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LABOR LAW REVIEW

Atty. Jefferson Marquez
School Year 2001-2002
CELESTE M.CUA
C. ANG, A. APALISOK, A. BLANCO, Z. FERROLINO, C. REYNES, JR.
and to all those who made this possible. . .
LABOR STANDARDS
INTRODUCTION
Sources of Labor Laws

1. The Labor Code of the Philippines (Presidential Decree 442, as amended)
It is the law governing Labor Standards.
This law took effect on November 1, 1974. Since then, the Labor Code has undergone several
amendments. The most substantial amendment is RA 6715 (March 1989).
2. Judicial Decisions
Article 8, Civil Code: Judicial decisions applying or interpreting the laws or the Constitution shall
form part of the legal system of the Philippines.
3. Rules and Regulations issued by administrative agencies

Have the force and effect of laws. Provided, however, that these rules and issuance will not
expand the law or strip the law. Otherwise, under the rules on statutory construction, these will be
considered void.
e.g.
Policy Instruction No. 54-88 (issued by former Sec. Franklin Drilon) has been declared void by the
Supreme Court because this has expanded Art. 83 of the Labor Code on Employment of Health
Personnel by erroneously interpreting that health employees are entitled to a full weekly wage
for 7 days if they have completed the 40-hour/5-day workweek.
To recapitulate:
The Labor Laws will not only include PD 442, as amended, but as well as all decisions of the Supreme
Court which interpret these laws. Including as well, rules and regulations issued by the appropriate
government agencies. E.g. Department of Labor and Employment.
LABOR STANDARDS
The minimum requirements prescribed by existing laws, rules and regulations and other issuances relating
to wages, hours of work, cost of living allowances and other monetary and welfare benefits, including those
set by occupational safety and health hazards. (Section 7, Rule I, Rules on the Disposition of Labor Standards
Cases September 16, 1987)
EMPLOYER - EMPLOYEE, DEFINITION AND DISTINCTIONS
Employer Includes any person directly or indirectly in the interest of an employer in relation to an
employee and shall include the Government and all its branches, subdivision and instrumentalities, all
government-owned or controlled corporations and institutions, as well as non-profit private institutions, or
organizations. (Article 97 b)
The employer may be a natural or juridical person. May be a single proprietor, a partnership or a
corporation.
Example: Dumon Sari-sari Store (single proprietorship). Who is considered the employer?
Wilbert Dumon will be the employer, because the sari-sari store does not have a
separate juridical personality. So, if Dumon is made a defendant in a labor case, the caption will
be - Employee vs. Wilbert Dumon, doing business under the name and style of Dumon Sari-sari
Store.
Labor Law Review (2001-2002) CUA 1

C. Ang, Apalisok, Blanco, Ferrolino, Reynes, Jr., et al.
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The Government is an employer within the meaning of the Labor Code in Labor Standards.
So, a government agency with an original charter contracts with a security agency to supply security
guards, and this security agency is unable to pay the wages of its guards.
Issue: Is principal government agency considered jointly and severally liable with the security agency?
Will Article 106-109, LC apply to them? Can the guards file with the labor complaint with the nearest
arbitration branch of the NLRC and sue both the security and government agency? YES, the Labor Code
will govern. The government agency cannot move for the dismissal of the complaint for lack of jurisdiction
on the part of the Labor Arbiter and say that they are governed by the Civil Service Law Rules and
Regulations. The government agency contracted the services of an independent contractor, so they are
considered principals. Therefore the LC will govern regarding the monetary gains of the security guards.
A motion to dismiss filed by the government agency in the above-cited example will not prosper on
the ground that the Labor Arbiter has no jurisdiction, because the term Employer includes government
agencies. It does not make any qualifications whether it is one with or without original charter.
Philippine Fisheries Development vs. NLRC

213 SCRA 21
The SC had the occasion to interpret the term Employer so as to include the government
including their subdivisions as well as instrumentalities.
Notwithstanding that the petitioner is a government agency, its liabilities, which are joint and
solidary with that of the contractor, are provided in Article 106, 107 and 109 of the Labor Code. This places
the petitioners liabilities under the scope of the NLRC. Moreover, Book III, Title II on Wages specifically
provides that the term EMPLOYER includes any person acting directly or indirectly in the interest of an
employer in relation to an employee and shall include the Government and all its branches, subdivisions and
instrumentalities, all governed-owned or controlled corporations and institutions as well as non-profit private
institutions. The NLRC, therefore, did not commit grave abuse of discretion in assuming jurisdiction to set
aside the Order of dismissal by the Labor Arbiter.
Employee Includes any individual employed by an employer. (Article 97c)
Only a natural person can qualify as an employee. Natural persons may include Filipino citizens and
Foreigners.
Q: Is there a provision in the Labor Code governing the hiring of a Foreigner? A Filipino?
A: For Foreigners, Art 40-42 of PD 442 on employment of nonresident aliens by domestic or foreign
employer. In case of a Filipino, there is none because the Constitution and the Labor Code encourages the
employment of Filipinos.
Foreign Investments Act
There are industries that can be the subject of investment of full equity for foreign nationals. There
are certain activities where foreign companies can invest on. Thus, the employer may be foreigner. In
other words, there are corporations that are fully owned by foreigners of which is limited to a certain
percentage, like 60-40. Please take note of the Constitutional limitations on Foreign investments in the
Philippines.
If they want to employ an alien to be their employee in the Philippines, the law requires that such
domestic or foreign companies should obtain a permit from the DOLE.
Here is a company fully owned by foreigners in an area permissible for full ownership by foreign
entities. It may hire a person who is not a Filipino at its employee. It may happen that a domestic
corporation decides to hire an alien. Example: Hotels that wish to hire chefs.
Arts. 40-42 of the Labor Code shall govern. Such that the employer must obtain a work permit from
the DOLE (nearest regional office that covers the particular place). This work permit is what is called the
ALIEN EMPLOYMENT PERMIT (AEP). The process is that the employer (domestic or foreign), before
admitting this alien to be its employee, will have to file an application with DOLE for the issuance of AEP,
submitting therein certain documents t o justify that there is a need for the employment of such alien.
Q: Is there any other requirement?

A: Yes. There must be a determination of the non-availability of a person in the Philippines who is
competent, able and willing at the time of application to perform the services for which the alien is
desired.
Purpose: To protect the Filipinos.

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The employer has to justify to the DOLE that it needs this person (alien) because he has special
expertise in this particular field that no other Filipino in the country is able, willing and competent to
discharge. The employer has the burden of proving with the DOLE. Failure to do so warrants the denial of
the application for AEP.
If employer employs an alien without complying with the above requirement, then a case may be filed
against it for violation of the Labor Code.
ILLUSTRATION: Foreigner who wishes to be employed in a hotel establishment as a cook or chef. He

can enter the Philippines if he has a VISA (as to what kind of VISA, check Philippine Immigration Act of
1940) but usually, it is a 9-G VISA or a PRE-ARRANGED VISA. Together with such requirement under the
Philippine Immigration Act, is the requirements are distinct because different laws provide them for.
Employer-Employee Relationship vs. Principal-Agent Relationship
Employee is governed by the LC, while the agent is governed by the CC.
AGENT in Article 1868, Civil Code: By the contract of agency a person binds himself to render some service
or to do something in representation or on behalf of another, with the consent or authority of the latter.
It is the principal who selects the agent in a principal-agent relationship. An agent is compensated
under the contract of agency for services rendered. An agent is disciplined by the principal as in the case
of an employee, because the agent is under the authority of the principal. The principal controls the
means and methods of the work of an agent. In the principal-agent relationship, there is only one party.
The agent is merely an extension of the principal. They are regarded as one. So, if there is a contractor
relationship, it is not between 3 parties, but is between the principal or the agent as an extension of the
principal and the other party.
To make a distinction between a principal-agent relationship from a employer-employee relationship,

the Four-Fold Test will not be used because the agent is also selected by the principal and is also
compensated by the principal and most oftentimes, the principal also substitutes his own judgment for
that of the agent.
Maraginot vs. NLRC

284 SCRA 539 (Contracting)
The SC had the occasion to determine the existence of an agent-principal relationship.

The relationship between VIVA and its producers or associate producers seems to be that of
agency, as the latter make movies on behalf of VIVA, whose business is to "make" movies. As such, the
employment relationship between petitioners and producers is actually one between petitioners and
VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be established by
the "control test." While four elements are usually considered in determining the existence of an
employment relationship, namely: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct,
the most important element is the employer's control of the employee's conduct, not only as to the
result of the work to be done but also as to the means and methods to accomplish the same. These
four elements are present here.
It may not be ignored, however, that private respondents expressly admitted that petitioners were
part of a work pool; 31 and, while petitioners were initially hired possibly as project employees, they
had attained the status of regular employees in view of VIVA's conduct.
A project employee or a member of a work pool may acquire the status of a regular employee
when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a project; and
2) The tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer.
However, the length of time during which the employee was continuously re-hired is not
controlling, but merely serves as a badge of regular employment.
A work pool may exist although the workers in the pool do not receive salaries and are free to seek
other employment during temporary breaks in the business, provided that the worker shall be available
when called to report for a project. Although primarily applicable to regular seasonal workers, this set-
up can likewise be applied to project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to attain the status
of regular employees. Clearly, the continuous rehiring of the same set of employees within the
framework of the Lao Group of Companies is strongly indicative that private respondents were an
integral part of a work pool from which petitioners drew its workers for its various projects.[Tomas Lao
Construction Case]

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Employer-Employee Relationship vs. Principal-Contractor Relationship
Contractor Carries on a distinct and independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility, according to its own manner and method, and
free from the control and direction of the principal in all matters connected with the performance of the
work except as to the results thereof. (Department Order No. 9)
In the principal-contractor relationship, the principal selects the contractor. The contractor is
compensated for services rendered. The contractor is not under the discipline of the principal. The
contractor is not under the control of the principal. The definition says that aside from engaging in a
business separately distinct from the principal, the performed job, work or service is, according to his own
means or methods, free from the control and direction of the principal except as to the results thereof.
Contractor may be an individual, or corporate or juridical contractor.
Principal-contractor relationship also exists in a situation under Article 106 wherein the principal will
engage the services of a security agency to render security services. That person rendering such services
will also qualify as a contractor.
Article 1713, Civil Code: By contract for a piece of work the contractor binds himself to execute a piece of work
for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor
or skill, or also furnish the material.
Important!! Please note: the distinctions on

Employer-employee relationship vs. Principal-agent relationship
Employer-employee relationship vs. Principal-contractor relationship
FOUR-FOLD TEST IN DETERMINING THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP

1. The selection and engagement of the employee
2. The payment of wages or salaries for services
3. The power of dismissal or to impose disciplinary actions
4. The employers power to control the employee with respect to the means and methods by which
the work is to be accomplished.
It is the so-called control test that is the most important element.
FIRST TEST: The SELECTION and engagement of the employee
MANAGEMENT PREROGATIVE
Strictly speaking, the employer has no right to hire a person as his employee. The matter of selecting
a person as ones employee is more appropriately described as a prerogative. It is not a right in which you
can go to court and enforce the right to hire a person otherwise it will violate the constitutional provision
against involuntary servitude if one is compelled to be anothers employee: No person can be compelled
against his will to do an act whether illegal or illegal. Thus, an employer cannot go to court and get an
injunction to compel a person to become his employee. If at all, the employer can only exercise the
prerogative to invite that person and to hire him if he so desires. In that sense, the right to hire is
essentially a management prerogative.
MANAGEMENT PREROGATIVE An act of the employer according to his own judgment or discretion to
regulate his business. This includes hiring, transfer, dismissal, etc.
The exercise of the right or prerogative to hire is not absolute. It is regulated by law.
LIMITATIONS OR RESTRICTIONS ON THE RIGHT TO HIRE (PRIOR TO HIRING)
A. Under the Labor Code:
1. Prohibition against gender discrimination
Article 135. Discrimination Prohibited.

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It shall be unlawful for any employer to discriminate against any woman employee with respect to
terms and conditions of employment solely on account of her sex.
The following are ACTS OF DISCRIMINATION:

(a) Payment of lesser compensation, including wage, salary or other form of remuneration or
fringe benefits, to a female employee as against a male employee, for work of equal value; and
(b) Favoring a male employee over a female employee with respect to promotion, training
opportunities, study and scholarship grants solely on account of their sexes.
Criminal liability for the willful commission of any unlawful act as provided in this article or any
violation to the rules and regulations issued pursuant to Section 2 hereof (RA 6725) shall be
penalized as provided in Articled 288 and 289 of this Code. Provided, that the institution of any
criminal action under this provision shall not bar the aggrieved employee from filing an entirely
separate and distinct action for money claims, for damages and other affirmative reliefs. The actions
hereby authorized shall proceed independently of each other.
Article 135 prohibits discrimination against women employees as regards terms and conditions of
employment on account of employment on account of sex. A recent development in this area is the
passage of RA 7192 (An Act Promoting the Integration of Women as Full and Equal Partners of Men
in Development and Nation Building).
2. Prohibition against stipulation of marriage
Article 136. Stipulation Against Marriage.

It shall be unlawful for an employer to require as a condition of employment or continuation of
employment that a woman employee shall not get married, or to stipulate expressly or tacitly that
upon getting married, a woman employee shall be deemed separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason of her
marriage.
This provision covers women who are not yet married.
PT&T vs. NLRC

272 SCRA 596
In the case at bar, PT&Ts policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination,
afforded all women workers by our labor laws and by no less than the Constitution. xxx
Art 136 is not intended to apply to only women employed in ordinary occupations, or it should have
categorically expressed so. The sweeping intendment of the law, be it on special or ordinary
occupations, is reflected in the whole text and supported by Art 135 that speaks of non-discrimination
on the employment of women.
Petitioners policy is not only in derogation of Art 136 of the Labor Code on the right of the woman
to be free from any kind of stipulation against marriage in connection with her employment, but it
likewise assaults good morals and public policy, tending to deprive a woman of freedom to choose
her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable
right.
3. Prohibition against child discrimination
Article 140. Prohibition Against Child Discrimination.

No employer shall discriminate against any person in respect to terms and conditions of
employment on account of his age.
4. Minimum Employable Age
Article 139. Minimum Employable Age.

(a) No child below 15 years of age shall be employed, except when he works directly under
the sole responsibility of his parents or guardian, and his employment does not in any way interfere
with his schooling.
(b) Any person between 15 and 18 years of age may be employed for such number of hours
and such periods of the day as determined by the Secretary of Labor in appropriate regulations.
(c) The foregoing provisions shall in no case allow the employment of a person below 18
years of age in an undertaking which is hazardous or deleterious in nature as determined by the
Secretary of Labor.

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Note: Sec. 12 of RA 7610 amended Art 139 and provides instances where children below 15 years old may
be employed. (see below under Special Laws)
Situation:
In a construction business, can the employer hire a person 15 years of age?
The implementing rules explain that any person, regardless of sex, between ages 15 and 18
may be employed in any non-hazardous work. It follows that in any hazardous work, the
employable age is 18 and up.
NON-HAZARDOUS WORK OR UNDERTAKING

One where the employee is not exposed to any risk which constitutes imminent danger to his
safety and health.
Hazardous Workplaces
Section 8, Rule I, Book IV
The Bureau of Labor Standards shall, with the approval of the Secretary of Labor, issue from
time to time a detailed list of hazardous workplaces for purpose of this Rule, in addition to the
following:
(a) Where the nature of the of the work exposes the workers to dangerous environment
elements, contaminants or work conditions including ionizing radiations, chemicals, fire,
flammable substances, noxious components and the like.
(b) The workers are engaged in construction work, logging, fire-fighting, mining, quarrying,
blasting, stevedoring, dock work, deep sea fishing and mechanized farming.
(c) Where the workers are engaged in the manufacture or handling of explosive and other
pyrotechnic products.
(d) Where the workers use or are exposed to heavy or power-driven machinery or equipment.
(e) Where workers use or are exposed to power-driven tools.
Note: There is no prohibition for employment of a person 18 years old and above. The age of
majority is 18 years old under the Family Code. Before the Family Code took effect, it was 21.
As regards the employment of a person 15, 16, 17 years old, you have to make a qualification
whether the undertaking or establishment is hazardous or not. How do we know that it is
hazardous or not?
See Department Order No. 4-1999 (for the new rules including karaoke bars)
Department Order No. 4-1999 shows what establishments have been classified by the DOLE
as hazardous. Therefore, if the establishment is classified as hazardous, a person 15-below 18
years of age cannot be employed.
Technical Guidelines for Classifying Hazardous and Non-Hazardous Establishments,

Workplaces and Work Processes (DOLE Memorandum Circular No. 2-1998)
Section 3. Criteria for Classifying Hazardous Establishments or Workplaces.

An establishment or workplace may be classified as hazardous if any of the conditions
provided under Rule 1013 of the OSHS has been confirmed, as follows:
(a) Where the nature of the of the work exposes the workers to dangerous environment
elements, contaminants or work conditions including ionizing radiations, chemicals, fire,
flammable substances, noxious components and the like;
(b) Where the workers are engaged in construction work, logging, fire-fighting, mining,
quarrying, blasting, stevedoring, dock work, deep sea fishing and mechanized farming;
(c) Where the workers are engaged in the manufacture or handling of explosives and other
pyrotechnic products;
(d) Where the workers use or are exposed to power-driven or explosive powder actuated tools;
and
(e) Where the workers are exposed to biologic agents like bacteria and fungi, viruses, protozoa,
nematodes and other parasites.
Example: Employment in a Karaoke Bar.

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It was not considered hazardous before, but it is considered hazardous workplace now.
Therefore, the owner of the karaoke bar should not employ persons below 18 otherwise they
would violate the department order above-mentioned.
Employment of persons below 15: Consult RA 7610, because that is the law, which tells us the 2
instances an employer, can employ a person below 15.
Note: the qualifications and the minimum employable age.
5. Yellow Dog Contract
The employer commits Unfair Labor Practice if he imposes as a precondition for hiring that an
employee shall not join or attempt to foster a union during their period of employment and shall
resign from the union to which they belong.
B. Under Special Laws:
1. RA 7610, which amended Article 139 of the LC
Article VII, Section 12.

Children below 15 years of age shall not be employed, except:
(1) When a child works directly under the sole responsibility of his parents or legal guardian
and where only members of the employers family are employed; Provided:
(a) His employment neither endangers his life, safety, health and morals, nor impairs his
normal development;
(b) The parent or legal guardian shall provide the said minor child with the prescribed
primary and secondary education;
(c) The employer shall first secure, before engaging such child a work permit from DOLE
which shall ensure observance of the above requirements.
(2) When the childs employment or participation in public and entertainment or information
through cinema, theater, radio or television is essential; Provided:
(a) The employer shall ensure the protection, health, safety, and morals of the child;
(b) The employer shall institute measures to prevent the childs exploitation or
discrimination taking into account the system and level of remuneration, and the duration and
arrangement of working time;
(c)The employer shall formulate and implement, subject to the approval and supervision
of competent authorities, a continuing program for training and skills acquisition of the child;
(d) The employer shall first secure, before engaging such a child, a work permit from
DOLE which shall ensure observance of the above requirements;
(e) The employment contract is concluded by the childs parents or legal guardian with
the express agreement of the child concerned, if possible.
Article VII, Section 14.

No person shall employ child models in all commercials or advertisements promoting alcoholic
beverage, intoxicating drinks, tobacco and its by-products and violence.
2. RA 7877 or the Anti-Sexual Harassment Act of 1995
Section 3(a). In a work-related environment, sexual harassment is committed when:

(1) A sexual favor is made as a condition in the hiring or in the employment, reemployment,
or continued employment of said individual.
(2) xxx
This prohibits the employer from asking sexual favor as a condition for employment. Thus
restricting the employers right to hire.
3. RA 7277 or the Magna Carta of Disabled Persons
Sec 32. Discrimination on Employment. No entity, public or private, should discriminate against
qualified disabled person in terms of job application procedures, hiring, promotion, discharge,
compensation and other benefits.

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Sec. 5. Equal Opportunity for Employment. - No disable person shall be denied access to
opportunities for suitable employment. A qualified disabled employee shall be subject to the same
terms and conditions of employment and the same compensation, privileges, benefits, fringe
benefits, incentives or allowances as a qualified able bodied person.
Mandates that qualified disabled persons be granted the same terms and conditions of
employment as qualified able-bodied employees.
Once they have attained the status of regular workers, they should be accorded all the benefits
granted by law, notwithstanding written or verbal contracts to the contrary.
BERNARDO vs. NLRC

G.R. No. 122917, 12 July 1999
The fact that the employees were qualified disabled persons necessarily removes the employment
contracts from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified
able-bodied persons, they are thus covered by Article 280 of the Labor Code. x x x
In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of the
working class, but also the concern of the State for the plight of the disabled. The noble objectives of
Magna Carta for Disabled Persons are not based merely on charity or accommodation, but on justice
and the equal treatment of qualified persons, disabled or not. In the present case, the handicap of
petitioners (deaf-mutes) is not a hindrance to their work. The eloquent proof of this statement is the
repeated renewal of their employment contracts. Why then should they be dismissed, simply because
they are physically impaired? The Court believes, that, after showing their fitness for the work
assigned to them, they should be treated and granted the same rights like any other regular
employees.
4. RA 8791 or the General Banking Laws of 2000
Section 55.4. No bank shall employ casual or non-regular personnel or too lengthy probationary
personnel in the conduct of its business involving deposits.
There is a possibility on the part of the mentioned employees to disclose confidentiality of

bank deposits. They have no security of tenure.
Provisions under the Labor Code which restrict the rights of the employer DURING
EMPLOYMENT
1. Article 135 Stipulation Against Marriage
2. Article 136 Discrimination Prohibited
SECOND TEST: The PAYMENT OF WAGES or salaries for services
WAGE Paid to any employee; shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to
be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the employee. Fair and
reasonable value shall not include any profit to the employer or to any person affiliated with the
employer. (Article 97f)
As defined, the WAGE is remuneration for services rendered and includes the fair and reasonable value of
facilities as may be determined by the Secretary of Labor. So it is not limited to cash payment for an
employees services.
Note: Article 97 also defines the different Methods of Fixing Compensation:

1. Time (daily and monthly paid workers)
2. Commission
3. Job or task basis
4. Piece-rate basis (payment by results)
These are very important in relation to persons or employees who are exempted from enjoying the
benefits under the Labor Code. Because under Article 82, workers paid by results are exempted from
overtime pay, service incentive leave, etc. (Conditions of Employment)

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Concept of Wage and Salary
WAGES as distinguished from SALARY applies to the compensation for manual labor, skilled or unskilled,
paid at stated times, and measured by the day, week, month, or season, while
SALARY denotes a higher degree or employment, or superior grade of services, and implies a position or
office.
By contrast, the term WAGES indicates considerable pay for a lower and less responsible character of
employment, while
SALARY is suggestive of a larger and more permanent or fixed compensation for more important service.
Songco vs. NLRC

183 SCRA 618
Wage and salary have the same etymology. While they have the same concept, distinctions have to be
made. WAGE is compensation more for skilled or unskilled manual laborers. SALARY pertains to white collar
workers and those of a higher or grade of employment, superior grade of services and position of office.
Labor Law; Commissions; The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly tat commissions are part of petitioners wage or
salary. We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners would be inspired to put a little more industry
on the jobs particularly assigned to them, still these commissions are direct remunerations for services
rendered which contributed ti the increase of income of Zuellig. COMMISSION is the recompense,
compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the
same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The
nature of the work of a salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commissions are part of petitioners wage or salary. We take judicial notice of the fact
that some salesmen do not receive any basic salary but depend on commissions and allowances or receive any
basic salary but depend on commissions and allowances or commissions alone, although an employer-
employee relationship exists.
Iran vs. NLRC

289 SCRA 433 (1998)
Workers were paid based on commission, not on time spent. Issue: whether or not that commission is
considered wage.
The SC ruled that commission are considered wage because Article 97 defines wage as to include payment
of remuneration in the form of commission.
Petitioner Iran is engaged in softdrinks merchandising and distribution in Mandaue City, Cebu, employing
truck drivers who double as salesmen, truck helpers, and non-field personnel in pursuit thereof. As part of
their compensation, the driver/salesman and truck helpers of the petitioner received commissions per case of
softdrinks sold.
The definition of WAGES in Article 97 (f) explicitly includes commissions as part of wages. While
commissions are indeed, incentives or forms of encouragement to inspire employees to put a little more
industry on the jobs particularly assigned to them, still these COMMISSIONS are direct remunerations for
services rendered. In fact, commissions have been defined as the recompense, compensation or reward
of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is
calculated as a percetage on the amount of his transactions or on the profit to the principal. The
nature of the work of a salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commissions are part of a salesmans wage or salary.
Gaa vs. CA
140 SCRA 304
Sc ruled that the wage of the employee is exempt from garnishment. Under the Civil Code, there is a
provision on the exemption of the employees wage from garnishment. The SC was able to apply this
provision.
Article 1708 of the Civil Code which exempts laborers wage from attachment or execution does NOT apply
to a responsibly placed employee, supervisory or managerial employee, but only to rank-and-file.
Article 1708 used the word WAGES and not SALARY in relation to LABORER when it declared what are
to be exempted from attachment and execution. The term WAGES as distinguished from SALARY, applies
to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day,
week, month, or season, while SALARY denotes a higher degree of employment, or a superior grade of
services, and implies a position of office; by contrast, the term WAGES indicates a considerable pay for a
lower and less responsible character of employment. While SALARY is suggestive of a larger and more
important service.

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The distinction between wages and salary was adverted to in Bell vs. Indian Livestock Co., wherein it
was said: WAGES are the compensation given to a hired person for service, and the same is true of
SALARY. The words seem to be synonymous, convertible terms, though we believe that use and general
acceptation have given to the word salary a significance somewhat different from the term wages in this:
that the former is understood to relate to a position of office, to be compensation given for official or other
service, as distinguished from wages, the compensation for labor.
Concept of Facilities and Supplements
FACILITIES are items of expense necessary for the laborers and his familys existence and subsistence.
Requisites for FACILITIES to be considered as an integral part of an employees wage:

1. Must be customarily furnished by the employer to the employees;
2. Must be charged at a fair and reasonable value; and
3. The provision on deductible facilities must be voluntarily accepted by the employee in writing.
(Mabeza vs. NLRC, 271 SCRA 670)
Mabeza vs. NLRC

271 SCRA 670
More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not
facilities but supplements. A benefit or privilege granted to an employee for the convenience of the employer is
NOT a facility. The criterion in making a distinction between the two not so much lies in the kind (food, lodging)
but the purpose. Considering, therefore, that hotel workers are required to work different shifts and are
expected to be available at various odd hours, their ready availability is a necessary matter in the operations of a
small hotel, such as private respondents hotel.
Millares vs. NLRC

305 SCRA 501
Defines FACILITIES and the term CUSTOMARY.

CUSTOMARY is founded on long-established and constant practice connoting regularity. The receipt of an
allowance on a monthly basis does not ipso facto characterize it as a regular and forming part of salary because
the nature of the grant is a factor worth considering. We agree with the observation of the Solicitor General that
the subject allowances were, temporarily, not regularly, received by the petitioners because In the case of
housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee
concerned transfers to the company premises and his housing allowance is discontinued x x x x On the
otherhand, the transportation allowance is in he form of advance for actual transportation expenses subject to
liquidation x x x given only to employees who have personal cars. The Bislig allowance is given to Division
managers and corporate officers assigned in Bislig, Surigao del Norte. Once the officer is transferred outside
Bislig, the allowance stops.
Section 5, Rule VII, Book III, of the Implementing Rules gives meaning to the term FACILITIES as
including articles or services for the benefit of the employee or his family but excluding the tools of
the trade or articles or services primarily for the benefit of the employer or necessary to the
conduct of the employers business.
The Secretary of Labor under Section 6, Rule VII, Book III, may from time to time fix in appropriate
issuances the fair and reasonable value of the board, lodging and other facilities customarily
furnished by an employer to his employees. Petitioners allowances do not represent such fair and
reasonable value as determined by the proper authority simply because the Staff/Managers allowance and
transportation allowance were amounts given by the employer in lieu of actual provisions for housing and
transportation needs whereas the Bislig allowance was given in consideration of being assigned to the hostile
environment then prevailing in Bislig.
SUPPLEMENTS constitute extra remuneration or special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages.
The classification of an item of expense as a facility or a supplement will depend on the purpose, and not
on the kind. So, if it is principally or mainly for the benefit of the employee, classify as facilities, and the fair
and reasonable value of that can be considered as deductible from the employees wage. An employer can
validly pay the employee in the form of cash or in kind. And that kind refers to facilities.
If the requisites are all present, that facilities may take the place of the cash payment of the employees
wage. This is one exception to the requirement that an employees wage shall be paid in legal tender; you
cannot pay it in kind.
If it classifies under facilities, it shall include the fair and reasonable value of board, lodging, etc. as long
as it is mainly and principally for the benefit of the employee.

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WAGE RATIONALIZATION ACT (RA 6767)
Importance: This law, which amended the Labor Code, will tell us the different government agencies
involved in the fixing of wages, and also, how to resolve wage distortion.
Purpose: was intended to rationalize wages

FIRST, by providing for full-time boards to police wages round-the-clock.
SECOND, by giving the boards enough powers to achieve this objective.
Policies:
(a) To rationalize the fixing of the minimum wage. (important)
It has been rationalized because Article 124 provides for the standards and criteria that should guide
the agency of government when it comes to fixing the minimum wage. It is noted that under the standard
criteria, that the Congress has tried to weigh the factors involving the employers, as well as the factors
involving the laborers when it comes to fixing of employees wage in order to rationalize it.
Before RA 6727, it was only Malacaang, through a Presidential Decree, that dictates how much
should be the minimum wage in the Philippines. Most often than not, those employers in the far-flung
areas are adversely affected because the fixing of minimum wage is not rationalized. It does not take into
consideration, for example, the capitalization of the employer, the profit expected, the cost of living in a
particular area.
With the advent of RA 6727, the law deems it necessary that there shall be standard criteria in fixing
the employees wage.
Article 124. Standards or Criteria for Minimum Wage Fixing.

a. The demand for living wages;
b. Wage adjustment vis--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 on employment generation and family income; and
j. The equitable distribution of income and wealth along with the imperatives of economic and
social development.
(b) To promote productivity-improvement and gain-sharing measures to ensure a decent standard of

living for the workers and their family.
(c) To guarantee the rights of labor to its just share in the fruits of production.
(d) To enhance employment generations in the countryside through industry dispersal.
To allow business and industry reasonable returns on investment, expansion and growth.
(e) The state shall also promote collective bargaining as the primary mode of setting wages and other
terms and conditions of employment; and whenever necessary, the minimum wage rates shall be adjusted
in a fair and equitable manner, considering existing regional disparities in the cost-of-living and other
socio-economic factors and the national economic and social development plans. (important)
This is an important policy because it promotes collective bargaining as a mode of settling labor
disputes.
Ilaw at Buklod ng Manggagawa vs. NLRC

198 SCRA 586 (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
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Rules Implementing RA 6727 provides for a specific and detailed approach on how to resolve
wage distortion short of strike or lockout.
Among the rights guaranteed to employees by the Labor Code is that of engaging in
concerted activities in order to attain their legitimate objectives. Article 263 of the Labor Code, as
amended, declares that in line with the policy of the State to encourage free trade unionism and
free collective bargaining, xx (w)orkers shall have the right to engage in concerted activities for
purposes of collective bargaining or for their mutual benefit and protection. A similar right to
engage in concerted activities for mutual benefit and protection is tacitly and traditionally
recognized in respect of employers.
The more common of these concerted activities as far as employees are concerned are:
i. strikes the temporary stoppage of work as a result of an industrial or labor dispute;
ii. picketing the marching to and fro at the employers premises, usually accompanied
by the display of placards or other signs, making known the facts involved in a
labor dispute; and
iii. boycotts the concerted refusal to patronize an employers goods or services and to
persuade others to a like refusal.
On the other hand, the counterpart activity that management may licitly undertake is the lockout
the temporary refusal to furnish work on account of a labor dispute. In this connection, the
same Article 263 provides that the the right of legitimate labor organizations to strike and
picket, and of employer to lockout, consistent with the national interest, shall continue to be
recognized and respected. The legality of these activities is usually dependent on the legality of
the purposes sought to be attained and the means employed therefore.
Cagayan Sugar Milling vs. Secretary or Labor

G.R. No. 128399. January 15, 1998
The record shows that there was no prior public consultation or hearings and newspaper
publication insofar as Wage Order No. RO2-02-A (Amended) is concerned (in violation of Art. 123 of the
Labor Coe). In fact, these allegations were not denied by public respondents in their comment. The Sec. of
Labors position is that there was no need to comply with the legal requirements of consultation and
newspaper publication as Wage Order No. RO2-02-A merely clarified the ambiguous provision of the original
wage order.
We are not persuaded.
To begin with, there was no ambiguity in the provision of Wage Order RO2-02 as it provided in
clear and categorical terms for an increase in statutory minimum wage of workers in the region. Hence, the
subsequent passage of RO2-02-A providing instead for an across the board increase in wages did not clarify
the earlier Order but amended the same. In truth, it changed the essence of the original Order.
In passing RO2-02-A without going through the process of public consultation and hearings, the
Regional Board deprived petitioner and other employers of due process as they were not given the
opportunity to ventilate their positions regarding the proposed wage increase.
In wage-fixing, factors such as fair return of capital invested, the need to induce industries to
invest in the countryside and the capacity of employers to pay are, among others, taken into consideration.
Hence, our legislators provide for the creation of Regional Tripartite Boards composed of representatives
from the government, the workers and the employers to determine the appropriate wage rates per region to
ensure that all sides are heard.
For the same reason, Article 123 of the Labor Code also provides that in the performance of their
wage-determining functions, the Regional Board shall conduct public hearings and consultations, giving
notices to interested parties. Moreover, it mandates that the Wage Order shall take effect only after
publication in a newspaper of general circulation in the region. It is a fundamental rule, borne out of a sense
of fairness, that the public is first notified of a law or wage order before it can be held liable for violation
thereof.
In the case at bar, it is indisputable that there was no public consultation or hearing conducted
prior to the passage of RO2-02-A. Neither was it published in a newspaper of general circulation as attested
in the February 3, 1995 minutes of the meeting of the Regional Wage Board that the non-publication was by
consensus of all the board members. Hence, RO2-02-A must be struck down for violation of Article 123 of
the Labor Code.
REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD (RTWPB)

An agency of Government responsible for fixing the minimum wage
Composition of the Board:

1) Regional Director of the DOLE as Chairman
2) Regional Directors of NEDA and DTI as Vice Chairmen
3) 2 members each from the workers and employers sector who shall be appointed by the President of
the Philippines, upon recommendation of the Secretary of the DOLE
4) Each Regional Board to be headed by its Chairman shall be assisted by a Secretariat
(7 members-please check wage order signatories)

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Two Major Functions of the Board:

(1) It has the power to receive, act and process application for wage increase and adjustment.
(2) The power to act, process and approve application for exemption from the wage orders.
These are the two most important functions of the board as far as lawyers are concerned.
Because that is where lawyers play an active role in representing the parties: 1) on the matter of
application of wage increase, and 2) on the matter of granting wage exemption or exemption from the
minimum wage.
Get a copy of the Revised Rules of Procedure on Minimum Wage Fixing. (1990)
NATIONAL WAGES AND PRODUCTIVITY COMMISSION (NWPC)

An appellate agency. This is not the same as the NLRC.
REVISED RULES OF PROCEDURE ON MINIMUM WAGE FIXING:

The procedure will tell us that you can file a petition for a wage increase with the RTWPB. Also, that the
Board can Motu Proprio fix the minimum wage or can act on the application for a minimum wage increase or
reduction.
Ordinarily, the Board will not act motu proprio. It will wait until an application for a wage increase is files
before it.
Modes to initiate the fixing of the minimum wage:

1) Motu Proprio by the RTWPB
2) Wage fixing by virtue of a petition filed
Rule II. Section 3. Procedures in Minimum Wage Fixing:
(a) Motu Proprio by the Board
Whenever conditions in the region, province or industry so warrant, the Board may, motu proprio on its
own initiative, or as directed by the Commission (NWPC), initiate action or inquiry to determine whether a
wage order should be issued. The Board shall conduct public hearings. The Board may also conduct
consultations with concerned sectors/industries.
(b) By Virtue of a Petition Filed
1) Form and Content of Petition
Any party may file a verified (subscribed and sworn to) petition for wage increase with the
appropriate Board in 10 legible copies, which shall contain the following:
a) Names and addresses of petitioners and signatures of authorized officials
b) Grounds relied upon to justify the increase being sought
c) Amount of wage increase being sought
d) Area and/or industry covered.
PROPER PARTY: Any party may file the petition to increase the wage or fix the
minimum wage, provided:
The petitioner is a legitimate organization of workers duly registered with the
DOLE
The employers are with substantial interest and are affected by the decision of
the order of the Board
If employed in an establishment, the employee cannot go to court and file a petition

for a wage increase because the employee is not considered a proper party. It must be an
employer or a legitimate labor organization.
2) Board Action
The Board must first examine if the formal and substantial requirements are complied with
and are completed.
If the petition conforms with the substantial requirements, the Board shall conduct public
hearings in the manner prescribed, to determine whether a wage order should be issued. The
Board may also conduct consultations with concerned sectors/industries.

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3) Publication of Notice of Petition/Public Hearing
The notice shall be published in a newspaper of general circulation in the region and/or
posted in public places as determined by the Board. The publication or posting shall be made
at least 15 days before the date of initial hearing and shall be in accordance with the
suggested form.
The notice of petition and/or public hearing shall include

The names and addresses of the petitioners
The subject of the petition
The date, place and time of the hearings
This is posted or published before the hearing of the petition.
4) Opposition
Any party may file his opposition to the petition on or before the initial hearing, copy
furnished to the petitioners. The opposition shall be filed with the appropriate Board in 10
typewritten legible copies, which shall contain the following:
a) Names and addresses of the oppositors, and signatures of authorized officials;
b) Reasons or grounds for the opposition; and
c) Relief sought
5) Consolidation of Petitions
If there is more than one petition filed, the Board may motu proprio or on motion of any
party, consolidate these for purposes of conducting joint hearings or proceedings to expedite
resolutions of petitions. Petitions received after publication of an earlier petition need not go
through the publication or posting requirement.
6) Assistance of Other Government and Private Organizations
The Board may enlist the assistance and cooperation of an government agency or private
person or organization to furnish information in aid of it wage fixing function.
Rule III. Conduct of Hearings.

In the performance of its wage-fixing functions, the Board shall conduct public hearings or consultations,
giving notices to employees and employers groups, provincial, city and municipal officials and other
interested parties.
Hearings may be conducted by the Board en banc or by a duly authorized committee thereof. The Board
shall determine the date, place and time of the hearing which shall be open to the public except as otherwise
requested by the party and so determined by the Board.
Order of Hearing (Section 3)

As much as practicable, the petitioners shall present their evidence first, followed by the oppositors, the
Board may then call on other persons to present their views and submit position papers and other supporting
documents.
Manner and Duration of Hearings (Section 4)

Public hearing shall be conducted in each province in the region as far as practicable.
Hearings shall be concluded within 45 days from the date of initial hearing except when conditions in the
region warrant otherwise.
Records of Proceedings (Section 5)

The Board Secretariat shall keep records or minutes of all Board proceedings, duly noted by the members
of the Board.
Non-Applicability of Technical Rules (Section 6)

The Board shall not be bound strictly by technical rules of evidence and procedures.
Prohibition Against Injunction (Section 7)

NO preliminary or permanent injunction or temporary restraining order may be issued by any court,
tribunal or any other entity against any proceeding before the Commission or Board.

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On the date of hearing, the Board will sit as a collegial body and will hear the petition, first from the petitioner
presenting their position paper and after that from the oppositors. And thereafter, the Board will then
determine whether to grant the petition or not. Whether to grant the wage increase or not, and how much. In
effect, the Board will fix the minimum wage and this will be done through the issuance of a wage order.
Rule IV. Wage Order.
Issuance of Wage Order (Section 1)

Within 30 days after conclusion of the last hearing, the Board shall decide on the merits of the petition,
and where appropriate, issue a wage order establishing the regional minimum wage rates to be paid by
employers, which, shall in no case be lower than the applicable statutory minimum wage rates. The Wage
Order may include wages by industry, province or locality as may be deemed necessary by the Board,
provided, however, that such wage rates shall not be lower than the regional minimum wage rates unless
expressly specified in the Wage Order.
The Board shall furnish the NWPC a copy of the decision on the petition or the Wage Order.
Effectivity (Section 4)
A Wage Order shall take effect 15 days after its publication in at least 1 newspaper of general circulation
in the region
Upon issuance of the Wage Order, it does not immediately become effective. It has to be published and takes
effect 15 days after its publication.
Frequency of Wage Order (Section 3)

General Rule:
Any Wage Order issued by the Board may not be disturbed for a period of 12 months from its effectivity.
And no petition for wage increase shall be entertained within the said period.
Exception:
In the event, however, that supervening conditions (such as extraordinary increase in prices of petroleum
products and basic goods and services), demand a review of the minimum wage rates as determined by the
Board and confirmed by the Commission, the Board shall proceed to exercise its wage fixing function even
before the expiration of the period (12 months).
Reason: The petitions would clog the Board dockets unreasonably.
The rules prohibit any interested party from filing a wage increase petition within 12 months from the
effectivity of a wage order. Please note the exception. Absent such circumstance, there will be no disturbance
of the Wage Order within 12 months from its effectivity. That is why the date of effectivity of a Wage Order is
important.
Remedy on the part of the aggrieved party from a Wage Order?

Rule V. Appeal.
Appeal to the Commission (NWPC) (Section 1)

Any party aggrieved by a Wage Order issued by the Board may appeal such Order to the Commission by
filing a verified appeal with the Board in 3 typewritten legible copies, not later than 10 days from the date of
publication of the Order.
The appeal shall be accompanied by a Memorandum of Appeal which shall state the grounds relied upon
and the arguments in support of the appeal.
The Board shall serve notice of the appeal to concerned parties.
So watch out for the date of the publication of the Wage Order because that is when the 10 calendar days will
start to run. Not from the effectivity, but from the date of publication.
Grounds for Appeal (Section 2)

(a) Non-conformity with prescribed guidelines and/or procedures
(b) Questions of law (Rule 45)
(c) Grave abuse of discretion (Rule 65)
The NWPC has established guidelines on the fixing of the minimum wage. If the Board, for instance, did not
conduct a hearing, that contravenes the guidelines, therefore, constituting the first ground.
As for instance, the Board is confronted with an issue on a question of law and the Board erred in interpreting
the law, this will fall under the second ground.

16
As when the Board acts arbitrarily, capriciously or whimsically in issuing the wage order, this will constitute
grave abuse of discretion.
Period to Act on Appeal (Section 4)

The Commission shall decide on the appeal within 60 days from the filing thereof.
Effect of Appeal (Section 5)
The filing of the appeal does not operate to stay the Order unless the party appealing such Order shall file
with the Commission an undertaking with a surety or sureties satisfactory to the Commission for payment to
employees affected by the Order of the corresponding increase, in the event such Order is affirmed.
Instance when the appeal will stay the Wage Order: In case the employer will post a surety bond.
The Wage Order fixes the minimum wage. The employer has to comply with that, unless the employer is
exempted from complying with the Wage Order. The employer, however, as an aggrieved party, can appeal
from the Wage Order on grounds provided by the law or by the rules. If he does appeal, that appeal will not
stop the employer from complying with the Wage Order. That means, he has to still pay his employees. He
can only refrain from paying his employees or giving them the minimum wage if he posts a cash or surety
bond in an amount equivalent to the wage increase. On the condition that the bond will answer in case his
appeal is dismissed by the NWPC.
Is the Regional Board under the DOLE?

It is not. It is only an attached to the department for policy and correlation purposes.
The decision of the Board is appealable to the NWPC. From the decision of the NWPC, does the aggrieved
party have any remedy? YES.
Remedy from the decision of the NWPC:

No appeal from the decision of the NWPC. The legal remedy is by means of Special Civil Action of
Certiorari under Rule 65 to the Court of Appeals within the period of 60 days.
St. Martins Funeral Home vs. NLRC

G.R. 130856, September 16, 1998
Under the Principle of hierarchy of courts, the certiorari should be filed not directly to the Supreme Court,
but to the Court of Appeals.
Senate Bill No. 1495, speech of Roco:
The Judiciary Reorganization Act, BP 129, reorganized the Court of Appeals and at the same time expanded
its jurisdiction and powers. Among others, its appellate jurisdiction was expanded to cover not only the final
judgment of the RTC, but also all final judgments, decisions, resolutions, orders, or awards of quasi-judicial
agencies, instrumentalities, boards and commissions, except those falling within the appellate jurisdiction of
the Supreme Court in accordance with the Constitution, the provisions of BP 129 and of subparagraph 1 of the
third paragraph and subparagraph 4 of Section 17 of the Judiciary Act of 1948.
The purpose of the law is to ease the workload of the Supreme Court by the transfer of some of its burden
of review of factual issues to the Court of Appeals, however, whatever benefits that can be derived from the
expansion of the appellate jurisdiction of the Court of Appeals was cut short by the last paragraph of Section 9
of BP 129 which excludes from its coverage the decisions and interlocutory orders issued under the Labor
Code and by the Central Board of Assessment Appeals.
There is a growing number of labor cases being elevated to this Court which, not being a trier of fact, has at
times been constrained to remand the case to the NLRC for resolution of unclear or ambiguous factual
findings; that the Court of Appeals is procedurally equipped for that purpose; aside from the increased number
of its component divisions; and that there is undeniably an imperative need for expeditious action on labor
cases as a major aspect of constitutional protection to labor.
Therefore, all references in the amended Section 9 of BP 129 to supposed appeals from the NLRC to the
Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule
65. Consequently, all such petitions should henceforth be initially filed in the Court of Appeals in strict
observance of the Doctrine of Hierarchy of Courts as the appropriate forum for the relief desired.
Under Rules of Civil Procedure, the Court of Appeals and the Supreme Court, shares original and
concurrent jurisdiction over Certiorari, including Prohibition, Mandamus, Quo Warranto, etc.
In Certiorari, there should be no other appeal, no other plain, speedy remedy in the course of law that is
why a motion for reconsideration should be filed from the decision of the NWPC.
If a motion for reconsideration is filed, the period for filing it will not be considered in determining the 60-
day period for filing the Certiorari. So, from the denial of the motion for reconsideration, there is still 60 days
to file for Certiorari.

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It is the prevailing rule that even is a motion for reconsideration is filed; there is still 60 days to file a
Petition for Certiorari from receipt of the denial of the motion for reconsideration.
Under the old rule, the SC said that there will only be a balance, but a most recent Supreme Court Circular
has repealed that.
So, with or without a motion for reconsideration, there is 60 days to file the Petition for Certiorari. This
should be grounded on grave abuse of discretion amounting to lack or excess of jurisdiction.
Remedy from the decision of the Court of Appeals:
From the decision of the Court of Appeals ruling on the denial of the petition for certiorari, a motion for
reconsideration can still be filed within 15 days. If denied by the CA, the legal remedy is Rule 45 to the
Supreme Court on question of law.
Summary:
The decision of the NWPC becomes final and executory.
There is no appeal from the decision of the NWPC, but there is still a remedy of Certiorari to the Court of
Appeals within 60 days.
From the decision of the CA, a motion for reconsideration can be filed
And if the motion for reconsideration is denied, can file a Petition for Review on Certiorari or Appeal
by Certiorari under Rule 45 to the Supreme Court. Meanwhile, the decision of the CA will not become
final and executory. It can be reviewed by the SC. Of course, the decision of the NWPC becomes final and
executory upon the denial of motion for reconsideration. If it becomes final and executory, it could be
subject on execution. And the only way to prevent the enforcement of the decision of the CA would be to
file a Petition for Certiorari and simultaneous or subsequent therewith, apply for the issuance
of a Temporary Restraining Order and/or a Writ of Preliminary Injunction . Without the TRO
and/or WPI, the decision of the NWPC cannot be enjoined and therefore, it should be executed.
If the NWPC affirms the Wage Order and there is no more review or there is no more remedy availed of by
the aggrieved party, then the decision and the Wage Order will have to be complied with.
Prevailing Wage Order: Wage Order No. 8, as of today, November 12, 2001. P190, covering the Cities of
Cebu, Lapulapu and Mandaue. Another round of increase of P5 will take effect on December 1, 2001.
EXEMPTION FROM MINIMUM WAGE

1) By operation of law
2) By application for wage exemption
Who are exempted from the minimum wage by operation of law?

Article 98. Application of Title.
This title (Wages) shall NOT apply to farm tenancy or leasehold, domestic service and persons working in
their respective homes in needle work or in any cottage industry duly registered in accordance with law.
Relate this to Employment of Homeworkers, Article 159-155. If a homeworker performs needlework in or at

his home, that person is exempted from employing the minimum wage by operation of law. So employers of
these employees are not obliged to comply with the minimum wage. If you are employing a househelper, you
are not covered by the minimum wage by operation of law. That means, you do not have to file an application
for exemption. And you do not have to comply with the P190 prevailing minimum wage.

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Revised Guidelines on Exemption from Wage Orders NWPC Guidelines No. 01-1996
Section 2. Criteria for Exemptible Establishments.

Exemption of establishments from compliance with the wage increases and cost of living allowances
prescribed by the Boards may be granted in order to
(1) Assist establishments experiencing temporary difficulties due to losses to maintain the financial
viability of their businesses and continued employment of their workers;
(2) Encourage the establishment of new businesses and the creation of more jobs, particularly outside
the National Capital Region and Export Processing Zones, in line with the policy on industry dispersal;
and
(3) Ease the burden of micro establishments, particularly in the retail and service sector, that have a
limited capacity to pay.
Types of Employers Eligible for Exemption from the Applicable Minimum Wage:
1) Distressed Establishments
2) New Business Enterprises (NBEs)
3) Retail or Service Establishments employing not more than 10 workers
4) Establishments adversely affected by natural calamities
Exemptible categories outside of the above-mentioned list may be allowed only if they are in accord with
the rationale for exemption reflected above. The concerned Regional Board shall submit strong and justifiable
reasons for the inclusion of such categories which shall be subject to review or approval by the Commission.
Note: Please check the guidelines for the documentary requirements that must be submitted in order to
process and secure approval of the application for wage exemption.
SERVICE ESTABLISHMENT refers to one principally engaged in the sale of services to individuals for their
own or household use and is generally recognized as such.
RETAIL ESTABLISHMENT refers to one principally engaged in the sale of goods to end users for personal
or household use.
Cases: Wage Exemption

RCPI vs. National Wages Council
207 SCRA 581
The purpose of wage exemptions is to help financially distressed companies meet their labor costs without
endangering the existence or viability of the firm upon which both management and labor depend for a living.
Under the spirit of Wage Order No. 6, it is the actual ability of a firm to spend for its current needs and
costs and not how the assets and liabilities of a firm may appear in the technical jargon of higher accounting
principles which is important. True, the retained earnings account constitutes a company's accumulated profits
of losses. However, it is not enough to treat said earnings as "earnings" in the real sense of the word for
purposes of wage exemptions.
To a company striving to meet daily payrolls, it is not of any comfort to say that the "appraisal increment
transferred to retained earnings" represents actual earnings which were previously deducted from the actual
net income figure through additional depreciation expense resulting from appraisal. In purely technical
accounting terms, they may be considered as merely being returned not to the net income account but to the
retained earnings balance to which the net income account is ultimately closed.
This is to keep the books straight. For purposes of compliance with the law on wage exemptions, however,
the retained earnings arising from appraisal increment do not represent hard cash but merely theoretical
increases resulting from upward valuations of old fixed assets.
There is no income or profit from the sale of goods or services. No income is realized from the reappraisal of
fixed assets until such a time as the machinery, equipment, and other fixed assets are sold or disposed of in
the event of a liquidation of assets.
The NWC ruling treats the revaluation increment as similar to the sale of fixed assets. In the same way,
however, that machinery and equipment should not be sold in order to meet increases in the wages of
workers (for this would destroy not only the company but the employment of the workers themselves) so
should a similar attitude be adopted when machinery or equipment is not sold but merely revalued. On
December 16, 1986, the NWC, through then Secretary Augusto B. Sanchez - its chairman, approved the
application for exemption of RCPI and stated, among other things, that: "The Executive Committee, therefore,
recognizes the necessity to set aside technicalities required by existing criteria under NWC Policy Guidelines
Nos. 6 and 8 and bestow greater significance to the actual financial condition of RCPI."
NWC decided to give RCPI a breathing spell because of numerous obligations that the company had to
meet. Under a compromise agreement, RCPI bound itself to pay 30% of whatever was due the employees
under PD 1713 for the mandatory third year increases and Wage Order No. 1 for the first and second year.
The balance of 70% was subject to negotiations. (See G.R. No. 77503, Buklod ng Manggagawa v. Sanchez,
supra, Rollo, p. 168). NWC found that RCPI's compliance with the Wage Orders would result in the company's
financial dislocation and, accordingly, granted it the prayed for exemption. We see no reason from the records
why a different treatment should apply in the following year. Simply because there were changes or transfers

19
of the same items to differently named accounts in the books of the company, it does not follow that it
thereby ceased to be entitled to exemptions.
(Distressed Establishment)
Joy Brothers vs. NWPC
273 SCRA 622
NWPC Revised Guidelines provides that it may be exempted upon application and due determination by the
board. The criteria for exemption for Distressed Establishments are as follows:
(a) In case of a stock corporation, partnership, single proprietorship, non-stock, non-profit organization or
cooperative engaged in a business activity or charging fees for its services
a.1 When accumulated losses for the last 2 full accounting periods and interim period, if any, immediately
preceding the effectivity of the Order have impaired by at least 25% the:
-- Paid-up capital at the end of the last full accounting period preceding the effectivity of the Order, in case
of corporations.
-- Total invested capital at the beginning of the last full accounting period preceding the effectivity of the
Order in the case of partnerships and single proprietorships.
a.1.1 Establishments operating for less than 2 years may be granted exemption when accumulated losses
for said period have impaired by at least 25% the paid-up capital or total invested capital, as the case may be.
Section 8, paragraph a, of the Rules Implementing Wage Order No. NCR-03 provides that exemption from
compliance with the wage increase may be granted to distressed establishments whose paid-up capital has
been impaired by at least 25% or which registers capital deficiency or negative net worth.
The Revised Guidelines on Exemption expressly require interim quarterly financial statements for the period
immediately preceding December 16, 1993. it is clear that the financial statements worthy of consideration are
those of the three quarters prior to December 16, 1993, the third quarter ending on September 30, 1993.
Thus, petitioner manifestly errs in claiming that said interim period is up to December 15, 1993 or December
31, 1993.
(Retail Establishment)
C. Planas Commercial vs. NLRC
303 SCRA 49
Petitioners invoke the exemption provided by law for retail establishments which employ not more than 10
workers to justify their non-liability for the salary differentials in question. They insist that PLANAS is a retail
establishment leasing a very small and cramped stall in the Divisoria Market which cannot accommodate more
than 10 workers in the conduct of its business.
The SC is unconvinced. The records disclose de los Reyes clear entitlement to salary differentials. Well-
settled is the rule that factual findings of labor officials who are deemed to have acquired expertise in matters
within their jurisdiction are generally accorded not only respect but even finality and bind this Court when
supported by substantial evidence or that amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion.
Section 4 (c) of RA 6727 categorically provides:
Retail or service establishments regularly employing not more than 10 workers may be exempted from the
applicability of this Act upon application with and as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations issued by the Commission. Whenever an application for
exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-
compliance with this Act shall be deferred pending resolution of the application for exemption by the
appropriate Regional Board. In the event that the applications for exemptions are not granted, employees
shall receive the appropriate compensation due them as provided for by this Act plus the interest of 1% per
month retroactive to the effectivity of this Act (emphasis supplied).
Nasipit Lumber vs. NWPC

289 SCRA 667
The power to prescribe guidelines is lodged in the NWPC, not in the RTWPB. This is clearly provided for in
Article 121 of RA 6727, amending the Labor Code. it grants the NWPC, not the RTWPB, the power to prescribe
rules and guidelines for the determination of minimum wage and productivity measure.
While the RTWPB may issue wage orders under Article 122(b) of the Labor Code, such orders must be
under the guidelines of the NWPC. However, the NWPC has the power not only to prescribe guidelines to
govern wage but also to issue exemptions therefrom, as the said rule provides that whenever a wage order
provides for an exemption, application thereto must be filed with the appropriate Board which shall process
the same, subject to guidelines which the RTWPB implements. Significantly, the NWPC authorized the RTWPB
to issue exemptions from wage orders, but subject to its review and approval. Since the NWPC never assented
to Guideline No.3 of the RTWPB, the said guideline is inoperative and cannot be used by the latter in deciding
or acting on petitioners application for exemption.
Reason for Exemption

A wage exemption is intended to assist financially beleaguered companies to meet their labor cost without
endangering the viability of the company.

20
WAGE DISTORTION
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 embodies in such wage
structure based on skills, length of service, or other logical bases of differentiation. (Article 124)
The definition of Wage Distortion as aforequoted, shows that such distortion can so exist when, as a
result of an increase in the prescribed wage rate, an elimination or severe contraction of intentional
quantitative differences in wage or salary rates would occur 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.
When does wage distortion happen?

It happens when the employer grants an increase only to a certain group of employees drastically
reducing or eliminating the normal salary differential or gap.
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
1) Government decreed increases through issuance of Wage Orders
2 Kinds of Wage Orders:

(a) The Congress provides for a statutory minimum wage (during the martial law era) and an
increase is given and added to the daily wage.
(b) 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.
2) Merger of two establishments whereby the employees of the dissolved company are
absorbed by the surviving company
Example:
Magnolia Nestle
Casual P160 P190
Permanent P190 P200
Magnolia-Nestle
Casual -- P190
Permanent -- P190
There will be 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.
4) Passage of RA 6727
Example: SM Company
Casual -- P145 a wage order is passed = Casual -- P190
Permanent -- P180 particularly Wage Order = Permanent P195
#8, increasing the minimum wage distortion
wage to P190 now exists
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.
21
Correction of Wage Distortion:

(brought about by the enactment or passage of a wage order)
The Court has pointed out that through Article 124, the law recognizes the validity of NEGOTIATED WAGE
INCREASES to correct wage distortion.
A. IF 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.
B. IF 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:
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.
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.
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.
LABOR ARBITRATION reference of a labor dispute to a third party for determination on the basis of
evidence and arguments presented by such parties, who are bound to accept the decision.
Arbitration may be classified on the basis of obligation on which it is based, it may either be:

22
(a) VOLUNTARY ARBITRATION a contractual proceeding whereby the parties to any dispute
or controversy in order to obtain a speedy and inexpensive final disposition of the matter,
select a judge of their own choice and by consent, submit their controversy to him for
determination (this is pursuant to a voluntary arbitration clause in the CBA)
The judge is called ARBITRATOR whose determination is a final and binding

resolution.
The power of the Voluntary Arbitrator to try and decide the case if the same as that
of a Labor Arbiter.
VOLUNTARY ARBITRATOR means

(1) Any person accredited by the Board as such, or
(2) Any person named or designated in the CBA by the parties to act as their voluntary
arbitrator, or
(3) One chosen, with or without the assistance of the NCMB, pursuant to a selection
procedure agreed upon in the CBA, or
(4) Any official that may be authorized by the Secretary of Labor to act as voluntary
arbitrator upon the written request and agreement of the parties to a labor dispute.
(b) COMPULSORY ARBITRATION process of settlement of labor disputes by a government

agency (or by other means provided by the government) which has the authority to
investigate and to make award which is binding on all the parties.
Parties are compelled to forego their right to strike.
A disinterested person or third party is usually appointed by the state.
It is compulsory because the law declares the dispute subject to arbitration, regardless of the
consent of the parties.
Done by the Regional Arbitration branch of the NLRC (please refer to Article 217)
It is an adversarial proceeding initiated by a complaint (usually by the union) for wage

distortion before the Labor Arbiter. The other party is entitled to answer.
The parties can agree to select a Labor Arbiter as a Voluntary Arbitrator because it is as to
the agreement between the parties.
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.
What should be contained in a CBA?

(1) Terms and conditions of employment
(2) Wages
(3) Hours of Work
(4) 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 (Sanciangko) [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.
Section 16 of Implementing Rules of RA 6727:

23
Any issue involving wage distortion shall not be a ground for strike or lockout.
STRIKE any temporary stoppage of work by the concerted action of employees as a result of an industrial
or labor dispute.
LOCKOUT is the temporary refusal of an employer to furnish work as a result of an industrial or labor
dispute.
Reasons why a STRIKE or LOCKOUT is prohibited:

(1) RA 6727 provides for a procedure in settling disputes (Article 124)
(2) RA 6727 (Section 2) provides that it is the policy of the state to promote collective bargaining as the
primary mode of settling wages and other terms and conditions of employment.
(Ilaw at Buklod ng Manggagawa vs. NLRC, 198 SCRA 586)
National Federation of Labor vs. NLRC, 234 SCRA 311

Correction of a wage distortion may be done by reestablishing a substantial or significant gap between the
wage rates of the differing classes of employees. It must be a reasonable but NOT necessarily a historical gap.
Should a wage distortion exist, there is not legal requirement that, in the rectification of that distortion by
readjustment 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 reestablishing a substantial or significant gap (as distinguished from the historical gap)
between the wage rates of differing classes of employees.
No law obligates the employer to restore the historical gap because:

(1) Adjustment of wage rates as mandated by law (RA 6727 and as the policy of the state) is not by way
of compulsion but through negotiation or CBA.
(2) Not all employers can afford to grant the same wage increase to all its employee (financial capacity
and the company has to be taken into consideration)
The law is based on equity between the employer and employee.
The employer, thru his own initiative (unilateral act) may correct wage distortion. The usual way though is
through negotiations between the employer and the employee or through CBA.

24
PROCEDURE FOR RESOLVING WAGE DISTORTION
A. WAGE DISTORTION in an UNORGANIZED ESTABLISHMENT:
Situation: In a company, there are 3 classes of employees:

A 200 (2 years or more) Wage Order No. 8 = 190
B 195 (1 year to 2 years) December 1, 2001 + 5
C 190 (newly hired) 195
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 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.
HOW IS THIS DONE?
(a) This procedure is initiated by the filing of a complaint with the NCMB (Sanciangko)
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.
(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.
(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.
(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.
(3) If not settlement is arrived at, then the dispute shall be referred to the Regional Arbitration Branch of
the NLRC for COMPULSORY ARBITRATION.

25
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.
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.
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
Luzon Stevedoring Employees Union
If APPEAL, will that stay the decision of the Voluntary Arbitrator?

NO, because the decision of the Voluntary Arbitrator is final and inappelable, but Temporary
Restraining Order and a Writ of Preliminary Injunction may be applied for.
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.
Before the St. Martins Funeral Homes Case (in the past), from the decision of the Voluntary
Arbitrator, the aggrieved party would go directly to the Supreme Court.
Cases: Wage Distortion
Prubankers Association vs. Prudential Bank and Trust Company

302 SCRA 74
WAGE DISTORTION presupposes an increase in the compensation of lower ranks in an office hierarchy
without a corresponding raise for higher-tiered employees in the same region of the country, resulting in the
elimination or the severe diminution of the distinction between the two groups.
Such distortion does not arise when a wage order gives the employees in one branch of a bank higher
compensation than that given to their counterparts in other regions occupying the same pay scale, who are
not covered by the said wage order.
In short, the implementation of the wage orders in one region but not in others does not in itself necessarily
result in wage distortion.
Employees Confederation vs. NWPC

201 SCRA 759
The NWPC noted that the determination of wages has generally involved 2 methods, the floor wage
method and the salary-ceiling method.
RA 6727 was intended to rationalize wages, first, by providing for full-time boards to police wages round-
the-clock, and second, by giving the boards enough powers to achieve this objective.
The Act is meant to rationalize wages, that is, by having permanent boards to decide wages rather than
leaving wage determination to Congress year after year and law after law.
The court used the salary ceiling method to minimize wage distortions.
26
The court is not convinced that the board is decreeing the across the board hike, performed an unlawful act
of legislation. Though the wage fixing like rate fixing constitutes an act of Congress, the latter may also
delegate the power to fix rate provided there are sufficient standards.
Metrobank vs. NLRC

226 SCRA 268
WAGE DISTORTION as defined under RA 6727 means a situation where an increase in prescribed wage
rate result in the elimination as severe contraction of intentional quantitative differences in wage or salary
rates between and among employee groups in an establishment as to effectively obliterate the distinction
embodied in such wage structure based on skill, length of service, or other logical basis of differentiation.
Whether it exists is mainly a question of fact the determination of which is the statutory function of the
NLRC. In this case majority of the members of the NLRC agree that there is a wage distortion arising from the
banks implementation of a P25 wage increase.
NOTE: From a P900 salary difference to only P150, the SC said there is a distortion as there is SEVERE
CONTRACTION, not necessarily elimination.
Metro Transit Organization vs. NLRC

245 SCRA 767
A wage distortion existed when salaries of rank and file employees were increased by P500.
The defense of management prerogative that if it is not obligated to grant supervisory employee a salary
increase whenever rank and file employees are granted an increase is unavailing.
BONUS is an act of gratuity or an act of liberality wherein the recipient has no right to demand as a matter
of right. A bonus however is demandable or an enforceable obligation when it is made part of the wage or
salary of an employee.
If it is an additional compensation which the employer promised and agreed to give without any conditions
such as success in business or increase in output, then it is part of the wage. But if it is paid only if profits are
realized or if a certain level of productivity is achieved, it cannot be considered as part of the wage. Where it is
not payable to all but only to some employees ans only when their labor becomes more efficient or productive,
it is only an inducement for efficiency, a prize thereof not a part of wage.
The demanded increase of SEAM is not a bonus and is an enforceable obligation as far as supervisory
employees of Metro are concerned.
The wage distortion had been corrected. A substantial gap or difference had been re-established between
rank and file and supervisory employees.
Capitol Wireless vs. Bate

246 SCRA 249
Petitioner and private respondent NAFLU signed a CBA with duration of 5 years. Included in the CBA is a
provision stating that should there be any government mandated wage increase allowance, the same shall be
over and above the benefit granted.
The wage orders did not give across the board wage increases to all employees in the National Capital
Region but limited such increase only to those already receiving not more than P125/day.
Since the wage order specified those who among the employees are entitled to the statutory wage
increases, then the increases applied only to those mentioned. The provisions of the CBA should be read in
harmony of the wage order whose benefit be given only to the employees entitled thereby.
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 across-the-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 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.

27
GRIEVANCE MACHINERY is simply a detailed procedure of how the parties would resolve a
dispute arising from:
i. The interpretation or implementation of the CBA and
ii. Those arising from the interpretation or enforcement of company personnel policies.
(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.
(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.
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.
o National Conciliation and Mediation Board:

Main Office: DOLE, Intramuros, Manila
Executive Director: Rolando Rico C. Olalia
Region VII: Sanciangko, near UC, Coliseum
Director II: Isidro L. Sepeda
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 at Mangagawa vs. NLRC.
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.
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.
(National Federation of Labor vs. NLRC)

28
National Federation of Labor vs. NLRC

234 SCRA 311
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 differing wage rate for each of the existing classes of employees.
The remedy contemplated by the Wage Orders and Article 124, as a practical matter, ordinarily
meant a wage increase for one or more of the affected classes of employees so that some gap or
differential would be re-established.
The NLRC is not authorized unilaterally to impose, directly or indirectly, under the guise of
rectifying a wage distortion, upon an employer a new scheme of classification of employees where
none has been established either by management decision or by collective bargaining.
Two Methods of Minimum Wage Adjustment:
1. Floor Wage Method involves the fixing of a determinate amount that would be added to the
prevailing statutory minimum wage.
2. Salary-ceiling Method whereby the wage adjustment is applied to employees receiving a

certain denominated (minimum) salary ceiling.
The first method was adopted in the earlier wage orders, while the latter method was used
in RA 6640 and RA 6727.
The shift from the first method to the second method was brought about by labor disputes
arising from wage distortions, a consequence of the implementation of the wage orders.
The shift from the first to the second method was due to the fact that the latter minimized
wage distortion disputes.


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LABOR LAW REVIEW

and to all those who made this possible. . .

Sources of Labor Laws

3. Rules and Regulations issued by administrative agencies

EMPLOYER - EMPLOYEE, DEFINITION AND DISTINCTIONS

Labor Law Review (2001-2002) CUA 1

Philippine Fisheries Development vs. NLRC

Employee Includes any individual employed by an employer. (Article 97c)

Foreign Investments Act

Q: Is there any other requirement?

Purpose: To protect the Filipinos.

ILLUSTRATION: Foreigner who wishes to be employed in a hotel establishment as a cook or chef. He

Employer-Employee Relationship vs. Principal-Agent Relationship

To make a distinction between a principal-agent relationship from a employer-employee relationship,

Maraginot vs. NLRC

The SC had the occasion to determine the existence of an agent-principal relationship.

Labor Law Review (2001-2002) CUA 3

Employer-Employee Relationship vs. Principal-Contractor Relationship

Contractor may be an individual, or corporate or juridical contractor.

Important!! Please note: the distinctions on

FOUR-FOLD TEST IN DETERMINING THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP

It is the so-called control test that is the most important element.

FIRST TEST: The SELECTION and engagement of the employee

LIMITATIONS OR RESTRICTIONS ON THE RIGHT TO HIRE (PRIOR TO HIRING)

A. Under the Labor Code:

1. Prohibition against gender discrimination

Article 135. Discrimination Prohibited.

Labor Law Review (2001-2002) CUA 4

The following are ACTS OF DISCRIMINATION:

2. Prohibition against stipulation of marriage

Article 136. Stipulation Against Marriage.

This provision covers women who are not yet married.

PT&T vs. NLRC

3. Prohibition against child discrimination

Article 140. Prohibition Against Child Discrimination.

4. Minimum Employable Age

Article 139. Minimum Employable Age.

Labor Law Review (2001-2002) CUA 5

NON-HAZARDOUS WORK OR UNDERTAKING

Technical Guidelines for Classifying Hazardous and Non-Hazardous Establishments,

Section 3. Criteria for Classifying Hazardous Establishments or Workplaces.

Example: Employment in a Karaoke Bar.

Labor Law Review (2001-2002) CUA 6

Note: the qualifications and the minimum employable age.

5. Yellow Dog Contract

B. Under Special Laws:

1. RA 7610, which amended Article 139 of the LC

Article VII, Section 12.

Article VII, Section 14.

2. RA 7877 or the Anti-Sexual Harassment Act of 1995

Section 3(a). In a work-related environment, sexual harassment is committed when:

3. RA 7277 or the Magna Carta of Disabled Persons

Labor Law Review (2001-2002) CUA 7

BERNARDO vs. NLRC

4. RA 8791 or the General Banking Laws of 2000

There is a possibility on the part of the mentioned employees to disclose confidentiality of

SECOND TEST: The PAYMENT OF WAGES or salaries for services

Note: Article 97 also defines the different Methods of Fixing Compensation:

Labor Law Review (2001-2002) CUA 8

Concept of Wage and Salary

Songco vs. NLRC

Iran vs. NLRC

Labor Law Review (2001-2002) CUA 9