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Wage Studies, Wage Agreements and Wage Determination

Art. 120. Creation of the NWPC, National Wages and Productivity

Commission through RA No. 6727, the Wage Rationalization Act
On June 9, 1989.


Executive Director - head
- same rank, salary & benefits as the Dept. Asst. Sec.
2 Deputy Directors - appointed by the President
-recommended by the DOLE Sec.

-same rank, salary & benefits as a Bureau Dir.

Art. 121. Powers and Functions of the NWPC:
a. Consulting and advisory body on wage, incomes and
productivity matters to the President and Congress
b. Review regional wage levels set by the Regional Tripartite Wages &
Productivity Boards to determine if these are in accordance with
prescribed guidelines and national development plans
c. Exercise technical and administrative supervision over the Regional
Tripartite Wages and Productivity Boards
d. Exercise powers and functions necessary to implement RA No. 6727.
e. Prescribe rules and regulations to determine minimum wage and
productivity measures at the provincial, regional and national level
f. Call a national tripartite conference of representatives of government,
workers and employers to consider measures to promote wage
rationalization and productivity
g. Review plans and programs of the Regional Tripartite Wages and
Productivity Boards to see if these are consistent with national
development plans
h. Undertake research necessary for the attainment of its functions
i. Formulate policies and guidelines on wages, incomes and
productivity improvement at the enterprise, industry and national levels
DOLE Secretary - ex-officio chairman
NEDA Director General - ex-officio vice-chariman
2 members from employers sectors
-appointed by the President
2 members from the workers sectors
-recommended by the DOLE
Executive Director of the NWPC
-based on the list submitted by
the workers & employers sectors
-serve for a term of 5 yrs.
-have the same rank, benefits &
salary prescribed by law for
labor & mgt. representatives in
the Employees Compensation


Art. 122. Creation of the Regional Tripartite Wages & Productivity

Boards (RTWPB) through RA 6727 on July 1, 1989
-known as Regional Boards
-NWPC determines the headquarters of the Regional Boards
-powers and functions are exercised within territorial jurisdictions
Powers and Functions of the Regional Boards: [DCRIED]
a. Develop plans, programs & projects relative to wages, income and
productivity improvement
b. Coordinate with other Regional Boards to attain the policy and
intention of the Labor Code
c. Receive, process and act on applications for exemption from
prescribed wage rates as may be provided by law or any Wage Order
d. Issue corresponding wage orders in accordance with the guidelines
set by the NWPC
e. Exercise other powers and functions necessary to carry out their
mandate under the Labor Code.
f. Determine & fix minimum wage rates applicable in their region,
province or industry
-implemented through regional offices of
-but technical supervision in relation to
the implementation still rests with the
Regional Boards
DOLE Regional Dir. - chariman
NEDA Regional Dir. - vice-chairman
DTI Regional Dir. - vice-chairman
2 members each from workers and employers sectors
-same qualifications as that of the NWPC
Secretariat - assists the Regional Board

Purpose of RTWPB: To rationalize wages, by:

a. Providing for full time boards to police wages round-the-clock
b. Giving the boards enough powers to achieve this objective
Courts Opinion on RA 6727: The Act sought a thinking group of men
and women, bound by statutory standards on the rationalization of wages.
Art. 123. Wage Order
What is a Wage Order?
- is an order issued by the Regional Board containing the prescribed
minimum wage in specific regions, provinces or industries, which is arrived
at after careful consideration of pertinent facts and criteria prescribed by law,
subject to guidelines issued by the NWPC.
When does it take effect?
-15 days from its complete publication in at least 1 newspaper of general
circulation in the region.
How does the Regional Board determine the minimum wage to be
indicated in the wage order?
1. The Regional Board will conduct public hearings/consultations with
employees and employers groups, city officials, municipal officials,
provincial officials and other interested parties.
2. Within 30 days after conclusion of the last hearing, the Board shall
decide on the merits of the petition.
3. It will then issue a wage order establishing the regional minimum
wage rates to be paid by employers, which shall in no case be lower than the
applicable statutory minimum wage rates.
Exception: The wage order may expressly specify rates that may be
lower than the minimum statutory wage rates.
4. The wage order may include wages by industry, wages by province or
5. The Regional Board shall then furnish the NWPC a copy of the
decision on the petition or the Wage Order.
6. The Regional Board shall then prepare the IRR of the Wage Order
upon the recommendation of the NWPC, subject to the approval of the DOLE
Secretary, not later than 10 days from the issuance of the Wage Order.
7. DOLE Sec. shall act on the IRR within 20 days from receipt thereof.
8. Once approved, the Regional Board shall then publish the IRR in at
least 1 newspaper of general circulation in the region.

How frequent will a Wage Order be issued?

-Any wage order issued by the Regional Board may not be disturbed for
12 months from its date of effectivity and no petition for wage increase shall
be entertained within the said period.
Is there no exception to this rule on the frequency of issuance of wage
-Yes, there is an exception. Supervening conditions may be taken into
account in demanding a review of the minimum wage rates as prescribed in
the previously issued wage order. Supervening conditions such as
extraordinary increases in prices of petroleum products and basic good or
services will trigger a review of the wage order. When this is deemed
necessary, the Regional Board may exercise its wage fixing function even
before the expiration of the said period.
Can any aggrieved party appeal a Wage Order issued by the Regional
-Yes, aggrieved parties may appeal such order to the NWPC within
10 calendar days from the publication of such order. It shall be mandatory for
the NWPC to decide on the appeal within 60 calendar days from the filing
Are there any grounds for an appeal to be considered by the NWPC?
-Yes, an appeal may be filed on the following grounds:
a. Non-conformity w/prescribed guidelines or procedure
b. Questions of law
c. Grave abuse of discretion
The filing of the appeal does not stay the order unless the person appealing
such order shall file with the NWPC an undertaking with a surety satisfactory
to the NWCP for the payment to the employees affected by the order of the
corresponding increase, in the event such order is affirmed.
Does a wage fixing order issued by the RTWPB need prior approval by
the NWCP?
-No, the NWCP may review the wage levels set by the RTWPBs, but the
wage fixing orders issued by the RTWPB do not need prior approval by the
NWCP. Both Art. 121 and 122 do not grant this power to the NWCP.
RTWPBs are empowered to determined and fix minimum wage rates
applicable in their regions...and to issue the corresponding wage orders.

Does the act of furnishing the NWCP a copy of the Wage Order mean
seeking its approval?
-No, furnishing the NWCP a copy of the Wage Order issued by the
RTWPB does not mean that it needs its approval; it only means that such
order is subject to their review. An approval by the NWCP is only needed for
the IRR which the RTWPB has to prepare within 10 days from the issuance
of the wage order. This IRR is approved by the DOLE Secretary upon the
recommendation of the NWCP.
Why is the approval of NWCP necessary for the IRR of a Wage Order?
-NWCPs approval is necessary for the IRR of a Wage Order because
only NWCP is empowered by RA 6727 to prescribe rules and regulations for
the determination of appropriate wages in the country.
If the IRR laid out by the RTWPB is not approved by the NWCP, what is
the effect of such an IRR?
-Guidelines or IRR laid out by the RTWPB without the approval of the
OF RIGHTS AND PRIVILEGES of the working men. The Supreme Court,
in a case, ruled that Art. 121 (c) and (d) and Art. 122 (b) clearly grant the
NWCP, 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 Art. 122 (b) of the Labor
Code, such orders are subject to the guidelines prescribed by the NWPC.
Are public hearings and publication a mandatory requirement for a
Wage Order?
-Yes, In the case of Cagayan Sugar Milling Co. Vs Sec. Of Labor, et al.
(1998), the Court upheld the objection of Cagayan Sugar Milling Co. when it
assailed the validity of Wage Order R02-02-A on the ground that it was
passed without the required public consultation and newspaper publication.
Respondents said that there was no need to comply with these requirements
since Wage Order R02-02-A merely clarified the ambiguous provision of the
orginal wage order. However, the Court held that there was no ambiguity as
it provided in clear and categorical terms for an increase in statutory
minimum wage workers in the region. Hence, the subsequent passage of R0202-A, providing instead for an across-the-board increase in wages did not
clarify the earlier order, but amended the same and changed the essence of the
original order. Hence, it was struck down as a violation of Art. 123 of the
Labor Code.

Art. 124. Standards/Criteria for Minimum Wage Fixing

-states that the regional minimum wages to be established by the
RTWPB shall be as nearly adequate as 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.
Note: Art. 124 contemplates a wage distortion arising from a compliance
with a wage order, NOT a distortion arising from a revision of salary
structure initiated by the employer.
What factors are to be considered in the determination of the of the
regional minimum wages?
-The following relevant factors to be considered are: [NINE WED PFC]
a. Needs of workers and their families
b. Improvements in standards of living
c. Need to induce industries to invest in the countryside
d. Effects on employment generation and family income
e. Wage adjustment vis-a-vis the consumer price index
f. Equitable distribution of income and wealth along the
imperatives of economic and social development
g. Demand for living wages
h. Prevailing wage levels
i. Fair return of the capital invested and employers capacity to pay
j. Cos of living changes or increases therein
Are the wages prescribed in accordance with Art. 124 considered the
prevailing minimum wages in every region?
-Yes, the wages prescribed in accordance with Art. 124 are considered
the standard prevailing minim wages in every region, which shall include
wages varying within industries, provinces or localities if the judgment of the
Regional Board make such local differentiation proper and necessary.
Art. 124 mandates that any person, company, corporation, partnership
and any other entity engaged in business to file and register annually
with the appropriate Regional Board, NWCP, and NSO, the required
documents. What are these documents that have to be registered?
- Under Art. 124, the document that has to be registered annually by
entities engaged in business is the itemized listing of their labor component,
which must contain the following:
a. Specific names of their workers

b. Specific names of their employees below the managerial level

c. Specific names of learners, apprentices and disabled/handicapped
workers who were hired under the terms prescribed in the employment
d. Corresponding salary and wages of each working class

across-the-board increase to its employees only when the wage distortion

contemplated under Art. 124 exists. If this happens, to remedy the distortion,
the employer must pay an across-the-board increase to its employees even if
at the time of the promulgation of the wage order, they were already being
paid more than the existing minimum wage.

What are the 2 methods of adjusting the minimum wage?

1. Fixing of determinate a determinate amount that would be added to the
prevailing statutory minimum wage.
2. Salary-ceiling method where the wage adjustment is applied to employees
receiving a certain denominated salary ceiling.
Note: RA 6727 adopts the Salary-Ceiling Method.

Illustrative Case:
Facts: Metrobank and its employee union arrived at a wage increase of P900
per month as of January 1, 199. It was arrived at through a collective
bargaining process or CBA. As result the daily wage of an employee holding
a lower position increased making a difference of only P100 in salary from an
employee holding a higher position.

Why was the Salary-Ceiling Method adopted by RA 6727?

-The Salary-Ceiling Method was adopted by RA 6727 because it minimized
wage distortion disputes which arose from the grievance procedure used in
attempting to be resolve labor disputes arising from wage distortions.

Question: Is there a quantitative wage salary difference or a sever contraction

in this case?

What is wage distortion?

Under Art. 124, wage distortion is 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 structures based on skills,
length of service, or other logical bases of differentiation.
In short, it is the effect of increasing the pay of an employee to such an
amount that equals, almost equals, or overtakes another employees pay
which has not been similarly increased. It is a result of the disappearance of
pay differentials because of compliance with a wage order. For a distortion to
exist, the law does not require a total elimination of quantitative wage salary
differences, a severe contraction thereof is enough.

Held: Yes, although there may not be an obliteration or elimination of said

quantitative distinction/difference, but clearly there is a contraction. The
intentional quantitative difference, intentional because it was arrived at
through a CBA, was contracted by more than 50%, or, in particular, by more
or less 83%, hence, there is no doubt that there is an evident sever contraction
resulting in the wage distortion. To rectify this, the Court must approximate
an acceptable quantitative difference between position levels, but an across
-the-board pay adjustment IS NOT REQUIRED BY LAW. According to
Justice Vitug, to compel employers 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 counterproductive so far as securing the interesets of labor is concerned.
(Metropolitan Bank & Trust Co. Employees Union-ALU TUCP vs NLRC,
GR No. 102636, Sept. 10, 1993)

If a wage order prescribes a minimum or floor wage to upgrade the

wages of employees receiving less than the minimum wage set by the
Order is issued, are employers compelled to grant an across-the-board
increase to its employees who, at the time of the promulgation of the
wage order, were already being paid more than the existing minimum
-No, those already placed higher than the new floor level need not be
moved further upward. An employer can only be compelled to grant an

What is minimum wage, and why do we have minimum wage?

-Minimum wage is the minimum amount of compensation an employee
must receive for performing labor. It is established by legislation which, in
effect, prohibits the payment of employees a pay lower than what is set as a
minimum wage by law.
-Minimum wage is set by RA 6727 in order for the State to attain the
following goals: [PEGEA]
a. Promote productivity-improvement and gain-sharing measures

b. Ensure a decent standard of living for the workers and their families
c. Guarantee the rights of labor ot its just share in the fruits of
d. Enchance employment generation in the countryside through industry
e. Allow business and industry reasonable returns on investment,
expansion, and growth.
What is wage structure or compensation plan?
-Wage structure or compensation plan is practiced by companies in
determining the pay grade of their employees. This requires classifying jobs
through Job Evaluation, where a point rating system is used. Jobs are given
quantitative ratings based on skill or education, degree of responsibility,
physical effort, work conditions, and complexity of duties. The job ratings
are clustered into job grades which correspond to salary grades. Each salary
grade progresses from hiring rate to maximum. Under the wage structure, the
salaries pertaining to positions are results of studied distinctions and relative
values of jobs. The higher the job grade, the higher the pay.
If a company revises its wage structure or compensation plan, thereby
effecting wage distortion, can it be held accountable under Art. 124 of the
Labor Code?
-No, Art. 124 of the Labor Code does not apply to a distortion arising
from a revision of a salary scale initiated by the employer, it only applies to a
wage distortion arising from a compliance of a wage order. If wage distortion
is effected through the employers initiation of a wage restructure, employees
can negotiate with its employers and lobby for a wage increase through
appropriate channels, such as through a collective bargaining agreement. In
the National Federation of Labor vs NLRC (1994), Court said that it cannot
interfere as this is a matter of management judgment and discretion, and
ultimately perhaps, a subject matter for bargaining negotiations.
If the same company, situated in different regions, decides to increase the
salary scale of one of its branches in one region, can it be considered
salary distortion by those branches in other regions which were not given
any increase by the company? Is this the distortion contemplated by Art.
-No to both questions. Art. 124 talks only of wage distortion resulting
from a compliance of a wage order. Also, if a company with different
branches in different regions decides to give an increase in pay only to one
branch in one region, it cannot be considered was wage distortion because for

one, the wages being compared are located in different regions; two, wage
fixing has been regionalized by RA 6727. That said each region has a
corresponding RTWPB which considers standards or criteria existing in the
region to fix a wage increase. Since these criteria vary from one region to
another, the pay levels of comparable jobs also tend to vary among regions.
Wage distortion will only arise if it involves comparison of jobs located in the
same region.
How do you correct wage distortion contemplated by Art. 124 of the
Labor Code?
-Wage distortion arising from compliance of a wage order can be
corrected through a negotiated wage increase to correct wage distortions,
which is recognized by the law as a valid remedy. The intent is to encourage
parties to seek solutions to the problem of wage distortion through voluntary
negotiation rather than strikes, lockouts, or other concerted activities of the
employees or management. Recognition and validation of wage increases are
given by employers either unilaterally or as a result of collective bargaining
negotiations for the purpose of correcting wage distortion are in keeping with
the public policy of encouraging employers to grant wage and allowance
increases to their employees which are higher than the minimum rates of
increases prescribed by law or administrative regulation.
Note: Wage Distortion is nonstrikeable as provided by Sec. 16, Chapter I
of RA 6727s IRR which declares that any issue involving wage
distortion shall not be a ground for strike/lockout.
What is the wage distortion adjustment formula?
-RA 6727 does not particularly prescribe a formula to estimate the
amount that will rectify or minimize wage distortion. However, NLRC
Commissioner Bonto-Paez in the case involving Metropolitan Bank
suggested a wage distortion adjustment formula that was accepted by the
Court as the appropriate measure.
This is merely a suggested
formula. Employers,
unions or employee reps.
may devise an equitable
formula differing from the
one adopted here.

Who is responsible to pay for wage increases for construction workers,

security services, janitorial services, and other similar services?
-According to Sec. 6 of RA 6727, the prescribed increases of the
aforementioned workers are to be borne by the principal or client of the
construction/service contractors and the contract shall be deemed amended
accordingly. However, in the event, the principal fails or client fails to pay the
prescribed wage rates, the construction/service contractor shall be jointly and
severally liable with his principal or client.
How does the DOLE ensure that the minimum wage law as described in
RA 6727 is being complied with?
-Sec. 9 of RA 6727provides that the DOLE shall conduct inspections as
often as possible of the payroll and other financial records kept by the
company or business to determine whether the workers are paid the
prescribed minimum wage rates and other benefits granted by law or by a
Wage Order.
In unionized companies, the DOLE inspectors shall always be
accompanied by any of the following in the conduct of the inspection
a. president
b. any reasonable officer of the recognized bargaining unit
c. any reasonable officer of the interested union
In non-unionized companies, establishments, or businesses, the
inspection should be carried out in the presence of a worker representing the
workers in the said company, who shall have the right to submit his own
findings to the DOLE to testify on the same if he cannot concur with the
findings of the labor inspector.
Art. 125. Freedom to Bargain. Workers in particular firms or enterprise of
industries have the freedom to bargain for higher wages with their respective
employer. No Wage Order can prevent this.
Art. 126. Prohibition Against Injuction. No preliminary or permanent
injunction or temporary restraining order may be issued by any court, tribunal
or other entity against any proceedings before the NWCP or the Regional
Art. 127. Non-Diminution of Benefits. No Wage Order issued by any
regional board shall provide for wage rates lower than the statutory minimum
wage rates prescribed by Congress.

Art. 128. Visitorial and Enforcement Power

-Art. 128 (a) embodies the visitorial and enforcement power of the
Labor Secretary or his duly authorized representatives which includes the
labor regulation officers. It further provides that they shall have access to
employers records and premises at any time of the day or night whenever
work is being undertaken therein.
What can the Labor Secretary or his authorized representatives exercise when
performing a visitorial function?
- The Labor Secretary or his authorized representatives exercise the
following rights when performing a visitorial function:
a. to copy employers records
b. to question an employee
c. to investigate any fact, condition or matter
which may be necessary to determine violations or which may aid in the
enforcement the Labor Code and of any labor laws, wage order or IRRs
issued pursuant thereto.
If the Labor Sec. or his authorized representatives discover violations
against Labor Laws during inspection, how can liability of the employer
be determined and enforced?
-Under Art. 128 (b), the Labor Secretary or his duly authorized
representative, in the exercise of their visitorial and enforcement powers, are
authorized to issue compliance orders to give effect to the labor standards
provisions of the Labor Code and other labor legislation based on the findings
of labor employment and enforcement officers or industrial safety engineers
made in the course of inspection. The Labor Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate authority for
the enforcement of their orders.
Exception: Cases where the employer contestes the finding of the
labor employment and enforcement officer and raises issues supported
by documentary proofs which were not considered in the course of the
What is D.O. No. 57-04? What is the purpose behind its passing into law?
D.O. No 57-04 is also known as the LSEF or the Labor Standards Enforcement
Framework which came about because of the shortage of labor inspectors who help
the administration and enforcement responsibility of the DOLE. D.O. No. 57-04 was
put in place to remedy this deficiency and to build a culture of compliance among
employers based on voluntariness instead of compulsion in complying with labor laws
in the country.

D.O No. 57-04 comprises 3 approaches, what are these approaches and how
are they effected?
-The 3 approaches of LSEF are: Self-Assessment, Inspection, and
Advisory Service.
1. Self-Assessment is voluntary compliance mode.
-applicable to and encouraged in establishments with at least 200
workers and, regardless of number of workers, to unionized firms with
-guided by a checklist provided by the DOLE regional offices in
the 1st quarter of every year
-within 1 month after receiving the checklist, a committee in the
employer company composed of employer and employee reps. shall
accomplish the checklist and submit it to DOLE within 5 days.
2. Inspection - undertaken by DOLE inspectors
-in work places with 10-199 workers
-inspection priority are workplaces that are subjects of
complaints or where accidents and illnesses are
imminent or work hazards exist.
-construction sites and places where women and children
work are also considered inspection priority.
-inspection for compliance of establishment of health
programs under Art. 165 of the Labor Code may be
delegated to local government units
3. Advisory Services - applicable to establishments w/less than 10
-registered as BMBEs
-assistance is given to improve their productivity to
facilitate their eventual compliance with labor standards.
How are labor standard violations, unearthed through self-assessment or
inspection, or related cases, to be disposed of?
-It shall be disposed of in accordance with Articles 128, 129, 168, and
171 of the Labor Code.
Art. 128, visitorial and enforcement powers where the Labor Sec. or
his authorized representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases where the
employers contest the findings of the labor inspectors with supporting
documents not considered in the course of the inspection.

Art. 129. Recovery of wages, simple money claims and other

benefits, where the Labor Secretary or his duly authorized
representative may supervise the payment of unpaid wages and other
monetary claims and benefits, including legal interest, found owing to
any employee or househelper und this Code.
Art. 168. Safety and health standards, where the Labor
Secretary, by appropriate orders, shall set and enforce mandatory
occupational safety and health standards to eliminate or reduce
occupational safety and health hazards in all workplaces and institute
new, and update existing, programs to ensure safe and healthful working
conditions in all places of employment.
Art. 171. Administration of Safety and Health Law, where the
Labor Secretary shall be solely responsible for the administration and
enforcement of occupational safety and health laws, regulations, and
standards in all establishments and workplaces wherever they may be
located; who through appropriate regulations may collect reasonable
fees for the inspection of:
a. Steam boilers
b. Pressure vessels
c. Pipings and electrical installations
d. Test and approval for safe use of materials, equipment & other
e. Approval of plans for such materials, equipment & devices
This fee shall be deposited in the national treasury to the credit of the
occupational safety and health fund and shall be expended exclusively
for the administration and enforcement of safety and other labor laws
administered by the DOLE.
What is the effect of the amendment of RA 7730 on Articles 128, 129 and
-RA 7730 freed the visitorial and enforcement power of the Regional

Director from the jurisdictional limitations imposed by Art. 129 and 217
as embodied in the phrase notwithstanding the provision of Articles 129
and 217... The intention of RA 7730 is to broaden the extent and
heighten the effectiveness of the enforcement power of the Regional
Director being the governments regional representative to give effect to
the labor standards provision of the Labor Code and other labor

Can the Dole Regional Director determine the existence of employeremployee relationship?
-Initially, As ruled in the Bombo Radyo Case (2009), the Court said that
determining the existence of employer-employee relationship should be
comprehensive and intensive and better left to the specialized quasi-judicial
body that is the NLRC. The intricacies and implications of an employeremployee relationship demand that the level of scrutiny should be far above
the cursory and the mechanical. The employer-employee relationship is a
matter fraught with questions of fact and law, which is best resolved by the
NLRC rather than an administrative official of the executive branch.
However, in 2012, it modified its decision through an En Banc
Resolution, conceding that DOLE has the authority to determine the existence
of an employer-employee relationship, subject to judicial review, NOT
REVIEW BY THE NLRC. Court said that DOLE must have the power to
determine the existence of an employer-employee relationship and from
there, decide whether or not to issue compliance orders in accordance with
Art. 128 (b) of the Labor Code as amended by RA 7730.