RULES IN FIXING WAGE

DISTORTION
Reported by:
Hibaya, Dennis
Lopez, Rizza Lynne
Sia, Nikki

WHAT IS WAGE DISTORTION?

a situation where an increase in prescribed wage rates;
results in the elimination or severe contraction of
intentional quantitative differences in wage or salary
rates;
between and among employee groups in an
establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length
of service, or other logical bases of differentiation.(As
amended by Republic Act No. 6727, June 9, 1989).

HOW WAGE STRUCTURE IS DONE?

Job Evaluation
The jobs or groups of positions are rated or
ranked base on the following factors:
Skill or education
Degree of responsibility
Physical effort
Working conditions
Complexity of duties

HOW WAGE STRUCTURE DONE?

Each factor is assigned a weight or value and each key job is given
points within the range of the weight.
The job ratings are clustered to determine the hierarchy or groups of
jobs which in turn correspond to salary grades, each grade progressing
by steps from hiring rate to maximum.
The salaries pertaining to positions are therefore results of studied
distinctions and relative value of jobs.
The higher the job grade, the higher the pay.
The differences among job-pay grades are intentional quantitative
differences which should be maintained, in fairness to the job
holders, despite mandated pay increases through wage orders.

Salary Scale

ELEMENTS OF WAGE DISTORTION

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. Elimination of the distinction between the two levels.
4. Existence of the distortion in the same region of the
country.

Possible Causes of Wage Distortion:

1. Government decreed increase thru wage orders
2. Merger of establishments (confusion or elimination of the
status of employee)
3. Increase granted by employers
4. Passage of RA 6727 or the Wage Rationalization Act

Possible Causes of Wage Distortion:

1. Government decreed increase thru wage orders

2 Kinds of Wage Orders:
The Congress provides for a statutory minimum wage
(during the martial law era) and an increase is given and
added to the daily wage.
With the passage of RA 6727, instead of providing for a
fixed amount for an increase, the wage order now fixes a
minimum wage below which the wages cannot fall.

Possible Causes of Wage Distortion

2. Merger of two establishments whereby the employees of the dissolved

company are absorbed by the surviving company

McDonalds

Jollibee

Casual

P160

P190

Permanent

P190

P200

McDonalds- Jollibee
Casual -- P190
Permanent -- P190
There will be wage distortion.

Possible Causes of Wage Distortion

3.

Employer granted increases to the workers of an establishment

The employer grants an increase affecting only a

certain group of employees thereby reducing
drastically or totally eliminating the salary gap
between such group and the next higher level.

Possible Causes of Wage Distortion

4. Passage of RA 6727

Existing Minimum
Wage

New Daily
Minimum Wage

Effects on Existing Wage Structure.

(Section 16, IRR of RA 6727)

Where the application of the wage increase

prescribed herein results in DISTORTIONS in the
wage structure within an establishment which
gives rise to dispute therein, such dispute shall:
a) First be settled voluntarily between the parties
b) In the event of deadlock, such dispute shall be
finally resolved through
compulsory arbitration by the Regional Arbitration
Branch of the NLRC having jurisdiction in the workplace.

ORGANIZED ESTABLISHMENT

Grievance Machinery under the CBA

CONCILIATION UNDER THE NCMB

NCMB will try to settle dispute over AMICABLE

SETTLEMENT.
Settlement must be arrived at within 10 days from
conciliation.
COMPULSORY ARBITRATION UNDER THE LABOR
ARBITER

If no settlement is arrived within 10 calendar days from

conciliation.
LA shall decide the case within 20 calendar days
from the time said dispute is submitted
APPEAL TO NLRC

Must be within 10 calendar days from receipt of

decision.
Decision is UNAPPEALABLE.
MR allowed within 10 days.
PETITION FOR CERTIORARI IN THE COURT OF
APPEALS (RULE 65)

Not later than 60 days from notice of the judgment,

order or resolution.

VOLUNTARY ARBITRATION UNDER CBA

Decision of the VA is FINAL and EXECUTORY after

the 10 day period from receipt of the copy of decision
by parties
One MR is allowed within 10 day period
Because of its final & executory nature only and TRO
from CA/SC will stay the execution of the VA
APPEAL TO CA FROM QUASI JUDICIAL BODIES
(RULE 43)

The Appeal shall be taken 15 days from notice of the

award, judgment, final order or resolution, if publication
is required by law for its effectivity, or its denial of
petitioners motion for new trial or reconsideration.
Involves question of fact, of law, or mixed questions of
fact and law
Correct Remedy: Petition for review with motion to
Stay.

APPEAL BY CERTIORARI IN THE SUPREME COURT

UNDER RULE 45

Within fifteen (15) days from notice of the judgment or

final order of resolution
PURE QUESTION OF LAW

UNORGANIZED ESTABLISHMENT

Employer and Employee Negotiations

CONCILIATION UNDER THE NCMB

NCMB will try to settle dispute over AMICABLE

SETTLEMENT.
Settlement must be arrived at within 10 days from
conciliation.
COMPULSORY ARBITRATION UNDER THE LABOR
ARBITER

If no settlement is arrived within 10 calendar days from

conciliation.
LA shall decide the case within 20 calendar days
from the time said dispute is submitted

VOLUNTARY ARBITRATION
REQUIRES CONSENT OF BOTH PARTIES

If the employer refuses to accede to the remedy

suggested by NCMB; OR Directly after failure of
negotiations.
Decision of VA is F&E after 10 days from the receipt
for the copy of the decision by the parties.
One MR is allowed within 10 day period.
Because of its Final and Executory nature, only a TRO
from the CA or SC will stay the execution of the VAs
judgment.
APPEAL TO CA FROM QUASI JUDICIAL BODIES
(RULE 43)

APPEAL TO NLRC

Must be within 10 calendar days from receipt of

decision.
Decision is UNAPPEALABLE.
MR allowed within 10 days.
PETITION FOR CERTIORARI IN THE COURT OF
APPEALS (RULE 65)

Not later than 60 days from notice of the judgment,

order or resolution.

The appeal shall be taken within fifteen 15 days from

notice of the award, judgment, final order or resolution,
or from the date of its publication, if publication is
required by law for its effectivity, or of the denial of the
petitioners motion for new trial or reconsideration.
Involves questions of fact, of law or mixed questions of
fact and law.
Correct remedy should be PETITION FOR REVIEW
WITH MOTION TO STAY.

APPEAL BY CERTIORARI IN THE SUPREME COURT

UNDER RULE 45

Within fifteen (15) days from notice of the judgment or

final order of resolution
PURE QUESTION OF LAW

Correction of Wage Distortion:

The Court has pointed out that through Article 124, the law
recognizes the validity of NEGOTIATED WAGE INCREASES to
correct wage distortion.
ORGANIZED ESTABLISHMENT refers to a firm or a company
where there is a recognized or certified exclusive bargaining
agreement.
UNORGANIZED ESTABLISHMENT where there is no
recognized union or collective bargaining agreement.

IF ORGANIZED OR UNIONIZED
a) The employer and the union should first negotiate to correct the
distortion (contemplates the absence of a grievance procedure)
b) If negotiations fail, the matter should be brought to the
grievance (machinery) procedure under their CBA
c) If no settlement is arrived at, the dispute should be submitted to
voluntary arbitration (voluntary arbitrators or panel of voluntary
arbitrators)
d) If still unresolved, or parties are unsatisfied, an appeal may be
made to the appropriate branch of the NLRC.

IF UNORGANIZED OR NOT UNIONIZED

a) The employer and the workers should negotiate to correct the
distortion.
b) If negotiations fail, the matter should be brought to the
National Conciliation and Mediation Board (NCMB).
c) If no settlement is arrived at after 10 calendar days of
conciliation, the dispute should be brought to the appropriate
branch of the NLRC, which shall conduct continuous hearings
and decide the dispute within 20 calendar days from the time
said dispute is submitted for compulsory arbitration.

Grievance Machinery or Procedure

(Article 260)
The parties to a collective bargaining agreement shall establish a
machinery for the adjustment and resolution of grievances arising from:
i.
ii.

The interpretation or implementation of CBA

The interpretation or enforcement of company personnel policies (the
voluntary

Arbitrator shall have exclusive and original jurisdiction to hear and

decide such grievances which remain unresolved after exhaustion of

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

Grievance Machinery or Procedure

(Article 260)
For this purpose, parties to a CBA shall

Name and designate in advance a Voluntary Arbitrator or panel of

Voluntary
Arbitrators, or
Include in the agreement a procedure for the selection of such
Voluntary Arbitrator or
panel of Voluntary Arbitrators, preferably from the listing of
qualified Voluntary Arbitrators duly accredited by the Board.

Grievance Machinery or Procedure

(Article 260)
In case the parties fail to select a Voluntary Arbitrator or panel of
Voluntary Arbitrators, the Board shall :
Designate the Voluntary Arbitrators, as may be necessary, pursuant to
the selection procedure agreed upon in the CBA, which shall act with
the same force and effect as if the Arbitrator or panel of Arbitrators
has been selected by the parties as prescribed.
The judge in voluntary arbitration is called ARBITRATOR while that in
compulsory arbitration is called LABOR ARBITER.
A Petition for Certiorari under Rule 65 of the Revised Rules of Court will
lie where:
A grave abuse of discretion or
An act without or in excess of jurisdiction on the part of the voluntary arbitrator is
clearly shown.

What should be contained in a CBA?

1.
2.
3.
4.

Terms and conditions of employment.

Wages.
Hours of Work.
Procedure for resolving grievances.

Organized or unionized establishments

may:
a) Meet and sit down and discuss the wage adjustment
b) In case of disagreement, the matter is elevated to the top
executives
c) Company grants an increase if it be proven that wage
distortion exists; this increase may be called a NEGOTIATED
WAGE INCREASE

 In case of organized or unionized establishments who submit to

voluntary arbitration, the mutual consent of the parties
governs the selection of a common arbitrator, usually from a
list found in the National Conciliation and Mediation Board [it
is a listing of qualified voluntary arbitrators duly accredited by
the Board].
If one of the parties does not agree with the other partys
selection of a voluntary arbitrator, parties will have to submit
to compulsory arbitration.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
A. WAGE DISTORTION in an UNORGANIZED ESTABLISHMENT:
Situation: In a company, there are 3 classes of employees

PROCEDURE FOR RESOLVING WAGE

DISTORTION
A wage order is issued fixing the minimum wage at P190. which group
will be affected?
Only class C because they are the minimum wage earners (unlike
before when the wage orders provided for an across-the-board
increase which affected everybody).
Under Wage Order No. 8, only C is entitled to the wage adjustment
come December 1, 2001. It will not apply equally to A and B. A and B
cannot validly demand a similar wage adjustment by virtue of the
wage order because the wage order only applies to those employees
receiving the minimum wage.
As a result, B and C will receive the same salary of P195 come
December 1. B now complains, what should he do?

PROCEDURE FOR RESOLVING WAGE

DISTORTION
Procedure for Resolving Wage Distortion in an
UNORGANIZED ESTABLISHMENT:
1) The employers and the workers should negotiate for the
adjustment of the wage rates:
Should the employer refuse to grant an adjustment,
then B should file a complaint with the NCMB on the
ground of wage distortion.
2) The dispute should be referred to the NCMB for
conciliation.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
HOW IS THIS DONE?
a) This procedure is initiated by the filing of a complaint
with the NCMB on the ground of wage distortion.
b) Just fill up the complaint form provided by the NCMB.
c) The Regional Director of the NCMB will now issue a
NOTICE OF HEARING directed to the employer inviting
him to meet with them at a designated time, date,
and place.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
HOW IS THIS DONE?
d) At the NCMB, the complainant B and the employer
will have to be present. This proceeding will be
supervised by an NCMB Hearing Officer.

This is entirely different from the first step because the third person
(NCMB Hearing Officer) now interferes and asks the employers
How much can you afford?

And to the employees

How much increase do you want?

In so doing, in takes into consideration the financial capacity of the

employer and the need of the workers.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
HOW IS THIS DONE?
e) The NCMB will try to settle the dispute through AMICABLE
SETTLEMENT.
Example: Employer wants to pay P1 increase. Employee wants P5
increase.

NCMB will settle for P3 and suggests this solution to both parties.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
HOW IS THIS DONE?
f) Should the employer refuse to accede to the remedy
suggested by the NCMB, the NCMB cannot make
negotiations to bind both parties because the main
purpose of NCMB is to conciliate and it will suggest
that the parties submit to VOLUNTARY ARBITRATION.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
Procedure for Resolving Wage Distortion in an UNORGANIZED
ESTABLISHMENT:
3) If no settlement is arrived at, then the dispute shall be
referred to the Regional Arbitration Branch of the NLRC for
COMPULSORY ARBITRATION.
This is presided over by Labor Arbiters (Article 217).
The proceeding is usually adversarial in character because it is initiated by a
complaint before the Labor Arbiter and the other party is required to answer.
So, there will be a full-blown hearing to resolve wage distortion.
Any decision coming out of the Labor Arbiter shall be binding on both
parties, whether they like it or not.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
Note: in the case of UNORGANIZED ESTABLISHMENTS

Prior to the time the parties submit their dispute to the NCMB, they could resort to VOLUNTARY ARBITRATION.
VOLUNTARY ARBITRATION is not compulsory; the parties will have to give their consent if they want to submit
their dispute to Voluntary Arbitration.
They will be given a LIST of voluntary arbitrators from which they will pick out those which they have chosen
to be the arbitrators.
However, most often than not, the parties do not submit their dispute to voluntary arbitration because most
of them do not trust the Voluntary Arbitrators.
The decision of the Voluntary Arbitrator is BINDING upon the parties. Why? This is a contractual proceeding
and the contract is the law of the parties.
In resolving wage distortions, you do not always consider monetary matters. You also have to take into
consideration the length of service, the skills.
Is the decision of the Voluntary Arbitrator appealable to the NLRC? NO, unless it becomes final and executory.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
The legal remedy to the decision of the Voluntary Arbitrator
1) To the Court of Appeals by way of Petition for Review under Rule 43
(Quasi-Judicial Agency) within 15 days.

If APPEAL, will that stay the decision of the Voluntary Arbitrator?

NO, because the decision of the Voluntary Arbitrator is final and
inappealable, but Temporary Restraining Order and a Writ of Preliminary
Injunction may be applied for.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
So, use Petition for Review with Motion to Stay, because of its final and
executory nature.
2) Then to the Supreme Court under Rule 45 on questions of law
(Appeal by Certiorari) 15 days from receipt of the decision of the
Court of Appeals or receipt of the denial of the motion for
reconsideration.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
B. WAGE DISTORTION in an ORGANIZED ESTABLISHMENT:
Most often than not, when there is a union, there is a CBA. And the
most important matter in the CBA is WAGES.
The union has more bargaining power than the ordinary employee; it
can demand for better labor standards (can even demand to see the
president of the company).
The CBA provides usually for wage increases which are usually acrossthe-board (for the benefit of all employees in the bargaining unit).
However, a wage order may be passed offsetting the increase given by
the employer, so there is a WAGE DISTORTION.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
Procedure for Resolving Wage Distortion in an
ORGANIZED ESTABLISHMENT:
1) The employer and the union shall negotiate to correct the wage
distortion.
2) If the negotiations fail, then the dispute is settled through the
grievance procedure under their CBA.
GRIEVANCE MACHINERY is simply a detailed procedure of how the
parties would resolve a dispute arising from:
i.
ii.

The interpretation or implementation of the CBA

Those arising from the interpretation or enforcement of company personnel
policies.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
Procedure for Resolving Wage Distortion in an
ORGANIZED ESTABLISHMENT:
3) If the dispute in unresolved, the matter is submitted for VOLUNTARY
ARBITRATION (which is not always the case because parties cannot be
compelled to submit to it).
4) The matter is also resolved through the NCMB by filing a complaint;
MEDIATION is done by the NCMB through its Hearing Officer, advising
the parties to submit their dispute to a voluntary arbitrator.
If both or one of the parties is unwilling to submit to Voluntary
Arbitrator, then the matter becomes unresolved.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
Procedure for Resolving Wage Distortion in an
ORGANIZED ESTABLISHMENT:
5) The matter is submitted to the Regional Arbitration Branch of the
NLRC for COMPULSORY ARBITRATION.

How is this done?

By filing a complaint with the Regional Arbitration Branch
The decision will be binding upon the parties.
From the decision of the Labor Arbiter, the matter would
be brought to the NLRC, then the CA, and even up to the
SC.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
Common Procedure in Unorganized and Organized Establishments:
If negotiations fail, the matter shall be referred to the National
Conciliation and Mediation Board (NCMB).
Now, the Hearing Officer of the NCMB will try to conciliate and
mediate between the parties so that they will reach an AMICABLE
SETTLEMENT.
If an amicable settlement is not reached, the Hearing Officer of the
NCMB will advise the parties to submit the matter to VOLUNTARY
ARBITRATION. So, there is Voluntary Arbitration for both organized
and unorganized establishments.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
In settling disputes, strikes and lockouts are impliedly
excluded as a mode of settlement because there is a very
detailed procedure provided for by the law in resolving wage
distortions (Article 124).
The authority on this matter is Ilaw at Buklod ng Manggagawa
vs. NLRC, GR No. 91980 (June 27, 1991)

The policy of the state is promoting collective bargaining as a mode of settling labor dispute.
There was a wage distortion affecting the establishment and what the employees did was to stage a strike in order to
compel the employer to solve wage distortion. The SC said NO. If RA 6727 is examined, strike is not provided as a
solution in resolving wage distortion. It should be through collective bargaining. Therefore, the SC declared the strike
as illegal because the Rules Implementing RA 6727 provides for a specific and detailed approach on how to resolve
wage distortion short of strike or lockout.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
Main Reason for Negotiations: Wage Adjustments
Does the procedure provided in Article 124 preclude the
company from initiating a solution to the problem of wage
distortion? Say, the employer himself believes that with the
passage of a certain wage order, a wage distortion is created.
Can he take action to solve it?

YES, because law through Article 124 has recognized

the validity of negotiated wage increases.

PROCEDURE FOR RESOLVING WAGE

DISTORTION
The company can even provide for a unilateral wage increase
to immediately solve the problem of wage distortion.
Note: The other level of employees receiving wages way above
the minimum allowable by law cannot legally compel the
company to provide a similar rate of increase provided by the
wage order for minimum wage earners. Why?

(1) RA 6727 as well as the policy of the state requires

that in the adjustment of wage rates, the same must not
be done by compulsion but through negotiation or CBA.
(2) Not all employers can afford the same amount of
increase to all employees at the same time.