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G.R.No.167217

FIRSTDIVISION

P.I.
MANUFACTURING,
G.R.No.167217
INCORPORATED,

Petitioner,

Present:

versus
PUNO,C.J.,Chairperson,

SANDOVALGUTIERREZ,

CORONA,
P.I.
MANUFACTURING
AZCUNA,and
SUPERVISORS
AND
LEONARDODECASTRO,JJ.
FOREMANASSOCIATION and

the
NATIONAL
LABOR

UNION,
Promulgated:
Respondents.

February4,2008
xx

DECISION

SANDOVALGUTIERREZ,J.:

TheCourthasalwayspromotedthepolicyofencouragingemployerstograntwageand
allowanceincreasestotheiremployeeshigherthantheminimumrates of increases prescribed
bystatuteoradministrativeregulation.Consistentwiththis,theCourtalsoadoptsthepolicythat
requiresrecognitionandvalidationof wage increases given by employers either unilaterally
[1]
orasaresultofcollectivebargainingnegotiationsinanefforttocorrectwagedistortions.

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BeforeusisamotionforreconsiderationofourResolutiondatedApril18,2005denying
thepresentpetitionforreviewoncertiorariforfailureofthepetitionertoshowthatareversible
errorhasbeencommittedbytheCourtof Appeals in its (a) Decision dated July 21, 2004 and
(b)ResolutiondatedFebruary18,2005.

Thefactsare:

Petitioner P.I. Manufacturing, Incorporated is a domestic corporation engaged in the

manufactureandsaleofhouseholdappliances.Ontheotherhand,respondentP.I.Manufacturing
Supervisors and Foremen Association (PIMASUFA) is an organization of petitioners
supervisorsandforemen,joinedinthiscasebyitsfederation,theNationalLaborUnion(NLU).

[2]
OnDecember10,1987,thePresidentsignedintolawRepublicAct(R.A.)No.6640
providing, among others, an increase in the statutory minimum wage and salary rates of
employeesandworkersintheprivatesector.Section2provides:
SEC. 2. The statutory minimum wage rates of workers and employees in the private
sector,whetheragriculturalornonagricultural,shallbeincreasedbytenpesos(P10.00)perday,
except nonagricultural workers and employees outside Metro Manila who shall receive an
increase of eleven pesos (P11.00) per day: Provided, That those already receiving above the
minimum wage up to one hundred pesos (P100.00) shall receive an increase of ten pesos
(P10.00) per day. Excepted from the provisions of this Act are domestic helpers and persons
employedinthepersonalserviceofanother.

Thereafter,onDecember18,1987,petitionerandrespondentPIMASUFAenteredintoa
new Collective Bargaining Agreement (1987 CBA) whereby the supervisors were granted an
increaseofP625.00permonthandtheforemen,P475.00permonth.The increases were made
retroactivetoMay12,1987,orpriortothepassageofR.A.No.6640,andeveryyearthereafter
untilJuly26,1989.Thepertinentportionsofthe1987CBAread:
ARTICLEIV
SALARIESANDOVERTIME

Section1.TheCOMPANYshallgranttoallregularsupervisorsandforemenwithinthe
coverageoftheunitrepresentedbytheASSOCIATION,wageorsalaryincreasesintheamount
setforthasfollows:
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A.ForFOREMEN
EffectiveMay12,1987,anincreaseofP475,00permonthtoallqualifiedregularforemen
whoareintheserviceoftheCOMPANYasofsaiddateandwhoarestillinitsemployonthe
signingofthisAgreement,subjecttotheconditionssetforthinsubparagraph(d)hereunder
a) EffectiveJuly 26, 1988, an increase of P475.00 per month/employee to all
coveredforemen
b) EffectiveJuly26,1989,anincreaseofP475.00permonth/peremployeetoall
coveredforemen
c)ThesalaryincreasesfromMay12,1987toNovember30,1987shallbeexcluding
andwithoutincrementonfringebenefitsand/orpremiumandshallsolelybeonbasicsalary.
B.ForSUPERVISORS
a) Effective May 12, 1987, an increase of P625.00 per month/employee to all
qualifiedregularsupervisorswhoareintheserviceoftheCOMPANYasofsaiddateandwho
are still in its employ on the signing of the Agreement, subject to the conditions set forth in
subparagraph(d)hereunder
b) EffectiveJuly26,1988, an increase of P625.00 per month/employee to all
coveredsupervisors
c)EffectiveJuly26,1989,anincreaseofP625.00permonth/employeetoallcovered
supervisors
d)ThesalaryincreasefromMay12,1987toNovember30,1987shallbeexcluding
andwithoutincrementonfringebenefitsand/orpremiumsandshallsolelybeonbasicsalary.

On January 26, 1989, respondents PIMASUFA and NLU filed a complaint with the
ArbitrationBranchoftheNationalLaborRelationsCommission(NLRC),docketedasNLRC
[3]
NCR Case No. 000100584, charging petitioner with violation of R.A. No. 6640.
Respondents attached to their complaint a numerical illustration of wage distortion resulting
fromtheimplementationofR.A.No.6640.

On March 19, 1990, the Labor Arbiter rendered his Decision in favor of respondents.
Petitioner was ordered to give the members of respondent PIMASUFA wage increases
equivalent to 13.5% of their basic pay they were receiving prior to December 14, 1987. The
LaborArbiterheld:
AsregardstheissueofwagedistortionbroughtaboutbytheimplementationofR.A.6640
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Itiscorrectlypointedoutbytheunionthatemployeescannotwaivefuturebenefits,much
lessthosemandatedbylaw.Thatisagainstpublicpolicyasitwouldrendermeaninglessthelaw.
Thus,thewaiverintheCBAdoesnotbartheunionfromclaimingadjustmentsinpayasaresult
ofdistortionofwagesbroughtaboutbytheimplementationofR.A.6640.
Justhowmucharethesupervisorsandforemenentitledtocorrectsuchdistortionisnow
thequestion.Pursuanttothesaidlaw,thosewhoonDecember14,1987werereceivinglessthan
P100.00 are all entitled to an automatic across theboard increase of P10.00 a day. The
percentage in increase given those who received benefits under R.A. 6640 should be the
samepercentagegiventothesupervisorsandforemen.
ThestatutoryminimumpaythenwasP54.00aday.WiththeadditionofP10.00aday,the
said minimum pay raised to P64.00 a day. The increase of P10.00 a day is P13.5% of the
minimum wage prior to December 14, 1987. The same percentage of the pay of members of
petitionerpriortoDecember14,1987shouldbegiventhem.
Finally,theclaimofrespondentthatthefilingofthepresentcase,insofarastheprovision
ofR.A.6640isconcerned,isprematuredoesnotdeservemuchconsiderationconsideringthatas
of December 1988, complainant submitted in grievance the aforementioned issue but the same
[4]
wasnotsettled.

Onappealbypetitioner,theNLRC,initsResolutiondatedJanuary8,1991,affirmedthe
LaborArbitersjudgment.

Undaunted,petitionerfiledapetitionforcertiorariwiththisCourt.However,wereferred
the petition to the Court of Appeals pursuant to our ruling in St. Martin Funeral Homes v.
[5]
NLRC. ItwasdocketedthereinasCAG.R.SPNo.54379.

OnJuly21,2004,theappellatecourtrendereditsDecisionaffirmingtheDecisionofthe
NLRCwithmodificationbyraisingthe13.5%wageincreaseto18.5%.Wequotethepertinent
portionsoftheCourtofAppealsDecision,thus:
Anent the fourth issue, petitioner asseverates that the wage distortion issue is already
barredbySec.2ArticleIVoftheContractdenominatedasTheCompanyandSupervisorsand
ForemenContractdatedDecember18,1987declaringthatitabsolves,quitclaimsandreleases
the COMPANY for any monetary claim they have, if any there might be or there might
havebeenprevioustothesigningofthisagreement.Petitionerinterpretsthisasabsolvingit
fromanywagedistortionbroughtaboutbytheimplementationofthenewminimumwagelaw.
SincethecontractwassignedonDecember17,1987,oraftertheeffectivityofRepublicActNo.
6640,petitionerclaimsthatprivaterespondentisdeemedtohavewaivedanybenefititmayhave
underthenewlaw.
Wearenotpersuaded.
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Contrarytopetitionersstance,theincreaseresultingfromanywagedistortioncausedby
the implementation of Republic Act 6640 is not waivable. As held in the case of Pure Foods
Corporationvs.NationalLaborRelationsCommission,etal.:
Generally, quitclaims by laborers are frowned upon as contrary to public
policy and are held to be ineffective to bar recovery for the full measure of the
workersrights.Thereasonfortheruleisthattheemployerandtheemployeedo
notstandonthesamefooting.

Moreover,Section8oftheRulesImplementingRA6640states:
No wage increase shall be credited as compliance with the increase
prescribed herein unless expressly provided under valid individual
written/collective agreements and provided further that such wage increase was
granted in anticipation of the legislated wage increase under the act. But such
increases shall not include anniversary wage increases provided in collective
bargainingagreements.
Likewise,Article1419oftheCivilCodemandatesthat:
When the law sets, or authorizes the setting of a minimum wage for
laborers,andacontractisagreeduponbywhichalaboreracceptsalowerwage,
heshallbeentitledtorecoverthedeficiency.
Thus,notwithstandingthestipulationprovidedunderSection2oftheCompanyandSupervisors
andForemenContract,wefindthemembersofprivaterespondentunionentitledtotheincrease
oftheirbasicpayduetowagedistortionbyreasonoftheimplementationofRA6640.
Onthelastissue,theincreaseof13.5%inthesupervisorsandforemensbasicsalarymustfurther
be increased to 18.5% in order to correct the wage distortion brought about by the
implementationofRA6640.ItmustberecalledthatthestatutoryminimumpaybeforeRA6640
wasP54.00 a day. The increase of P10.00 a day under RA 6640 on the prior minimum pay of
P54.00is18.5%andnot13.5%.Thus,petitionershouldbemadetopaytheamountequivalentto
18.5% of the basic pay of the members or private respondent union in compliance with the
provisionsofSection3ofRA6640.

Petitionerfiledamotionforreconsiderationbutitwasdeniedbytheappellatecourtinits
ResolutiondatedFebruary18,2005.

Hence,thepresentrecourse,petitionerallegingthattheCourtofAppealserred:
1) Inawardingwageincreasetorespondentsupervisorsandforementocurean
alleged wage distortion that resulted from the implementation of R.A. No.
6640.

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2) Indisregardingthewageincreasesgrantedunderthe1987CBAcorrecting
whateverwagedistortionthatmayhavebeencreatedbyR.A.No.6640.
3) In awarding wage increase equivalent to 18.5% of the basic pay of the
membersofrespondentPIMASUFAinviolationoftheclearprovisionofR.A.
No.6640excludingfromitscoverageemployeesreceivingwageshigherthan
P100.00.
4)InincreasingtheNLRCsawardofwageincreasefrom13.5%to18.5%,which
increaseisverymuchhigherthantheP10.00dailyincreasemandatedbyR.A.
No.6640.

Petitioner contends that the findings of the NLRC and the Court of Appeals as to the
existenceofawagedistortionarenotsupportedbyevidencethatSection2ofR.A.No.6640
doesnotprovideforanincreaseinthewagesofemployeesreceivingmorethanP100.00and
thatthe1987CBAhasobliteratedanypossiblewagedistortionbecausetheincreasegrantedto
the members of respondent PIMASUFA in the amount of P625.00 and P475.00 per month
substantiallywidenedthegapbetweentheforemenandsupervisorsandasagainsttherankand
fileemployees.

Respondents PIMASUFA and NLU, despite notice, failed to file their respective
comments.

InaMinuteResolutiondatedApril18,2005,wedeniedthepetitionforpetitionersfailure
toshowthattheCourtofAppealscommittedareversibleerror.

Hence,thismotionforreconsideration.

Wegrantthemotion.

Intheultimate,theissuehereiswhethertheimplementationofR.A.No.6640resultedin
awagedistortionandwhethersuchdistortionwascuredorremediedbythe1987CBA.

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R.A.No.6727,otherwiseknownastheWageRationalizationAct,explicitlydefineswage
distortionas:
xxxasituationwhereanincreaseinprescribedwageratesresultsintheeliminationor
severe contraction of intentional quantitative differences in wage or salary rates between and
amongemployeegroupsinanestablishmentastoeffectivelyobliteratethedistinctionsembodied
insuchwagestructurebasedonskills,lengthofservice,orotherlogicalbasesofdifferentiation.

Otherwisestated,wagedistortionmeansthedisappearanceorvirtualdisappearanceof
pay differentials between lower and higher positions in an enterprise because of compliance
[6]
withawageorder.

Inthiscase,theCourtofAppealscorrectlyruledthatawagedistortionoccurreddueto
[7]
the implementation of R.A. No. 6640. The numerical illustration submitted by respondents
showssuchdistortion,thus:
IIWAGEDISTORTIONREGARDINGRA6640(P10.00perdayincreaseeffective
December31,1987)

IllustrationofWageDistortionandcorrespondingwageadjustmentsasprovidedinRA
6640

RATE
RATEAFTER

BEFORE INCREASEOF
NAMEOFSUPERVISOR INCREASE
RA6640
(S)
OF
P10.00
AND
RA6640
FOREMAN(F)
P10.00

1.ALCANTARA,V
P99.01
P109.01
(S)
2. MORALES, A
94.93
104.93
(F)
3.SALVO,R(F)
96.45
106.45
Note:No.1to3withincreaseofRA6640
4.BUENCUCHILLO,
102.38
102.38
C(S)
5. MENDOZA, D
107.14
107.14
(F)
6. DEL PRADO, M
108.80
108.80
(S)
7.PALENSO,A(F)
109.71
109.71
8.OJERIO,E(S)
111.71
111.71
9.REYES,J(S)
114.98
114.98
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P109.01
P118.80
P128.08
OVER
OVER
OVER
PASSED
PASSED
PASSED
P108.80
P118.08
P123.76
RATEAFTER RATEAFTER RATEAFTER
ADJUSTMENT ADJUSTMENT ADJUSTMENT
P10.00
P10.00
P10.00

P112.38

117.14

118.80

P119.71
121.71
124.98

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10. PALOMIQUE, S
116.79
116.79
(F)
11. PAGLINAWAN,
116.98
116.98
A(S)
12.CAMITO,M(S)
117.04
117.04
13. TUMBOCON, P
117.44
117.44
(S)
14.SISONJR.,B(S)
118.08
118.08
15.BORJA,R(S)
119.80
119.80
16.GINON,D(S)
123.76
123.76
17.GINON,T(S)
151.49
151.49
18.ANDRES,M(S)
255.72
255.72
Note:No.4to18noincreaseinR.A.No.6640

126.79

126.98

127.04
127.44

128.08

P129.80
133.76

Notably, the implementation of R.A. No. 6640 resulted in the increase of P10.00inthe
wage rates of Alcantara, supervisor, and Morales and Salvo, both foremen. They are
petitionerslowestpaidsupervisorandforemen.Asaconsequence,theincreasedwagerates
offoremenMoralesandSalvoexceededthatofsupervisorBuencuchillo.Also,theincreased
wage rate of supervisor Alcantara exceeded those of supervisors Buencuchillo and Del
Prado. Consequently, the P9.79 gap or difference between the wage rate of supervisor Del
Prado and that of supervisor Alcantara was eliminated. Instead, the latter gained a P.21 lead
overDelPrado.Likeadomino effect, these gaps or differences between and among the wage
ratesofalltheaboveemployeeshavebeensubstantiallyalteredandreduced.It is therefore
undeniable that the increase in the wage rates by virtue of R.A. No. 6640 resulted in wage
distortionortheeliminationoftheintentionalquantitativedifferencesinthewageratesofthe
aboveemployees.

However,whilewefindthepresenceofwagedistortions,weareconvincedthatthesamewere
cured or remedied when respondent PIMASUFA entered into the 1987 CBA with petitioner
after the effectivity of R.A. No. 6640. The 1987 CBA increased the monthly salaries of the
supervisorsbyP625.00andtheforemen,byP475.00,effectiveMay12,1987.Theseincreases
reestablishedandbroadenedthegap,notonlybetweenthesupervisors and the foremen, but
also between them and the rankandfile employees. Significantly, the 1987 CBA wage
increasesalmostdoubledthatoftheP10.00increaseunderR.A.No.6640.TheP625.00/month
means P24.03 increase per day for the supervisors, while the P475.00/month means P18.26
increaseperdayfortheforemen.Theseincreasesweretobeobservedeveryyear,startingMay
12, 1987 until July 26, 1989. Clearly, the gap between the wage rates of the supervisors and
thoseoftheforemenwasinevitablyreestablished.Itcontinuedtobroadenthroughtheyears.
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Interestingly,suchgapasreestablishedbyvirtueoftheCBAismorethanasubstantial
compliance with R.A. No. 6640. We hold that the Court of Appeals erred in not taking into
accounttheprovisionsoftheCBAvizavizthewageincreaseunderthesaidlaw.In National
[8]
FederationofLaborv.NLRC, weheld:
We believe and so hold that the reestablishment of a significant gap or differential
between regular employees and casual employees by operation of the CBA was more than
substantialcompliancewiththerequirementsoftheseveralWageOrders(andofArticle124of
the Labor Code). That this reestablishment of a significant differential was the result of
collective bargaining negotiations, rather than of a special grievance procedure, is not a
legal basis for ignoring it. The NLRC En Banc was in serious error when it disregarded the
differential of P3.60 which had been restored by 1 July 1985 upon the ground that such
differentialrepresent[ed] negotiated wage increase[s] which should not be considered covered
andincompliancewiththeWageOrders.xxx

[9]
InCapitolWireless,Inc.v.Bate, wealsoheld:

xxxThewageordersdidnotgrantacrosstheboardincreasestoallemployeesintheNational
Capital Region but limited such increases only to those already receiving wage rates not more
than P125.00 per day under Wage Order Nos. NCR01 and NCR01A and P142.00 per day
underWageOrderNo.NCR02.Sincethewageordersspecifiedwhoamongtheemployeesare
entitled to the statutory wage increases, then the increases applied only to those mentioned
therein.TheprovisionsoftheCBAshouldbereadinharmonywiththewageorders,whose
benefitsshouldbegivenonlytothoseemployeescoveredthereby.

Ithasnotescapedourattentionthatrequiring petitioner to pay all the members of respondent

PIMASUFA a wage increase of 18.5%, over and above the negotiated wage increases
providedunderthe1987CBA,ishighlyunfairandoppressivetotheformer.Obviously,itwas
not the intention of R.A. No. 6640 to grant an acrosstheboard increase in pay to all the
employeesofpetitioner.Section2ofR.A. No. 6640 mandates only the following increases in
the private sector: (1) P10.00 per day for the employees in the private sector, whether
agriculturalornonagricultural,whoarereceivingthestatutoryminimumwagerates(2)P11.00
perdayfornonagriculturalworkersandemployeesoutsideMetroManilaand(3)P10.00 per
day for those already receiving the minimum wage up to P100.00. To be sure, only those
receiving wages P100.00 and below are entitled to the P10.00 wage increase. The apparent
intention of the law is only to upgrade the salaries or wages of the employees specified
[10]
therein.
As the numerical illustration shows, almost all of the members of respondent
PIMASUFA have been receiving wage rates above P100.00 and, therefore, not entitled to the
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P10.00increase.Onlythree(3)ofthemarereceivingwageratesbelowP100.00,thus,entitled
tosuchincrease.Now,todirectpetitionertograntanacrosstheboardincreasetoallofthem,
regardlessoftheamountofwagestheyarealreadyreceiving,wouldbeharshandunfairtothe
former.AsweruledinMetropolitanBankandTrustCompanyEmployeesUnionALUTUCPv.
[11]
NLRC:
x x x To compel employers simply to add on legislative 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 statutory prescribed minimum rates of increases.
Clearly, this would be counterproductive so far as securing the interests of labor is
concerned.

Corollarily, the Court of Appeals erred in citing Pure Foods Corporation v. National Labor
[12]
Relations Commission
as basis in disregarding the provisions of the 1987 CBA. The case
involves,notwagedistortion,butillegaldismissalofemployeesfromtheservice.The Release
andQuitclaimexecutedthereinbythePureFoodsemployeeswereintendedtoprecludethem
from questioning the termination of their services, not their entitlement to wage increase on
accountofawagedistortion.

Atthisjuncture,itmustbestressedthataCBAconstitutesthelawbetweenthepartieswhen
[13]
freely and voluntarily entered into.
Here, it has not been shown that respondent
PIMASUFAwascoercedorforcedbypetitionertosignthe1987CBA.Allofitsthirteen(13)
officerssignedtheCBAwiththeassistanceofrespondentNLU.Theysigneditfullyawareof
thepassageofR.A.No.6640.Thedutytobargainrequiresthatthepartiesdealwitheachother
withopenandfairminds.A sincere endeavor to overcome obstacles and difficulties that may
arise, so that employeremployee relations may be stabilized and industrial strife eliminated,
[14]
mustbeapparent.
Respondentscannotinvokethebeneficialprovisionsofthe1987CBA
but disregard the concessions it voluntary extended to petitioner. The goal of collective
bargaining is the making of agreements that will stabilize business conditions and fix fair
[15]
standardsofworkingconditions.
Definitely,respondentsposturecontravenesthisgoal.

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Infine,itmustbeemphasizedthatintheresolutionoflaborcases,thisCourthasalwaysbeen
guided by the State policy enshrined in the Constitution that the rights of workers and the
promotionoftheirwelfareshallbeprotected.However,consistentwithsuchpolicy,the Court
cannot favor one party, be it labor or management, in arriving at a just solution to a
controversyifthepartyconcernedhasnovalidsupporttoitsclaim,likerespondentshere.

WHEREFORE, we GRANT petitioners motion for reconsideration and REINSTATE

thepetitionwelikewiseGRANT.TheassailedDecisionoftheCourtofAppealsinCAG.R.SP
No.54379isREVERSED.

SOORDERED.
ANGELINASANDOVALGUTIERREZ
AssociateJustice

WECONCUR:

REYNATOS.PUNO
ChiefJustice
Chairperson

RENATOC.CORONA
AssociateJustice

ADOLFOS.AZCUNA
AssociateJustice

TERESITAJ.LEONARDODECASTRO
AssociateJustice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusionsintheaboveDecisionwerereachedinconsultationbeforethecasewasassignedto
thewriteroftheopinionoftheCourtsDivision.
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REYNATOS.PUNO
ChiefJustice

[1]
NationalFederationofLaborv.NationalLaborRelationsCommission,G.R.No.103586,July21,1994,234SCRA311.
[2]
AnActProvidingforanIncreaseintheWageofPublicorGovernmentSectorEmployeesonaDailyWageBasisandinthe
StatutoryMinimumWageandSalaryRatesofEmployeesandWorkersinthePrivateSectorandforotherPurposes.Official
Gazette,Vol.84,No.7,February15,1988,pp.759761.
[3]
Rollo,NCRACN0.00112,p.2.
[4]
Record,NationalLaborRelationsCommission,pp.172173.
[5]
G.R.No.130866,September16,1998,295SCRA494,rulingthatallreferencesintheamendedSection9ofB.P.No.129to
supposedappealsfromtheNLRCtotheSupremeCourtareinterpretedandherebydeclaredtomeanandrefertopetitionsfor
certiorariunderRule65.Consequently,allsuchpetitionsshouldhenceforthbeinitiallyfiledintheCourtofAppealsinstrict
observanceofthedoctrineonthehierarchyofcourtsastheappropriateforumforthereliefdesired.
[6]
Azucena,TheLaborCodewithCommentsandCases,Vol.1,p.301.
[7]
Rollo,NCRACNo.00112,p.120.
[8]
Supra,footnote1.
[9]
316Phil.355(1995).
[10]
Manila Mandarin Employees Union v. National Labor Relations Commission, G.R. No. 108556, November 19, 1996, 264
SCRA320.
[11]
G.R.No.102636,September10,1993,226SCRA269.
[12]
G.R.No.122653,December12,1987,283SCRA133.
[13]
MactanWorkersUnionv.Aboitiz, G.R.No.L30241,June30,1972,45SCRA577,citingShellOilWorkersUnionv.Shell
CompanyofthePhilippines,39SCRA276(1971).
[14]
Werne,LawandPracticeoftheLaborContract,Volume1OriginandOperationDisputes,1957,p.20.
[15]
Werne,LawandPracticeoftheLaborContract,Volume1OriginandOperationDisputes,1957,p.180.

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