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Wage Distortion

Labor Standards
Its causes; resolution; Contents of CBA; and Definition of Organized
and Unorganized.

Causes of Wage Distortion

A newly government-decreed
increase in minimum wage
(wage order) .
Merging of two companies, with
differing classification of
employees and different wage
rates) and the surviving
company absorbs ALL the
employees of the dissolved

Both resulted to an
contraction of intentional
quantitative difference in
wage or salary rates
employee groups in an
the establishment as to
effectively obliterate the
distinction existed prior to
the decreed wage order or

Causes of Wage Distortion

Passage of Wage
Rationalization Act (RA 6727) .

Increase granted by the


contraction of intentional
quantitative difference in
wage or salary rates between
and among employee groups
in an the establishment as to
distinction existed prior to the
decreed wage order or

Concepts of Wage Distortion

In the case of Metro Transit Organization vs. NLRC, G.R. No. 116008, citing the case National
Federation of Labor vs. NLRC:

4th Concept:

The concept of wage distortion assumes an existing grouping or classification of

employees which establishes distinctions among such employees on some relevant or
legitimate basis. This classification is reflected in a deferring wage rate for each of the
existing classes of employees.

The re-establishment of a significant

difference in wage rates may
the result
of resort
to grievance
Wage be
have often
been the
result of government-decreed increases in
minimum wages. There are, however, other causes of wage distortions, like the merger
procedures or collective bargaining negotiations.
of two (2) companies (with differing classifications of employees and different wage
rates) where the surviving company absorbs all the employees of the dissolved
corporation. (In the present Metro case, as already noted, the wage distortion arose
because the effectivity dates of wage increases given to each of the two (2) classes of
employees (rank-and-file and supervisory) had not been synchronized in their
respective CBAs.)

Should a wage distortion exist, there is no legal requirement that, in the rectification of
that distortion by re-adjustment of the wage rates of the differing classes of employees,
the gap which had previously or historically existed be restored in precisely the same
amount. In other words, correction of a wage distortion may be done by re-establishing
a substantial or significant gap (as distinguished from the historical gap) between the
wage rates of the differing classes of employees.

Elements of Wage Distortion

An existing hierarchy of positions with corresponding salary rates;

A significant change in the salary rate of a lower pay class without a

concomitant increase in the salary rate of a higher one;

The elimination of the distinction between the two levels; and

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

Reference: (Prubankers Association vs. Prudential Bank and Trust Co. 302 SCRA 74, reiterated
in Bankard Employees Union-Workers Alliance Trade Unions vs. NLRC, G.R. No. 140689,
Feb. 17, 2004)

Resolving Disputes on Wage Distortion

Organized establishment
Refers to an establishment where there exists a recognized or
certified sole and exclusive bargaining agent.

Unorganized establishment
Refers to an establishment where there exists no recognized
union or collective bargaining agreement.

What is a CBA? What does it contain?

It refers to a negotiated contract between a

legitimate labor organization and the employer
which contains the following, to wit:

Terms & conditions of employment (e.g. rest

periods; holiday pay; SILP);


Hours of Work;

Procedures for resolving grievances.

What are classifications of Labor

Voluntary Arbitration

a contractual proceeding whereby the partiesto any

or controversy in order to obtain a speedy and
final disposition of the matter, select a judge of their own
choice and by consent, submit their controversy to him
for determination

Compulsory Arbitration
A process of settlment of labor disputes
by a government agency which has the
authority to investigate and make
which is binding to all parties.
The Regional Arbitration Branch of the
NLRC has the original and exclusive
Jurisdiction to hear and decide the

Voluntary Arbitration
Voluntary Arbitrators must be those named in the
CBA. (Permanent Arbitrators)
If not named, the selection must be done in
accordance with the procedure for selection of VAs
provided in the CBA. (ad hoc Arbitrators)
If both parties fail to select a VA or panel of VAs, the
NCMB shall designate a VA pursuant to the
procedure for selection of VAs in the CBA. (ad hoc

Grievance Procedure
Grievance Machinery or Procedure (Article 266 of Labor Code)
The parties to a collective bargaining agreement shall establish a machinery for
the adjustment and resolution of grievances arising from:

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)

Procedure in Handling Grievances

The specific provision in the CBA
or existing company practice
for the procedures in handling
grievance shall apply.

The following shall apply:

EE shall present his
grievance/complaint to the shop
Steward escalates it to EE's immediate
If not settled, submitted to grievance
committee which the latter must
decide within 10 days from receipt.

If still unresolved in the

grievance committee,
the EE or ER may
serve notice to the
other of its decision to
grievance/complaint to
voluntary arbitration.

In the absence of such provision/practice.

(The grievance committee must settle the

issue within 7 days otherwise the issue
shall be automatically be submitted for
Voluntary Arbitration)

Disputes in an organized establishment

as a result of wage distortion
Union and ER shall
negotiate to correct
the distortion.

If not


Negotiated Wage Increase

= it is the increase granted
in the negotiation, by the
employer after recognition
that a wage distortion did

Dispute shall be resolved in the grievance

Machinery provided in their CBA.

Voluntary Arbitration

File a complaint to NCMB, and the latter, thru

A Hearing Officer shall proceed for mediation
And conciliation.

Disputes in an organized establishment

as a result of wage distortion
The dispute shall be resolved
through grievance machinery
under their Collective Bargaining

Voluntary Arbitration
If one/both fail to
Submit for VA

Court of Appeals
Compulsory Arbitration

Mandatory Conference

Amicable Settlement




Decision after evaluation
Of the case


consists of efforts of a third party someone other than the

immediate disputants to assist the parties to end their dispute
perhaps by condoning each others fault or finding a give-and-take
Conceived of as a mild form of intervention by a neutral third party,
CM, relying on his persuasive expertise, who takes an active role in
assisting parties by trying to keep disputants talking, facilitating
other procedural niceties, carrying messages back and forth
between the parties, and generally being a good fellow who tires to
keep things calm and forward looking in a tense situation
Does not render verdict


there is also conciliation but a mediator within his authority takes a

more active role than a conciliator in searching for and formulating a
Mild intervention by a neutral third party, CM, whereby he starts
advising the parties or offering solutions or alternatives to the
problems with the end in view of assisting them towards voluntarily
reaching their own mutually acceptable settlement of the dispute.
Does not render verdict

Conciliator Mediator

official of the NCMB whose principal function is to

settle and dispose potential and actual labor
disputes through conciliation and preventive
mediation including the promotion and
encouragement of voluntary approaches to labor
disputes prevention and settlement.

Disputes in an unorganized establishment

as a result of wage distortion (NCMB)
File notice or

Service of copy
or request to
other party

Parties may
appear in their
own behalf or by

In case of bargaining
Who may file:
deadlocks, the notice shall as
a.Any certified or duly
far as practicable, further
of the
a.the unresolved issues in the
notice oremployer
declare aand
orunionto file:
bargaining negotiations and
request for
preventive a.shall be filed with the
be accompanied by the written
in cases
ofof regional
the industry
to having
over the workplaceproposals of the union,
the employer
b.the counterproposals of the
unfair labor
the union members.
number ofofunion
b.The employer
- Where two or more employer and
ofathe workers
off period:
c.the proof
of a request
notice orindeclare
the bargaining
unit, branches have
request for
over the
such other
relevant data
the facilitate
same cases.
the Branch that
b.Unfair labor practice 15
c.In the absence
of of
first received the notice
days, except:
duly recognized bargaining
shall acquire jurisdiction over
a. Dismissal from
representative, any legitimate
the dispute to the exclusion of
employment of union
labor organization in thethe other/s.
establishment may file a
- By written agreement
notice, request preventive
of both parties the venue of practices, the notice shall, as
mediation or declare a strike
the dispute shall be deemed far as practicable, state
a.the acts complained of and
but only on grounds of unfair
the efforts taken to resolve the
labor practice.
dispute amicably.

The lawyer or authorized representative of

parties must have the authority in writing to
bind their principal or client or enter into a
compromise agreement with the other party
in full or partial discharge of a principal's
client's claim.

Preparation of
the Agreement
- Extra care must be taken in drafting the Agreement in order to
minimize doubtful or vague interpretation that might result to further
disagreement or worsening of the problem.
- The Conciliator must see to it that the agreement must be clear and
concise and must contain all points of the parties' understanding.

and Compliance
- The conclusion of an agreement does not per se terminate the
responsibility of the Conciliator over the case.
- He must monitor the implementation and compliance therewith to
ensure that the parties have indeed normalized their relationship.

Submission of
- All Conciliators must regularly submit the necessary progress
reports to the NCMB Central Office through the Directors II for
cases of labor standard laws or wage distortions, copy furnished
the Regional Director or Executive Labor Arbiter concerned,
utilizing, the form prescribed for the purpose.
- The Final Conciliator's Report shall be submitted to the Office of the
NCMB Executive Director IV utilizing the outline prescribed by the

If unsettled by CM
Any or both parties involved in the dispute may preterminate the conciliation-mediation proceedings and
request referral or endorsement to the appropriate
DOLE agency or office which has jurisdiction over the
dispute, or if both parties so agree, refer the
unresolved issues to voluntary arbitration
Art 228 (b) by RA 10396

Voluntary Arbitrator

Setting of Initial Conference; Notice to Parties

- Within 2 days from receipt of

Submission agreement, Notice to
Arbitrate or Appointment, the
voluntary arbitrator, shall set the
date, time and place of the initial
conference with due notice to the

Initial Conference
- Parties
encouraged to
explore all
possible means
of effecting a
settlement of the

Should parties
arrive at any
agreement as to
the whole or any
part of the
dispute, the same
shall be reduced
in writing and
signed by the
parties before the

Authority to Require the Parties to

Enter into Stipulation of Facts

To facilitate speedy disposition of cases, in case the parties failed to reach a

voluntary settlement of the dispute, the voluntary arbitrator or panel of
voluntary arbitrators shall encourage the parties to enter into stipulation of
facts, which shall be reduced in writing, signed by the parties, and shall form
part of the records of the case.
Facts no longer disputable, leaving the presentation and examination of
evidence, and only such facts that are in dispute

Clarification and/or simplification of issues

- Arbitrator must see to it that he understands clearly the issue/s submitted.
- If he finds necessity to clarify/simplify the issues, he shall assist the parties
in the reformulation of the same

Authority to Conciliate and Mediate

Formulation of Ground Rules

In case of non-appearance of either parties for 2

consecutive conferences, despite dues notice, VA
shall terminate conference and issue order
requiring parties to submit position papers within
10 calendar days
Otherwise, case will be deemed submitted for
decision based on available records

absence of any voluntary

settlement, the voluntary arbitrator
shall proceed with the hearing of
the case on its merits.

- voluntary arbitrator or panel of

voluntary arbitrators are
encouraged to conciliate or
mediate to aid the parties in
reaching a voluntary settlement
of the dispute, before proceeding
with arbitration.

Once the arbitrator determines that no amicable settlement may be effected,

the parties and the arbitrator shall jointly formulate the ground rules
determining the following:
The date, time and place of hearing
Schedule and frequency of hearings
Rules on postponements
Period and manner of submission of position papers and other pleadings
Period to decide the case
Cost of arbitration
Recording/documentation of proceedings

Submission of Position Papers and

other pleadings

VA shall direct parties to submit verified position papers and other pleadings
on the dates agreed upon during the initial conference
These papers shall cover only issues and causes of action raised in the
submission agreement, notice to arbitrate or appointments of VA, and
stipulation of facts, as simplified and clarified during the initial conference
These shall be accompanied by supporting evidence including affidavits of
witnesses which shall take form if direct testimonies

Determination For Necessity of a

Clarificatory Conference including
conduct of ocular inspection

Determination of Necessity of a
Formal Hearing

Hearing Proper
Arbitration Conference

Immediately after the submission of the

position papers and other pleadings, the
voluntary arbitrator shall determine the
need for holding a clarificatory conference
or ocular inspection parties shall be duly

Immediately after the submission of the position papers and other pleadings,
the voluntary arbitrator shall determine the need for holding a formal hearing
where at his discretion, clarificatory questions may be asked from witnesses
to further elicit information material to the case.
1. Presentation of witnesses
2. Direct and cross examination
3. Redirect and re-cross examination
VA shall
- provide the parties adequate opportunities to be heard
- Control the proceedings and see to it that proper decorum is observed
- Must treat all significant aspects of the proceedings as confidential in
nature unless waived


Final and executory after 10 days

for receipt of copy

- May take the form of a dismissal of a claim or grant of specific

- Must be rendered within the period agreed upon the parties and
the arbitrator during the initial conference but in no case to exceed
20 calendar days from submission of case for decision
- Failure to render decision within the agreed period, without
justificable reason, shall upon verified complaint of a party be
sufficient ground for the board to discipline VA
- In event that parties finally settle their dispute during pendency of
the arbitration proceedings, the terms shall be reduced into writing
and shall be adopted as decision of the arbiter
- Must state in clear, concise and definite terms the facts and the
law upon which it is based

Not subject to motion for


Both parties shall comply voluntarily

and faithfully

Writ of execution

- In instances of non-compliance ,
a motion to enforce/execute
award may be filed with the VA
- In case of absence of VA, motion
shall be filed with Labor arbiter in
the region having jurisdiction
over the workplace

- The filing of a petition for

certiorari with CA or SC shall not
stay the execution of the
assailed decision unless a TRO
or injunction is issued by the CA
or SC pending resolution of such

Disputes in an unorganized establishment

as a result of wage distortion (NLRC)
Disputes arising from the wage distortion
resulting from the wage order issued by
the Regional Wage and Productivity Board
shall be referred to the appropriate
regional branch of the NLRC if not settled
within ten (10) calendar days of
[NCMB Manual of Procedures]

File a complaint or pleading with

appropriate docketing unit of the
Regional arbitration Branch of the

- Signed under oath by the

petitioner or complainant, with
declaration of non-forum

Full names of parties in

interest, whether natural
or juridical persons or
entities authorized by
law, shall be stated in the
caption of the complaint
or petition, as well as
decisions, resolutions or
orders of the Labor
Arbiter or the

- The party filing a pleading shall serve the opposing parties

with a copy and its supporting documents. No pleading shall
be considered without proof of service to the opposing parties
except if filed simultaneously during a schedule set before the
Labor Arbiter

-All cases which Labor Arbiters have authority to hear and decide
may be filed in the Regional Arbitration Branch having jurisdiction
over the workplace of the complainant or petitioner.

Raffle and assignment of cases

All complaints and petitions filed with the docket

unit of the Regional Arbitration Branch shall be
immediately raffled and assigned to a Labor Arbiter
from receipt thereof.

Nature of the proceedings

non-litigious in nature
the technicalities of law and procedure and the
rules obtaining in the courts of law shall not strictly
apply thereto.

Issuance of Summons

- Executive Labor Arbiter shall be responsible for the immediate raffle

and assignment of all complaints and petitions filed with his/her
Regional Arbitration Branch, and the immediate forwarding of all
subsequent pleadings and motions.
- All pleadings and motions subsequent to the filing of the complaint
shall be forwarded to the Labor Arbiter before whom the case is
pending within twenty-four (24) hours from receipt thereof.

Consolidation of Cases
Objection to consolidation shall be
resolved by the Executive Labor Arbiter

when a case is assigned

to a Labor Arbiter, the
entire case and any or all
incidents thereto shall be
considered assigned to
him/her; and the same
shall be disposed of in
the same proceedings to
avoid multiplicity of suits
or proceedings

- Within two (2) days from receipt of a complaint or amended complaint,

the Labor Arbiter shall issue the required summons, attaching thereto a
copy of the complaint or amended complaint and its annexes, if any.
The summons shall specify the date, time and place of the mandatory
conciliation and mediation conference in two (2) settings.

Service of Summons

- Summons shall be served personally upon the parties by the bailiff or a

duly authorized public officer within three (3) days from his/her receipt
- The bailiff or officer serving the summons shall submit his/her return
within two (2) days from date of service
- If no service was effected, the reason thereof shall be stated in the

Service of Summons

- Summons shall be served personally upon the parties by the bailiff or a

duly authorized public officer within three (3) days from his/her receipt
- The bailiff or officer serving the summons shall submit his/her return
within two (2) days from date of service
- If no service was effected, the reason thereof shall be stated in the

Motion to dismiss
Before the date set for the mandatory
conciliation and mediation conference

- Immediately resolved by the Labor Arbiter

through written order
- An order denying the motion to dismiss, or
suspending its resolution until the final
determination of the case, is not appealable

Mandatory Conciliation and

Mediation Conference
Labor Arbiter presides

compromise agreement shall be approved by the Labor

-he/she is satisfied that they understand the
-that the same was entered into freely and voluntarily
by them,
-and that it is not contrary to law, morals, and public

-lack of jurisdiction over
the subject matter,
-improper venue,
-res judicata,
-prescription and
-forum shopping

1.amicably settling the case upon a fair compromise;
2.determining the real parties in interest;
3.determining the necessity of amending the complaint and
including all causes of action;
4.defining and simplifying the issues in the case;
5.entering into admissions or stipulations of facts; and
6.threshing out all other preliminary matters.

Any agreement entered into by the parties whether in partial or full

settlement of the dispute shall be reduced into writing and signed by the
parties and their counsel or the parties authorized representatives

If parties fail to agree on amicable

settlement, the Labor Arbiter shall
proceed to the other purposes of
the said conference

non-appearance of the
complainant or petitioner
during the two (2) settings,
shall be a ground for the
dismissal of the case without
non-appearance of the
respondent during 2 settings,
considered to have waived
right to file position paper

LA direct parties to submit verified

position papers within 10 days from
termination of CM proceedings

No amendment of the complaint or petition

shall be allowed after the filing of position
papers, unless with leave of the Labor
Within ten (10) days from receipt of the
position paper of the adverse party, a reply
may be filed on a date agreed upon and
during a schedule set before the Labor

Determination of Necessity Hearing

or Clarificatory Conference
By Labor Arbiter

ask clarificatory questions to further elicit

facts or information, including but not limited
to the subpoena of relevant documentary
evidence, if any, from any party or witness

LA terminate CM proceedings
and direct petitioner to file
verified position paper
- No postponement shall
be allowed, except upon
meritorious grounds and
subject to the
requirement of
expeditious disposition of
The conference shall be
terminated within thirty
(30) calendar days from
the initial conference.
non-appearance of any of
the parties during the
conference, despite due
notice, proceedings shall
be conducted ex-parte.
Thereafter, the case shall
be deemed submitted for

Submission of Case for Decision

Labor Arbiter may voluntarily inhibit

himself/herself from the resolution of a
case and shall so state in writing the
legal justifications therefor

Period to decide Case

Labor Arbiter shall render his/her decision within

thirty (30) calendar days, without extension, after
the submission of the case by the parties for

- Upon the submission by the parties of

their position papers or replies, or
- the lapse of the period to submit the same
- Upon termination of the said hearing or
1.facts of the case;
2.issues involved;
3.applicable laws or rules;
4.conclusions and the reasons therefor;
5.specific remedy or relief granted.

Finality of Decision or Order or

Issuance of Finality

Unless LA call for

clarificatory conference.

In case of monetary award,

it shall state the amount

In case of reinstatement,
1.a statement that the
reinstatement aspect is
immediately executory;
2.a directive for the
employer to submit a
report of compliance
within ten (10) calendar
days from receipt of the
said decision

final and executory after (10) calendar days

from receipt thereof
Issue certificate of finality

Revival and Re-opening or Refiling of Dismissed case and

Lifting of Waiver

- party may file a motion to revive or re-open a case

dismissed without prejudice, within ten (10) calendar days
from receipt of notice of the order dismissing the same
- After 10 days, re-file case
- A party declared to have waived his/her right to file
position paper may, at any time after notice thereof and
before the case is submitted for decision, file a motion
under oath to set aside the order of waiver upon proper
showing that his/her failure to appear was due to
justifiable and meritorious grounds.


Appeal to NLRC
Filed with RAB or Regional Office where
case was heard and decided

Appeal Fee to RAB or RO

If appeal by employer and involves
monetary award perfected only
upon posting of bond
Within 48 hours after filing of
appeal, records shall be transmitted
by RAB or RO to the Commission
Once appeal perfected, LA loses
jurisdiction; all pleadings and
motions addressed to Commission
No appeal from an interlocutory
order shall be entertained

Commission after hearing may censure or

cite in contempt

- Decisions, awards, or orders of the Labor Arbiter shall be final and executory
unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt thereof
1.If there is prima facie evidence of abuse of discretion on the part of the
Labor Arbiter or Regional Director;
2.If the decision, award or order was secured through fraud or coercion,
including graft and corruption;
3.If made purely on questions of law; and/or
4.If serious errors in the findings of facts are raised which, if not corrected,
would cause grave or irreparable damage or injury to the appellant.
1.filed within the reglementary period
2.verified by the appellant himself/herself
3.in the form of a memorandum of appeal which shall state the grounds
relied upon and the arguments in support thereof, the relief prayed for, and
with a statement of the date the appellant received the appealed decision,
award or order;
4.in three (3) legibly typewritten or printed copies; and
5.accompanied by:
a) proof of payment of the required appeal fee and legal research fee;
b) posting of a cash or surety bond as provided in Section 6 of this
Rule; and
c) proof of service upon the other parties.
The appellee may file with the Regional Arbitration Branch or Regional Office
where the appeal was filed, his/her answer or reply to appellant's
memorandum of appeal, not later than ten (10) calendar days from receipt
thereof. Failure on the part of the appellee who was properly furnished with a
copy of the appeal to file his/her answer or reply within the said period may be
construed as a waiver on his/her part to file the same. .

24 members
Public sector

Presence of Majority
shall constitute a quorum
Majority of quorum shall
be decision en banc

8 Divisions

No motion to inhibit the

entire Division of the
Commission shall be

any Commissioner may

inhibit himself/herself from
the consideration and
resolution of any case or
matter before the Division
and shall so state in
writing the legal or
justifiable grounds

The rules of procedure

and evidence prevailing
in courts of law and
equity shall not be

Appealed and injunction

cases involving the
same parties, issues, or
related questions of fact
or law shall be
consolidated before the
Commissioner to whom
the case with the lowest
case number is

Worker Sector

Presence of 2
commissioner shall
constitute a quorum
concurrence of two (2)
Commissioners shall be
necessary for the
pronouncement of a
judgment or resolution

conclusions of a
Division on any case or
matter submitted to it for
decision shall be
reached in consultation
before the case is
assigned to a member
for the writing of the
opinion - mandatory

In case of absence or nonconcurrence, Chairman

shall designate additional

In case of inhibition,
Chairman may designate a
Special Division or assign
the case to another
Should any member of a
Division indicate his/her
intention to write a
dissenting opinion, he/she
may file the same within
the period prescribed for
deciding or resolving the

Conciliation and

settlement of cases on appeal, to be valid and binding between

the parties, shall be approved by the Commission

the Commission, in the exigency of the service, shall be

assisted by a Labor Arbiter who may be directed to study,
review, hear and receive evidence, and submit reports thereon.



shall state clearly and distinctly

1.the findings of facts, issues, and conclusions of
law on which it is based, and
2.the relief granted, if any.
3.the specific amount awarded

the decisions, resolutions or orders of the

Commission shall become final and executory
after ten (10) calendar days from receipt thereof
order or resolution enjoining the performance of
illegal acts immediately executory

MFR shall not be entertained except when based on palpable or patent

errors; provided:
1.that the motion is filed within ten (10) calendar days from receipt of
decision, resolution or order,
2.with proof of service that a copy of the same has been furnished, within
the reglementary period, the adverse party; and
3.that only one such motion from the same party shall be entertained