Order No. 6 expressly allowed the crediting of increases in wages or allowances granted under CBAs towards compliance with increases i n ECOLA requirements prescribed by those Wage Orders. Section 7 o f Wage Order No. 5 provided as follows: All increases in wages and/or allowances granted by employers between February 1, 1984 and the effectivity of this order [16 June 1984] shall be credited as compliance with the minimum wage and allowance adjustments prescribed herein . . . Section 4 of Wage Order No. 6 had very similar language: All increases in wages and/or allowances granted by employers between June 17, 1984 and the effectivity of this order [November 1, 1984] shall be credited as compliance with the minimum wage and allowance adjustments prescribed herein It is important to note that the creditability provisions in Wage Orders Nos. 5 and 6 are grounded in an important public policy. That public policy may be seen to be the encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates of increases prescribed by statute or administrative regulation. Further, every grant of daily increase in statutory minimum wage rates and living allowance must be considered as independent, separate or apart from the wage increases in the collective bargaining agreement and must be integrated into the salary scale of the employees to the end that the desired rates decreed by the National Wages Council are attained. Thus, Apex having lawfully credited the P2.00 increase in basic salary towards compliance of the increase in ECOLA prescribed by Wage Orders Nos. 5 and 6, it follows that respondent Sandigan's claim to a differential in ECOLA lacks basis in fact and in law. 48. PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and PT&T EMPLOYEE'S UNION-ALU, respondents. G.R. No. 99858 June 19, 1995 FACTS: Herein private respondent PT&T Union-ALU initiated this case via a complaint, filed on 25 November 1986, charging petitioner Philippine Telegraph and Telephone Corporation ("PT&T") with unfair labor practice acts and underpayment of statutory and contractual benefits claimed to be due pursuant to Wage Orders No. 3, 4, 5 and 6, and also under Sections 2 and 3, Article IX, of the 1984 Collective Bargaining Agreement ("CBA") and Section 2, Article XII, of the 1986 CBA. Petitioner denied the charges. ISSUE; Whether or not the PT&T be obligated to pay both the CBA and statutory, wage increases? HELD: No. Union members should be paid their salary differentials in accordance with Wage Orders No. 3 to 6; and Sections 2 and 3, Article IX of the 1984 CBA and Section 2, of Article XII of the 1986 CBA. The common provisions of Wage Orders No. 3, 5, and 6, state that: All increases in wages and/or allowances granted or paid by employers . . . shall be credited as compliance with the minimum wage and allowance adjustments prescribed herein, provided that where the increases are less than the applicable amount provided in this Order, the employer shall pay the difference. Such increases shall not include

anniversary wage increases provided in collective bargaining agreements unless the agreements expressly provide otherwise Petitioner company and private respondent union, in the 1984 and 1986 CBAs, in turn, have stipulated that: The parties agree that in the event of additional wage increases, bonuses or allowances which may during the life of this agreement being made mandatory as a matter of law, such that the minimum wage including bonuses and allowances shall be greater than the wage provided therein, then such wages shall ipso factobecome the total remunerations under such agreement in lieu of all other remunerations and increases herein provided . The foregoing CBA provisions reveal quite sufficiently the parties' intention to consider salary increases provided in the CBA to be creditable to wage increases that are or may be mandated within the applicable period by law. Such agreements merely create an equivalence between legal and contractual imperatives, rendering both obligations susceptible performance by compliance with either, subject only to the condition that where the increases given under agreement fall short in amount of those fixed by law, the difference must be made up by the employer 49. PRUBANKERS ASSOCIATION VS. PRUDENTIAL BANK AND TRUST COMPANY 302 SCRA 74 (1999) Facts: On November, the RTWPB 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 had rendered service for at least three (3) months before its effectivity, and for the same period thereafter, in the following categories: P17.50 in the cities of Naga and Legaspi; P15.50 in the municipalities of Tabaco, Daraga, Pili and the city of Iriga; and P10.00 for all other areas in the Bicol Region. On November 1993, RTWPB 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 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 bank granted a COLA of P17.50 to its employees at its Naga Branch, the only branch covered by Wage Order No. RB 503, 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, 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. It 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. Issue: Whether or not a wage distortion resulted from respondent's implementation of the Wage Orders. Ruling: The court ruled that there is no wage distortion since the wage order implementation covers all the branches of the bank. The hierarchy of positions was still preserved. The levels of different pay classes was not eliminated. The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended by Republic Act No. 6727, which reads: 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 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." 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 and (4) The existence of the distortion in the same region of the country. A disparity in wages between employees holding similar positions but in different regions does not constitute wage distortion as contemplated by law. As stated, 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.
50. METRO TRANSIT ORGANIZATION, INC., petitioner, vs. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, Second Division; EDNA BONTO-PEREZ, Presiding Commissioner; DOMINGO H. ZAPANTA, Commissioner; ROGELIO I. RAYAZA, Commissioner; and THE SUPERVISORY EMPLOYEES ASSOCIATION OF METRO (SEAM), respondents. G.R. No. 116008 July 11, 1995 FACTS: Metro Transit Organization, Inc. ("Metro") is the operator and manager of the Light Railway Transit (LRT) System in Metro Manila. It employs close to 1,000 rank-and-file and over 200 supervisory employees. Private respondent Supervisory Employees Association of Metro (SEAM) is a union composed of supervisory employees of petitioner Metro. In May 1989, SEAM was certified as the sole bargaining unit for the supervisory employees of Metro.

The first CBA between petitioner Metro and private respondent SEAM took effect. Prior to this, Metro had a CBA only with its rank-andfile employees. During the period when no CBA governed the terms and conditions of employment between Metro and its supervisory employees, 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 P50.00. Later, Metro paid its rank-and-file employees a salary increase of P500.00 per month in accordance with the terms of their CBA. Metro, however, did not extend a corresponding salary increase to its supervisory employees. Then, Metro, in compliance with its CBA with SEAM, paid its supervisory employees a salary increase of P800.00 per month. Thereafter, Metro paid its rank-and-file and supervisory employees a P600.00 monthly increase. Then, it paid its supervisory employees the remaining balance of P400.00 per month in addition to the P600.00 a month it had earlier started to pay. Hence, SEAM filed a Notice of Strike before the National Conciliation and Mediation Board ("NCMB") charging petitioner Metro with (a) discrimination in terms of wages; (b) underpayment of salary increase per CBA for 1990 and/or adjustment of salaries for correction of disparity/inequity in pay with rank-and-file employees and (c) harassment and demotion of union officers. ISSUE: (a) Whether or not a wage distortion exists in respect of the salaries of the rank-and-file and supervisory employees of petitioner Metro? and (b) assuming a wage distortion existed, whether or not it has been corrected by petitioner Metro in accordance with law? HELD: (a) Yes, wage distortion exists when the salaries of rank-and-file employees were increased by P500.00 per month as stipulated in their CBA and no corresponding increase was paid to the supervisory employees. The increase of P550.00 sought by SEAM was neither an inducement nor was it contingent on (a) the success of the business of petitioner Metro; or (b) the increased production or work output of the company or (c) the realization of profits. The demand for this increase was based on a company practice, admitted by Metro, of granting a salary increase (and a premium) to supervisory employees whenever rank-and-file employees were granted a salary increase. That those increases were precisely designed to correct or minimize the wage distortion effects of increases given to rank-and-file employees (under their CBA or under Wage Orders), highlights the fact that those increases were part of the wage structure of supervisory employees. The demanded increase therefore is not a bonus that is generally not demandable as a matter of right. The demanded increase, in this instance, is an enforceable obligation so far as the supervisory employees of Metro are concerned. (b) Metro shall pay the "P550.00 per month wage increase effective April 17, 1989 and onwards" and similarly ordered the payment of P600.00 per month which it found to have been underpaid "effective December 1, 1990 and onwards." Thus, together with the increase of P550.00, those provisions will have adequately rectified the wage distortion which arose in respect of rank-and-file and supervisory employees. Metro must pay, the increase in pay of supervisory employees would be P1,500.00 more per month than the increases in pay of rank-and-file employees By the grant of the award of P550.00 to supervisory employees and by the operation of the Metro-SEAM CBA, the wage distortion which occurred on 17 April 1989 had been corrected. By 1 December 1991, a substantial gap or differential had been re-established between the salaries of the rank-and-file and supervisory employees of petitioner Metro. It was, therefore, grievous abuse of discretion for the NLRC to disregard such rectification and to rule that petitioner Metro was liable to its supervisory employees for P550.00 monthly increase beyond 1 December 1989 and "onwards." That distortion, as already pointed out, lasted only from 17 April 1989 up to 30 November 1989, since the following day, 1 December 1989, the CBA of Metro and SEAM went into effect. Additional payments of P600.00 per month to supervisory employees from 17 April 1990 up to 1 December 1990 should be deemed included in the P1,000.00 monthly increase effective from 1 December 1990 and onwards. Otherwise, allowing such will amount to unjust enrichment of supervisory employees at the expense of their employer Metro. Clearly therefore, 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.

51. BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC., respondents. G.R. No. 140689| February 17, 2004 FACTS: Bankard, Inc. (Bankard) classifies its employees by levels. Its Board of Directors approved a "New Salary Scale" for the purpose of making its hiring rate competitive in the industrys labor market. It 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 Employees Union-WATU (petitioner), the duly certified exclusive bargaining agent of the regular rank and file employees of Bankard, continue to request for an increase in the wages and salaries of Bankards regular employees. As their request remained unheeded, it filed a Notice of Strike 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. NLRC, finding no wage distortion, dismissed the case for lack of merit. Petitioners motion for reconsideration of the dismissal of the case was denied. Petitioner thereupon filed a petition for certiorari which was referred to the Court of Appeals which denied the same for lack of merit. ISSUE: Whether or not 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? HELD: 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. The four elements of wage distortion is laid down in the case of Prubankers Association v. Prudential Bank and Trust Company. 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 such as: (a) the degrees of responsibility, (b) the skills and knowledge required, (c) the complexity of the job, (d) or other logical basis of differentiation. The differing wage rate for each of the existing classes of employees reflects this classification. 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 Bankards 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. Bankards right to increase its hiring rate, to establish minimum salaries for specifi c 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. 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. Therefore, 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.