Labor 1 - Digests - 100815

LABOR 1 - 100815 Songco v. NLRC Boie-Takeda v. De La Serna PDI v. NLRC Plastic Town Davao Fruits v. Assoc Nasipit Lumber v. NWCP Employers Confed Metrobank v. NWPC Prubankers v. Prudencial

Jose Songco, Romeo Cipres, & Amanco Manuel v NLRC, Labor Arbiter Flavio Aguas, F.E. Zuellig (M) Inc. 23 Mar 1990; Medialdea, J. FACTS 1.

LA’s reasoning: The term “salary” in the concerned provisions was intentionally used to express the intent of the framers that for purposes of separation pay, they mean to be specifically referring to salary only.  Definition of “wage” in LC 97(f) is a general definition and had no indication that “commission” is part of salary.  Sec 10, IRR states that the basis of termination is the “latest salary rates”  LC 284 and the Implementing Rules invariably used “monthly pay or monthly salary rates” 8. NLRC affirmed LA decision. NLRC’s reasoning: “Wage” was used in a generic sense, which is the basic wage rate to be ascertained on a time, task, piece, or commission basis or other method of calculating the same. It does not mean that commission, allowances, or analogous income necessarily forms part of the employees’ salary because to do so would lead to a sweeping situation in which emergency living allowance, 13 th month pay, overtime and premium pay may be insisted by the employees as part of their salaries as well. 9. Hence, the present petition by Songco et al. (Note: Pending resolution of this case, Cipres filed “Notice of Voluntary Abandonment and Withdrawal of Petition” because he was already satisfied and had already received his separation pay. Court granted and dismissed the petition as to him.)

Petitioners Songco et al. are employees in the sales force of respondent Zuellig receiving at least P400 per month plus commissions on every sale they made. 2. Zuellig filed with the Dept. of Labor an application for clearance to terminate the services of the petitioners on the ground of retrenchment due to financial loss. 3. Petitioners opposed the application and alleged that they ISSUES, RESOLUTION, and RATIO were being dismissed because of their membership in the 1. WON allowances should be included in the monthly salary of union. petitioners for the computation of their separation pay 4. At the last hearing of the case, however, petitioners Yes, allowances should be included. manifested that they are no longer contesting their dismissal.  This had been resolved by the Court in several Both parties then agreed that the sole issue to be resolved is the basis of the computation for separation pay that must be previous cases, the most notable would be the Court’s given to each petitioner. pronouncement in Santos v NLRC (reiterated in 5. Arguments Soriano v NLRC and Planters Products, Inc. v NLRC): “in the computation of back wages and separation pay, account PETITIONERS Songco et al. must be taken not only of the basic salary of petitioner but also of Their basic salary, earned sales commissions, and allowances should her transportation and emergency living allowances” be added together to come up with the legal amount of separation pay due them. 2. WON earned sales commissions should be included in the monthly salary of petitioners for the computation of their Art. 97 (f) of the Labor Code: separation pay (f) Wage – remuneration or earnings, however designated, capable of earned sales commissions should be included. being expressed in terms of money, whether fixed or ascertained on Yes, a  There is actually no ambiguity among LC 97(f), Art XIV time, task, piece, or commission basis, which is payable by an employer to an employee xxx for work done or to be done, or for services of the CBA, LC 284, and Sec 9(b) and Sec 10 of the rendered or to be rendered xxx IRR.  “Salary”, “wage”, and “pay” are synonymous and 6. For the determination of basis of separation pay, the carry the fundamental idea to mean reward/ following stipulations were relied on by both parties: compensation for services. Art XIV of the Collective Bargaining Agreement between Zuellig and SALARY (Latin ‘salarium’ or ‘sal’) F.E. Zuellig Employees Association (of which petitioners were Recompense or consideration made to a person for his members): pains or industry in another man’s business Collective Bargaining Agreement between Art. 284, Labor Code Zuellig and F.E. Zuellig Employees The termination of of were any indeed incentives to encourage employees Evenemployment if commissions Association (of which petitioners were employee due to thetoinstallation of labor-saving work harder, these commissions are still direct remunerations for members) devices, redundancy,services retrenchment to in prevent rendered favor of Zuellig which contributed to the latter’s Art XIV – Retirement Gratuity losses, and other similar profit. causes, shall entitle Sec. 1 (a). Any employee, who is separated the employee affected thereby to separation from employment due to old age, sickness, pay. xxx In case ofCOMMISSION retrenchment –torecompense, prevent compensation or reward of an agent, death or permanent lay-off not due to the fault losses and other similar causes,executor, trustee, receiver, factor, broker, or bailee, when salesman, of said employee, shall receive from the pay shall be equivalent the tosame is calculated as percentage on the amount of his company a retirement gratuity in an amount least ½ month fortransactions every yearor on of the service, profit of the principal equivalent to 1 month salary per year of whichever is higher service. ‘One month of salary’ as used in this months shall be considered wholecommissions year. To hold1 that are not salaries would be tantamount to paragraph shall be deemed equivalent to the saying that those salesman who do not receive basic salary but salary at date of retirement. ‘Years of service’ depend on commissions alone, are working under an employershall be deemed equivalent to total service employee relationship without any wage, and are therefore not entitled credits, a fraction of at least 6 months being to separation pay upon the termination of their employment. This would considered 1 year, including probationary also be contrary to the purpose of separation pay, which is to alleviate employment. the difficulties which confront a dismissed employee. 7.

LA rendered decision ordering Zuellig to pay Songco et al. separation pay equivalent to their one month salary for every year of service they worked in the company, commissions, allowances, etc. are not included.

Lastly, it must always be kept in mind that all doubts in the interpretation and implementation of labor laws should be resolved in favor of labor (Art 4, Labor Code).

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Petition is granted. NLRC decision is modified to include allowances and commissions in the separation pay of Songco and Manuel. Case further remanded to LA for proper computation of separation pay. Boie-Takeda v. De la Serna G.R. No. 92174; 10 December 1993; Narvasa, C.J. Digest prepared by Glenn Agbayani Doctrine: Commissions earned by an employee is not part of the basic or regular wage and therefore NOT included in the computation of 13th month pay. Only the basic or regular wage is included in the computation. (From previous class discussion) Commissions earned by sales persons are considered part of their wages because it is judicial notice that the nature of their work provides commissions in their transactions as remunerations (Songco v NLRC). In this case, the commissions earned by the petitioners are not counted because the nature of their work (medical representatives – concerned with product promotions) customarily does not include commissions. In fact, they usually receive a fixed basic salary and their commissions merely serve as additional incentives. I. Facts  In these two consolidated petitions, employers BoieTakeda (Medical Representatives) and Philippine Fuji Xerox impute grave abuse of discretion to respondent DOLE officials in including commissions received by their employees in the computation of 13th month pay.  DOLE conducted routine inspections in the premises of Boie and Fuji Xerox. DOLE found that they had not been including the commissions earned by its employees in the computation of their 13 th month pay.  Boie-Takeda argues that the law only speaks of regular or basic salary in the computation of 13 th month pay and excludes all other remunerations which are not part of the basic salary. It argues that commissions cannot be defined as regular in nature because if no sales are made by its employee, no commission is received.  Respondent DOLE officials ordered Boie and Fuji Xerox to effect restitution and correction of the underpayment of 13th month pay. The basis for giving such order is par. 2, Section 5(a) of the Revised Guidelines on the Implementation of 13th Month Pay. The provision says that “employees who are paid on a fixed or guaranteed wage plus commission are also entitled to the mandated 13 th month pay based on their total earnings during the calendar year, i.e. on both their fixed or guaranteed wage and commission.”  Petitioners appealed to the Supreme Court alleging grave abuse of discretion on the part of respondent DOLE officials in giving effect to said Section 5 of the Revised Guidelines. II. Issue WON commissions earned are included in the computation of 13th month pay - NO.

IV. Ratio Commission earned is excluded from computation of 13th month pay 

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Par. 2 Sec. 5(a), Revised Guidelines on the Implementation of PD 851 is null and void 

The said provision, in including commissions in the computation of 13th month pay, unduly expanded the concept of “basic salary” as defined in PD 851. Implementing rules cannot add to or detract from the provisions of the law it is designated to implement. The DOLE committed grave abuse of discretion in giving effect to such provision.

Other remunerations excluded from computation of 13 th month pay 

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The Court mentioned several kinds of remunerations and earnings which are not part of the basic salary and hence not included in the computation of 13 th month pay. The Court in San Miguel v. Inciong clarified the coverage of “basic salary” as used in PD 851 (13th Month Pay Law). In that case, the Court said that under the IRR of PD 851, the following are NOT deemed part of basic salary: o cost-of-living allowances o profit-sharing payments o all allowances and monetary benefits which are not considered or integrated as part of the basic salary of the employee Under the Supplementary Rules and Regulations Implementing PD 851, overtime pay, earnings, and other remunerations are excluded as part of the basic salary and in the computation of 13 th month pay. “Earnings and other remunerations” include payments for sick, vacation, or maternity leaves, premium for works performed on rest days and special holidays, pays for regular holidays, and night differentials.

Development of laws regarding 13 th month pay mentioned in the case  

III. Held Par. 2, Section 5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law is declared null and void.

Only the basic salary is included in the computation of 13th month pay. In the Rules and Regulations Implementing PD 851, “’thirteenth month pay’ shall mean 1/12 of the BASIC SALARY of an employee within a calendar year. In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is the BASIC SALARY because this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions; they are ADDITIONAL PAY and do not form part of the basic salary.

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When PD 851 (13th Month Pay Law) was enacted, only employees who receive a basic salary of NOT MORE THAN 1,000 a month are entitled to 13th month pay. President Cory Aquino issued Memorandum Order 28 which removed the salary ceiling of 1,000 a month set by PD 851. Hence, all rank-and-file employees are entitled to 13th month pay. Then came the assailed Revised Guidelines on the Implementation of the 13th Month Pay Law. Par. 2, Sec. 5(a) included both fixed or guaranteed wage and commission in the computation of 13 th Month Pay. LABOR 1: Digests | 100815 | kb | 2

Philippine Duplicators Inc. v. NLRC G.R. No. 110068; February 15, 1995; Feliciano, J. Digest prepared by Maggy Gan Facts and Issues are taken from Ian’s digest. Focus on the explanation of BONUS. I. Facts (taken from Ian’s digest) Petitioner company is a domestic corporation engaged in the distribution of foreign-made copying machines and related consumables. It employs salesmen who are paid a fixed or guaranteed salary plus commissions. The commissions are computed based on the selling price of the duplicating machines sold by the salesmen.

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When PD 851 requiring employers to pay 13 month pay to employees along with its IRR and other memos of the SOLE and the Minister of Labor and Employment, the salesmen union of the company demanded payment of the 13th month pay to be computed based on the total of their fixed/guaranteed money plus the sales commissions they get. The Court decided for the union and held that sales commissions are part of the basic salary of the salesman hence their 13th month pay is 1/12 of their basic salary (fixed salary plus sales commission). Petitioner filed an MR on the SC decision but this was denied with finality on Dec. 15, 1994.

II. Issue/Held (taken from Ian’s digest) WON sales commissions of salesmen of petitioner company are included in the definition of basic salary for the purpose of determining 13th month pay.

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Boie and Philippine Duplicators present different factual scenarios although the same word “commissions” was used or invoked Here, the sales commission earned by sales men who make or close a sale constitute part of the compensation or remuneration paid to sales men for serving as salesmen, and hence part of the ‘wage’ or salary of petitioner’s salesmen. Significant to note that the fixed or guaranteed protin of the wages paid to the salesmen represented only 15% to 30% of an employee’s total earnings per year [Remember what ma’am emphasized in class: JUDICIAL NOTICE that the salesmen’s commission is the very source or an integral part of their salary]

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In Boie, the so called commissions paid to medical representatives were excluded from the term “basic salary” because these were paid as “productivity bonuses”  These additional payments partook the nature of profitsharing bonuses  Medical representatives are not salesmen; they merely promote the pharmaceutical products or medical services of their employer

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Definition and Characteristics of BONUS An amount granted and paid ex gratia to the employee for his industry and loyalty w/c contributed to the success of

If an employer can’t be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall w/in the “basic salary” of employees when time comes to compute 13th month pay. So the court in Boie was correct in not including the “commissions” as part of “basic salary” in computing for 13th month pay.

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Yes. Sales commission of salesmen should be included. The doctrines in the two cases are not directly opposite but they actually co-exist. Petitioner company is liable to pay 13 th month pay using with the basic salary computed as the fixed or guaranteed wage plus the sales commissions. III.

TEST to determine if Bonus forms part of wages PART of wages: o if it is an additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output  NOT part of wages: o if it is paid only if profits are realized or a certain amount of productivity achieved o if it is paid on the basis of the amount of actual work accomplished 

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On Dec. 10, 1994 the Court decided the consolidated case of BoieTakeda and Philippine Fuji and held that the commissions should not be included in the definition of basic salary for the computation of the 13th month pay. Because of this decision, herein petitioner company filed on January 14, 17, 1994 a motion for leave to admit 2 nd MR and the 2nd MR invoking the Boie decision. Petition argued that the decision in Boie-Takeda is "directly opposite or contrary to" the decision in Philippine Duplicators.

the employer’s business and made possible the realization of profits It’s payment constitutes an enlightened generosity and self-interest on the part of the employer NOT a demandable or enforceable obligation (NONDEMANDABLE CHARACTER) o No right to demand as a matter of right o Something given in addition to what is ordinarily received by or strictly due the recipient o Basically a management prerogative which cannot be forced upon the employer

Comparison of Productivity Bonuses v. Sales Commissions Similarity: both may have an incentive effect Differences Productivity Bonuses Generally tied to the productivity or profit generation of the employer Not directly dependent on the extent on the extent an individual employee exerts himself Something extra for which no specific additional services are rendered by any particular employee Not legally demandable absent a contractual undertaking to pay it

PLASTIC TOWN CENTER CO. v. NLRC/NLM-KATIPUNAN G.R. No. 81176; 19 Apr 1989; GUTIERREZ JR., J. Digest by Miguel Doctrine: In the absence of express stipulation on the definition of “month” in matters outside salaries, whatever interpretation would prove more advantageous to labour should be considered—in this case, the Civil Code interpretation of 30 days/month. The “no work, no pay” rule does not apply to cases outside salaries. I.

Facts: a. Central to this case are several provisions of the CBA between petitioner and respondent labor union, which are the basis of the complaint against petitioner: i. Issue 1: Violation of Wage Order #5 by crediting the P1/day wage increase in CBA as part of compliance with the said wage order 1. CBA: Every year, on July 1st, a wage increase of P1/worked day, to continue from 1983 to 1985. (Sec. 1) a. Also: increases in pay shall be credited against future allowances or LABOR 1: Digests | 100815 | kb | 3

Sales Co Intimately energy o Paid upo employee A percen operates

II.

III.

wage orders implemented and enforced by virtue of Letters of Instructions, Decrees, etc. (Sec. 3) 2. Wage Order 4: Integration of ECOLA into basic pay of all covered workers effective 1984. Minimum wage rate should be P32/day. Took effect May 1984. a. Petitioners incurred a deficit of P1 after integration. To meet the requirement, they advanced the July 1984 salary increase for the benefit of the workers. 3. Wage Order 5: Increased the minimum wage rate to P35/day for Metro Manila (i.e. P3 increase) . Took effect June 1984. 4. Arguments: a. RES: The salary increase for May (compliance with WO 4) should have been separate from the CBA salary increase in July. (2 sep) b. PET: WO 4 was complied with by advancing the July salary increase. (1 only) ii. Issue 2: Unfair labor practice based on the interpretation of monthly salary in Sec. 2 of the CBA re: gratuity pay 1. RES: Should be 30-days, number of days in a month 2. PET: Should be 26-days, actual number of days worked b. The Labor Arbiter ruled in favour of the petitioners. On the issue of the monthly salary, the court noted that the computation was based on actual number of days worked, and that these people were daily wage earners. c. However, the LA decision was reversed in the NLRC. MR for the NLRC decision was denied. Issues: a. Whether or not the July wage increase could be credited to compliance with Wage Order #5. b. Whether or not the computation of one month salary for gratuity pay should be on the basis of the number of actual days worked (26 days). Held: a. No. Wage Orders #4 and 5 took place before the July increase; further, Sec. 3 of CBA made the CBA increases prospective in effect—there were, in fact, three separate increases. b. No. In the absence of a clear definition of “monthly salary” vis-à-vis gratuity pay (and not salary per se), provisions should be construed in favour of labor—monthly salary should mean 30 days.

IV. Ratio: In general: The object for interpretation in this case is a contract, which is the law that binds the two parties—hence, the rules for interpreting contracts are to be used.

a.

b.

No. Wage Orders #4 and 5 took place before the July increase; further, Sec. 3 of CBA made the CBA increases prospective in effect—there were, in fact, three separate increases. i. In order to comply with WO4, the petitioners granted a P1.00 increase that was supposed to be credited to the July increase. ii. However, Sec. 3 of the CBA stated that any CBA increases were to apply only to future wage orders/increases. 1. Effect: The July salary increase is separate from the salary increases required to comply with WOs 4 and 5. Therefore, there are three salary increases: the WO4 compliance increase, the July increase, and the WO5 compliance increase. No. In the absence of a clear definition of “monthly salary”, provisions should be construed in favour of labor—monthly salary should mean 30 days. i. First, looking at the definition of gratuity pay: it is a special gift given to workers for previous services rendered—a special reward. It is not equivalent to a salary/wage, which would be subject to “no work, no pay.” ii. Monthly salary for gratuity pay was not defined. It could mean either 26 days (the actual days worked) or 30 days (the number of days in a month according to the NCC). iii. Since there was no express stipulation to that effect, we resolve in favour of labor—30 days.

DAVAO FRUITS CORPORATION V ASSOCIATEDLABOR UNIONS (ALU) G.R. No. 85073; August 24, 1993; Quason, J. Digest prepared by Jackie Canlas FACTS:  Jan 1976 – Supplementing Rules and Regulations of PD 851, which was issued by the SOLE, defined 13 th month pay as 1/12 of the basic salary. It excluded in the computation of 13th month pay the payments for sick, vacation and maternity leaves, premiums for work done on rest day and special holidays and pay for regular holidays.  Despite this, Davao Fruits Corp (Davao) still computed the 13th month pay without excluding the said benefits, from 1975 to 1981. Davao only continued this practice until the promulgation of the San Miguel Corporation v. Inciong when it purportedly “discovered” its mistake.  Associated Labor Union (Union), in behalf of the all the rankand-file employees and workers of Davao filed a complaint for “Payment of the 13th Month Pay Differentials” for 1982.  Defense of Davao: The mistake in its interpretation of “basic salary” (including the said benefits) was founded upon doubtful and difficult question of law (from orders, opinions and rulings by then SOLE Inciong).  LA found in favor of Union, and ordered Davao to pay the 13th month pay differential for the year 1982. NLRC affirmed the decision. Davao appealed to SC by ccertiorari. ISSUE/HELD: WON said benefits should be excluded in the computation of the 13th month pay, regardless of long-standing company practice – NO Petition dismissed. RATIO: LABOR 1: Digests | 100815 | kb | 4

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From 1975 to 1981, Davao had freely, voluntarily and continuously included in the computation of the employees’ 13th month pay, the payments for sick, vacation and maternity leaves, premiums for work donw on rest day and special holidays and pay for regular holidays. The considerable length of time the questioned items had been included by Davao indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake. A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement enjoyed by the exmployees cannot be reduced, diminished, discontinued or eliminated by the exmployer, by virtue of Labor Code Article 100 (Tiangco v. Leogardo, Jr., 122SCRA 267, [1983]).

Nasipit Lumber Company v. NWCP G.R. No. 113097; April, 27, 1998; Panganiban, J. Digest prepared by Eka Facts 

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The Region X Tripartite Wages and Productivity Board (RTWPB) issued Wage Order No. RX-01 which provides an increase in minimum wage rates applicable to workers and employees in the private sector in Northern Mindanao. A supplementary Wage Order No. RX-01-A was also issued, which provides that all workers in Region X already receiving wages above the statutory minimum wage (P120) shall also receive an increase as provided in RX-01. Nasipit Lumber Company (NALCO), Philippine Wallboard Corporation (PWC), and Anakan Lumber Company (ALCO) applied for an exemption from the Wage Orders as distressed establishments under Guidelines No. 3, issued by RTWPB. o They are engaged in the logging and integrated wood processing industry but are distressed due to conditions beyond their control (1. Worldwide recession, 2. Peace and order problems, 3. Environmental fees on top of regular forest charges, 4. Logging moratorium, 5. Deduction in annual allowable volume of cut logs, 6. Highly insufficient raw material supply, 7. Extraordinary increases in costs of fuel, oil, spare parts, and maintenance, 8. Excessive labor cost, and 9. Lumber export ban). o Unions opposed the application for exemption on the ground that said companies are not distressed establishments since their capitalization has not been impaired by 25%. RTWPB approved the applications for exemption because (1) they are claiming exemption not on the basis of capital impairment but on belonging to a distressed industry, (2) they are experiencing liquidity problems and extreme difficulty servicing their loan obligations, (3) there is a slump in the wood-processing industry, and (4) most of the circumstances responsible for the financial straits of petitioners are largely external. In fact, they should be extended assistance and encouragement to continue operating so that jobs therein may be preserved. Unions filed an appeal with the National Wages and Productivity Commission (NWPC), which affirmed ALCO’s application but reversed NALCO’s and PWC’s because Guideline No. 3 cannot be a valid basis for granting exemption since it did not pass the approval of the commission. o Sec 1, Rule VIII, of the Rules of Procedure on Minimum Wage Fixing provides that it NWPC is empowered to set the criteria on exemptions while the Boards may issue guidelines but should first pass NWPC for the purpose of determining its conformity to the latter’s general policies and guidelines.

After NWPC’s Secretariat made some comments on Guidelines No. 3 by RTWPB, it was never submitted again for approval. Until and unless it is approved by NWPC, it has no operative force and effect. o The applicable guidelines on exemption are the one issued by NWPC which requires a 25% impairment on the paid-up capital or total invested capital. o NALCO, ALCO, and PWC incurred a capital impairment of 1.89%, 28.72%, and 5.03%, respectively therefore only ALCO’s application should be approved. o (As response to the MR) Guidelines No. 3 cannot also be given effect because it grants exemption by industry when the Wage Order mentioned only distressed establishments. The implementing guidelines cannot expand nor limit the provision of the law it seeks to implement. Issue: Is a guideline issued by an RTWPB without the approval of or, worse, contrary to the guidelines promulgated by the NWPC valid? Held: No, the petition is dismissed. Ratio:  The three branches and the various administrative agencies of the government can exercise only those powers conferred upon them by the Constitution and the law.  RA 6727, amending the Labor Code, created both the NWPC and the RTWPB and defined their respective powers. It clearly grants the NWPC, not the RTWPB, the power to “prescribe the rules and guidelines” for the determination of minimum wage and productivity measures. o RTWPB has the power to issue wage orders under Art 122(b), LC but such orders are subject to the guidelines prescribed by NWPC. NWPC lays down the guidelines which the RTWPB implements. o NWPC authorized the RTWPB to issue exemptions from wage orders, but subject to its review and approval. Since NWPC never assented to Guideline No. 3, it is inoperative and cannot be used in deciding or acting on applications for exemption.  To allow RTWPB Guideline No. 3 to take effect without the approval of NWPC is to arrogate unto RTWPB a power vested in the NWPC by Art 121, LC, as amended by RA 6727. o A statutory grant of “powers should not be extended by implication beyond what may be necessary for their just and reasonable execution.  There is no basis for petitioner’s claim that their vested rights were prejudiced by the alleged retroactive application of NWPC’s rules because Guideline No. 3, not being valid, cannot be a source a right, much less a vested one.  Guideline No. 3 is also void because it is inconsistent with the avowed State policies protective of labor. By exempting all establishments belonging to a distressed industry, it surreptitiously and irregularly takes away the mandated increase in the minimum wage awarded to the affected workers It proceeded against the declared policy enshrined in RA 6727. o

Employers Confederation of the Philippines (ECOP) v National Wages and Productivity Commission G.R. No. 96169; September 24, 1991; Sarmiento, J. Digest prepared by John Cruz Facts: 1. ECOP is questioning the validity of Wage Order No. NCR-01-A, which amended Wage Order No. NCR-01, increasing the minimum wage by P17.00 daily in NCR. a. This was issued by the Regional Tripartite Wages and Productivity Board of NCR pursuant to RA 6727 or the “Wage Rationalization Act.” LABOR 1: Digests | 100815 | kb | 5

2. Arguments: ECOP ECOP assails the board's grant of an "across-the- board" wage increase to workers already being paid more than existing minimum wage rates (up to P125.00 a day) as an excess of authority.  because under the RA 6727, the boards may only prescribe "minimum wages," not determine "salary ceilings" and  that RA 6727 is meant to promote collective bargaining as the primary mode of settling wages, and in its opinion, the boards cannot preempt CBAs by establishing ceilings. Wage-fixing is a legislative function and RA 6727 delegated to the Regional boards no more than the power to grant minimum wage adjustments  hence, the boards can only adjust "floor wages.” Issue: W/N Wage Order No. NCR-01-A is valid. – YES Held: Petition is DENIED.

The Court is not convinced that the Regional Board of NCR performed an unlawful act of legislation. Congress may delegate the power to fix Solicitor General has set sufficienthike standards as mentioned above. Prescribingrates anand across-the-board additional or other benefits to workers is of to theemployees mistaken impression that RA 6727 is meant extension of wage ECOP increases and workers to "get more the Government of the industry" and leave labor and already receiving than minimumout wages” management alone in deciding wages. The Court does not think that  the law intended to deregulate the relation between labor and capital given the express provisions of the Constitution. Furthermore, the concept of "minimum wage" means more than setting a floor wage to upgrade existing wages, Minimum wages" underlies the effort of the State, as RA 6727 expresses it:  "toto promote productivity-improvement RA 6727 is intended correct "wage distortions" and the and gain-sharing measures to ensure wages) a decent standard of living for the salary-ceiling method (of determining is meant, and their families; precisely, to rectifyworkers wage distortions  to guarantee the rights of labor to its just share in the fruits of production;  to enhance employment generation in the countryside through industry dispersal; and  to allow business and industry reasonable returns on investment, expansion and growth,"  and as the Constitution expresses it, to affirm "labor as a primary social economic force.

Ratio: The Court agrees with the Government. In the NWPC’s Order of Nov 6, 1990 the Commission noted that the determination of wages has generally involved two methods, the “floor-wage" method and the "salary-ceiling" method. Floor-wage method involves the fixing of determinate amount that would be added to the prevailing statutory minimum wage adopted in the earlier wage orders The shift from the first method to the second method was brought about by labor disputes arising from wage distortions. With the establishment of the second method as a practice in minimum wage fixing, wage distortion disputes were minimized.

The question whether the salary-cap method utilized by the Board may serve the purposes of RA 6727 in future cases and whether that method is a lasting policy of the Board is a question in which we may only speculate at the moment and therefore not justiciable. Salary-ceiling method Bank and Trust Co., Inc. v. National Wages Metropolitan the wage Productivity adjustment isCommission applied to employees receiving a certain, denominated ceiling. T6 February 2007; Austria-Martinez, J. G.R.salary No. 144322; used in R.A. Nos.prepared 6640 andby6727. Digest Maggy Gan IV. -

Republic Act No. 6727 was intended to rationalize wages, (1) by providing for full-time boards to police wages round- the-clock; and (2) by giving the boards enough powers to achieve this objective. The Court's opinion is that if RA 6727 intended the boards alone to set floor wages, the Act would have no need for a board but an Accountant to keep track of the latest consumer price index or better, would have Congress done it as the need arises as the legislature, prior to the Act, has done so for years. In fact, the law imposes standards in which the board shall fix the minimum wage: ART. 124. Standards/Criteria for Minimum Wage Fixing.—The regional minimum wages to be established by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well- being of the employees within the framework of the national economic and social development program. In the determination of such regional minimum wages, the Regional Board shall, among other relevant factors, consider the following: (a) The demand for living wages; (b). Wage adjustment vis-a-vis the consumer price index; (c) The cost of living and changes or increases therein;"(d) The needs of workers and their families; (e) The need to induce industries to invest in the countryside;"(f.) Improvements in standards of living; (g) The prevailing wage levels;"(h) Fair return of the capital invested and capacity to pay of employers; (i) Effects of employment generation and family income; and (j) The equitable distribution of income and wealth along the imperatives of economic and social development.

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Facts On Oct. 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II, Tuguegarao, Cagayan (RTWPB), by virtue of RA 6727, issued Wage Order No. R02-03 (Wage Order).  Section 1 provides: “xxx, all employees/workers in the private sector throughout Region II, regardless of the status of employment are granted an across-the-board increase of P15 daily.”  Section 13 provides that any party aggrieved by the Wage Order may file an appeal with the National Wages and Productivity Commission (NWPC) through the RTWPB within 10 calendar days from the publication of this Wage Order.

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In a letter-inquiry to the NWPC dated May 7, 1996, the Bankers' Council for Personnel Management (BCPM), on behalf of its member-banks, requested for a ruling on the eligibility of establishments with head offices outside Region II to seek exemption from the coverage of the Wage Order since its member-banks are already paying more than the prevailing minimum wage rate in the National Capital Region (NCR), which is their principal place of business.  NWPC stated that the member-banks of BCPM are covered by the Wage Order.

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In a letter-inquiry to the NWPC dated July 23, 1996, petitioner Metro Bank sought interpretation of the applicability of said Wage Order. Its inquiry was referred by the NWPC to the RTWPB.

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Petitioner filed a Petition for Certiorari and Prohibition with the CA seeking nullification of the Wage Order.  CA denied the petition. Issues/Held/Ratio

Petitioner’s arguments LABOR 1: Digests | 100815 | kb | 6

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The RTWPB, in issuing the said Wage Order, exceeded its authority delegated to it under RA 6727, which is limited to determining and fixing the minimum wage rate within their respective territorial jurisdiction and with respect only to employees who do not earn the prescribed minimum wage rate. Employers Confederation of the Philippines (ECOP) v. NWCP is not authority to rule that the respondents have been empowered to fix wages other than the minimum wage since said case dealt with an across-the-board increase with a salary ceiling. Ultra vires acts of administrative agencies are correctible by way of a writ of certiorari and prohibition Even assuming that it did not observe the proper remedial procedure in challenging the Wage Order, the remedy of certiorari and prohibition remains available to it by way of an exception, on grounds of justice and equity

Respondent’s arguments Petition is fatally defective from inception since no appeal from the Wage Order was filed by the petitioner  The letter-query to NWPC did not constitute an appeal contemplated by law The implementation of the Wage Order had long become fait accompli [Meaning: an action which is completed before those affected by it are in a position to query or reverse it] for prohibition to prosper Even if procedural lapses are disregarded, the Wage Order was issued pursuant to RA 6727 and in accordance with the Court’s pronouncements in the ECOP case. 1.

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Procedural Issue: W/N petitioner’s recourse to a petition for certiorari and prohibition with the CA was proper – No, it was not. However, Court will resolve substantive issues to promote the administration of justice. Requisites of Certiorari as a special civil action: (1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting lack or excess of jurisdiction; and (3) there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law. Requisites of Prohibition as a special civil action: (1) it must be directed against a tribunal, corporation, board, officer, or person exercising functions, judicial, quasi-judicial, or ministerial; (2) the tribunal, corporation, board or person has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting lack or excess of jurisdiction; and (3) there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. A respondent is said to be exercising judicial function where he has the power to determine what the law is and what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties. Quasi-judicial function is a term which applies to the action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature. Ministerial function is one which an officer or tribunal performs in the context of a given set of facts, in a prescribed manner and without regard to the exercise of his own judgment upon the propriety or impropriety of the act done. [I added all these just to be safe]

In the issuance of the Wage Order, respondent RTWPB act was in the nature of subordinate legislation, promulgated by it in the exercise of delegated power under RA 6727. It was issued in the exercise of its quasi-legislative power. Petitioner did not avail of the remedy provided by law  Section 13 of the Wage Order provides that any party aggrieved by the Wage Order may file an appeal with the

NWPC through the RTWPB within 10 days from publication of the wage order. Wage Order was published December 2, 1995.  No appeal was filed by the petitioner. It remained silent until 7 months later when it filed a letter inquiry on July 24, 1996 with the NWPC seeking a clarification of the application of the Wage Order. It must also be noted that NWPC only referred petitioner’s letter-inquiry to the RTWPB. Petitioner did not appeal the letter-reply of the RTWPB to the NWPC. Not only was it improper to implead the NWPC as a partyrespondent in the petition, but also petitioner failed to avail of the primary jurisdiction of the NWPC under Article 121 (d) of the Labor Code. Under the doctrine of primary jurisdiction, courts cannot and will not resolve a controversy involving a question which is within the jurisdiction of an administrative tribunal Nevertheless, the Court will proceed to resolve the substantial issues in the present petition pursuant to the well-accepted principle that acceptance of a petition for certiorari or prohibition as well as the grant of due course thereto is addressed to the sound discretion of the court. Rules of procedure are intended to facilitate and promote the administration of justice. As to respondent’s submission that implementation of the Wage Order had long become fait accompli, suffice it to state the courts will decide a question otherwise moot if it is capable of repetition yet evading review. The implementation of the Wage Order does not render the case moot, since the issue of the validity of the Wage Order subsists even after its implementation.

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W/N Wage Order No. R02-03 is void and of no legal effect RA 6727 created the NWPC which is vested with the power to prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels It authorized the RTWPB to determine and fix the minimum wage rates applicable in their respective regions, provinces, or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the NWPC. In ECOP, the Court declared that there are two ways of fixing the minimum wage: the "floor-wage" method involves the fixing of a determinate amount to be added to the prevailing statutory minimum wage rates the "salary-ceiling" method, the wage adjustment was to be applied to employees receiving a certain denominated salary ceiling. In other words, workers already being paid more than the existing minimum wage (up to a certain amount stated in the Wage Order) are also to be given a wage increase. To illustrate: under the "floor wage method", it would have been sufficient if the Wage Order simply set P15.00 as the amount to be added to the prevailing statutory minimum wage rates, while in the "salary-ceiling method", it would have been sufficient if the Wage Order states a specific salary, such as P250.00, and only those earning below it shall be entitled to the salary increase. In the present case, the RTWPB did not determine or fix the minimum wage rate by the "floor-wage method" or the "salary-ceiling method" in issuing the Wage Order. The RTWPB granted an across-the-board wage increase of P15.00 to all employees and workers of Region 2. In doing so, the RTWPB exceeded its authority by extending the coverage of the Wage Order to wage earners receiving more than the prevailing minimum wage rate, without a denominated salary ceiling. As correctly pointed out by the OSG, the Wage Order granted additional benefits not contemplated by RA 6727.

Concomitant Effect of the Nullity of the Wage Order LABOR 1: Digests | 100815 | kb | 7

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Applied by analogy the Court’s pronouncement in Philippine Ports Authority v. Commission on Audit (COA), Blaquera v. Alcala, De Jesus v. COA, and Kapisanan ng mga Manggagawa sa GSIS v. COA Employees, other than minimum wage earners, who received the wage increase mandated by the Wage Order need not refund the wage increase received by them since they received the wage increase in good faith, in the honest belief that they are entitled to such wage increase and without any knowledge that there was no legal basis for the same.

Held: Section 1 of Wage Order No. R02-03 is declared VALID - insofar as the mandated increase applies to employees earning the prevailing minimum wage rate at the time of the passage of the Wage Order and VOID - with respect to its application to employees receiving more than the prevailing minimum wage rate at the time of the passage of the Wage Order. Prubankers Association vs. Prudential Bank and Trust Company G.R. No. 131247; January 25, 1999; Panganiban J. Digest prepared by Rose Ann Gonzales Synopsis: Regional Tripartite Wages and Productivity Board of Region V and VII imposed increase in the wage/s in the form of COLA and also adjusted the minimum wage rate. Prudential Bank complied with the wage orders but only in its branches covered by the wage orders. Petitioner, Prubankers Association, contended that there is wage distortion and that Prudential Bank should have adjusted the wages in all of its branches nationwide (it argued that increasing wages only in Region V created wage distortion). Court held that there is no wage distortion. Wage distortion involves a parity in the salary rates of different pay classes which, as a result, eliminates the distinction between the different ranks in the same region. Facts 

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On November 18, 1993, the Regional Tripartite Wages and Productivity Board (The Board) of Region V issued Wage Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to workers in the private sector who had rendered service for at least three (3) months before its effectivity, and for the same period thereafter. (17.50 in the cities of Naga and Legaspi; (P15.50) in the municipalities of Tabaco, Daraga, Pili and the city of Iriga; and (P10.00) for all other areas in the Bicol Region.) The Board then issued another wage order mandating the integration of the COLA into the basic pay of all workers. It also established an increase in the minimum wage rates for all workers in the private sector (in Cebu, Mandaue and Lapulapu, municipalities of Compostela, Liloan, Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon and Tagbilaran) Prudential Bank complied with the wage orders only in branches covered by said orders. On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the Labor Management Committee be immediately convened to discuss and resolve the alleged wage distortion created in the salary structure upon the implementation of the said wage orders. The dispute was not resolved. They agreed to submit to voluntary arbitration. Ruling of Voluntary Arbiter: There is wage distortion. o “the Bank's separate and regional implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches created a wage distortion in the Bank nationwide which should be resolved in accordance with Art. 124 of the Labor Code” Court of Appeals: No wage distortion. o the variance in the salary rates of employees in different regions of the country was justified by RA 6727. o "the underlying considerations in issuing the wage orders are diverse, based on the distinctive

o Issues 1. 2. 3. 4. 5.

situations and needs existing in each region. Hence, there is no basis to apply the salary increases imposed by Wage Order No. VII-03 to employees outside of Region VII." "the distinctions between each employee group in the region are maintained, as all employees were granted an increase in minimum wage rate.”

WoN there was wage distortion-No WoN wage distortion is confined only in one region and not nationwide-Yes WoN the Wage Orders violate the “equal pay for equal work” principle-No WoN “establishment” as used in Art. 125 of LC refers to the regional Branches of the Bank and not the bank as a wholeyes WoN the bank is stopped from implementing the wage order for a specific region only-No

Held CA decision affirmed. There is no wage distortion. Ratio 1. Petitioner argues: Wage distortion exists, because the implementation of the two Wage Orders has resulted in the discrepancy in the compensation of employees of similar pay classification in different regions. (the employees in the affected regions have higher compensation than their counterparts of the same level in other regions) SC held: Contrary to petitioner's postulation, a disparity in wages between employees holding similar positions but in different regions does not constitute wage distortion as contemplated by law. It is the hierarchy of positions and the disparity of their corresponding wages and other emoluments that are sought to be preserved by the concept of wage distortion. A wage distortion arises when a wage order engenders wage parity between employees in different rungs of the organizational ladder of the same establishment. The statutory definition of Wage Distortion is found in Art. 124 of the Labor Code, as amended by RA 6727. “As used herein, a wage distortion shall mean a situation where an increase in prescribed wage results in the elimination of 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.” (Art. 124 as amended) The Court previously held that where a significant change occurs at the lowest level of positions in terms of basic wage without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof the distinction between one level of position from the next higher level, and resulting in a parity between the lowest level and the next higher level or rank, between new entrants and old hires, there exists a wage distortion. Wage distortion involves four elements: 1. An existing hierarchy of positions with corresponding salary rates 2. A significant change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher one 3. The elimination of the distinction between the two levels 4. The existence of the distortion in the same region of the country In the case at bar, there is no wage distortion because:  In the said branches, there was an increase in the salary rates of all pay classes.  Furthermore, the hierarchy of positions based on skills, lengh of service and other logical bases of differentiation was preserved. The distinction between Pay Class 1 and Pay Class 2, for example, was not eliminated as a result of the implementation of the two Wage Orders in the said region. 2.

Petitioner argues: The wage orders must be applied nationwide. “Wage distortion” should not only be confined in a certain region. LABOR 1: Digests | 100815 | kb | 8

SC held: The difference in wages between employees in the same pay scale in different regions is not the mischief sought to be banished by the law.

wage board of that region, based on the prevailing situation therein. Necessarily, the wages in different regions will not be uniform. 4.

Republic Act No. 6727 (the Wage Rationalization Act), recognized "existing regional disparities in the cost of living”. It also established several factors to be taken into consideration in the determination of regional minimum wages. It is clear therefore that a disparity in wages between employees with similar positions in different regions is necessarily expected. In insisting that the employees of the same pay class in different regions should receive the same compensation, petitioner has apparently misunderstood both the meaning of wage distortion and the intent of the law to regionalize wage rates. The reasons behind the necessity of such disparity/ regionalization of wages are:  Controlling factors such as the cost of living; supply and demand of basic goods, services and necessities; and the purchasing power of the peso vary in each region of the country.  Wages in some areas may be increased in order to prevent migration to the National Capital Region and, hence, to decongest the metropolis. RA 6727 recognizes that there are different needs for the different situations in different regions of the country. The fact that a person is receiving more in one region does not necessarily mean that he or she is better off than a person receiving less in another region. We must consider, among others, such factors as cost of living, fulfillment of national economic goals, and standard of living. In any event, the Court is only concerned with the enforcement of the law. It does not have the power to pass upon the wisdom of the law (political question). 3. Petitioner argues: the implementation of the Wage Order in only one region violates the equal-pay-for-equal-work principle

Petitioner argues: Regional offices of the Bank do not themselves constitute, but are simply branches of, the establishment which is the whole bank. Thus, wage distortion covers all employees even those of different regions.

SC held: RA 6727, Sec. 13 provides that the "minimum wage rates of workers working in branches or agencies of establishments in or outside the National Capital Region shall be those applicable in the place where they are sanctioned". The statutory provision does not support petitioner's view that "establishment" includes all branches and offices in different regions. Also, NWPC Guideline No. 1 (S. 1992) entitled "Revised Guidelines on Exemption From Compliance With the Prescribed Wage/Cost of Living Allowance Increases Granted by the Regional Tripartite Wages and Productivity Board," states that "establishment" "refers to an economic unit which engages in one or predominantly one kind of economic activity with a single fixed location." 5.

Petitioner argues: Bank has adopted a uniform wage policy, which has attained the status of an established management practice; thus, it is estopped from implementing a wage order for a specific region only.

SC held: No. Said nationwide uniform wage policy of the Bank had been adopted prior to the enactment of RA 6727. After the passage of said law, the Bank was mandated to regionalize its wage structure. Even if the Bank implemented some wage orders nationwide after effectivity of RA 6727, the Bank was, at the time, still uncertain on how to follow the new law. Court held that said single instance cannot be constitutive of "management practice."

SC held: No. Socioeconomic factors vary per region. RA 6727 mandates that wages in every region must be set by the particular

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