Associated Labor Unions-TUCP vs. NLRC

Negotiated wage increases, whether arising from collective bargaining agreements or voluntary employer grants, may be considered in determining whether a wage distortion exists under Article 124 of the Labor Code, as amended by R.A. No. 6727, because the law expressly contemplates that employers and unions negotiate to correct distortions.

Petitioner Associated Labor Unions-TUCP represented the regular employees of private respondent Del Monte Philippines, Inc., who were covered by a collective bargaining agreement. The temporary employees ("broilers") of the same company were not union members and received lower wages. Republic Act No. 6727, the Wage Rationalization Act, took effect on July 1, 1989, granting a P25.00/day increase in the statutory minimum wage to all private-sector workers subject to certain conditions, which directly benefited the temporary employees but not the higher-paid regular employees.

On July 1, 1989, Republic Act No. 6727 took effect, granting a P25.00/day increase in the statutory minimum wage to all private-sector workers. In implementation of the law, Del Monte Philippines, Inc. gave the P25.00/day increase to its temporary employees, known as "broilers," who were then receiving P54.00/day. The regular employees, who were members of petitioner Associated Labor Unions-TUCP and were receiving P100.80/day, were not granted a similar increase. This prompted the union to complain to management, arguing that the legislated increase to the lower-paid temporary workers had sharply narrowed the wage gap between the two groups.

On February 14, 1990, the parties executed a Memorandum Agreement in which Del Monte, "in positive response to the union's representations and notwithstanding that it has no legal or contractual obligation," granted the union members a P10.00/day wage increase effective January 1, 1990, subject to the union's right to claim the remaining P15.00/day as a balance through compulsory arbitration. Prior to this agreement, the union members had already received a P15.00/day increase effective September 1, 1989 under the collective bargaining agreement, and were scheduled to receive another P15.00/day CBA increase effective September 1, 1990.

On June 5, 1990, petitioners filed a complaint before the NLRC Regional Arbitration Branch X in Cagayan de Oro City, alleging that a wage distortion had been created by the grant of the P25.00/day increase to temporary employees under R.A. No. 6727, reducing the wage difference between regular and temporary employees from P46.80 to P21.80. The Labor Arbiter dismissed the complaint on November 27, 1990, finding no wage distortion based on a table showing that, after accounting for the CBA increases and the February 14, 1990 agreement, the wage difference between the two groups had actually increased from P46.80 to P61.80. On appeal, the NLRC affirmed the Labor Arbiter's findings and denied the motion for reconsideration, prompting the present petition.

• Exclusion of Negotiated Increases: Petitioners contended that the increases mandated by the parties' collective bargaining agreement and the voluntary agreement dated February 14, 1990 should not be considered as having corrected the wage distortion, since employee benefits derived from law are exclusive, distinct, and separate from those obtained through negotiation and agreement.

• Wage Distortion: Whether negotiated wage increases arising from collective bargaining agreements and voluntary employer grants may be considered in determining whether a wage distortion exists under Article 124 of the Labor Code, as amended by R.A. No. 6727.
• Factual Findings: Whether the factual findings of the Labor Arbiter, affirmed by the NLRC, that no wage distortion exists are binding on the Supreme Court.

• Wage Distortion: No. The contention that negotiated increases should be excluded from the wage distortion analysis has no merit; Article 124 of the Labor Code expressly recognizes the validity of negotiated wage increases to correct wage distortions, and public policy encourages employers to grant increases higher than statutory minimums.
• Factual Findings: Yes. The findings of the Labor Arbiter, affirmed by the NLRC, that no wage distortion exists are entitled to respect and finality, being based on substantial evidence, as the existence of wage distortion is essentially a question of fact.

• Wage Distortion: Article 124 of the Labor Code, as amended by R.A. No. 6727, expressly provides that where the application of a prescribed wage increase results in distortions of the wage structure within an establishment, the employer and the union shall negotiate to correct the distortions. The law thus recognizes the validity of negotiated wage increases to correct wage distortions, the legislative intent being to encourage parties to seek solutions through voluntary negotiation or arbitration rather than strikes or lockouts. Recognition of wage increases given by employers—whether unilaterally or through collective bargaining—for the purpose of correcting wage distortions is consistent with the public policy of encouraging employers to grant more than the statutorily prescribed minimum. To compel employers simply to add on legislated increases without regard to what is already paid would penalize employers who grant workers more than the minimum, which would be counterproductive to labor's interests. Applying this to the facts, the table prepared by the Labor Arbiter showed that the wage difference between union members and temporary employees had actually increased from P46.80 to P61.80 after accounting for CBA increases and the February 14, 1990 agreement. There was thus no "effective obliteration of the distinction embodied in the wage structure based on skills, length of service, or other logical basis of differentiation," as the language of the law requires.

• Factual Findings: Whether or not a wage distortion exists by reason of the grant of a wage increase to certain employees is essentially a question of fact. The Labor Arbiter's findings, affirmed by the NLRC, that no wage distortion exists were based on substantial evidence and are therefore entitled to respect and finality. The Court found no reason to disturb these findings, as the wage differential between the two employee groups had not been eliminated or severely contracted but had in fact widened.

• Wage Distortion — Correctability Through Negotiated Increases — A wage distortion under Article 124 of the Labor Code, as amended by R.A. No. 6727, is defined as 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, effectively obliterating distinctions based on skills, length of service, or other logical bases of differentiation. The Court held that negotiated wage increases—whether from CBAs or voluntary employer grants—may validly be considered in determining whether a wage distortion exists, because the law expressly contemplates negotiation as the primary mechanism for correcting distortions. Excluding negotiated increases from the analysis would penalize employers who voluntarily grant more than the statutory minimum.
• Factual Findings of Labor Tribunals — Binding on Review — The existence of a wage distortion is essentially a question of fact. Factual findings of the Labor Arbiter, when affirmed by the NLRC and supported by substantial evidence, are entitled to respect and finality and will not be disturbed on certiorari.

• "Art. 124 of the Labor Code, as amended by Republic Act No. 6727, expressly provides that where the application of any prescribed wage increase by virtue of a law or wage order issued by any Regional Board results in distortions of the wage structure within an establishment, the employer and the union shall negotiate to correct the distortions. The law recognizes, therefore, the validity of negotiated wage increases to correct wage distortions." — This passage states the ratio decidendi: that the Labor Code itself validates the use of negotiated wage increases to correct wage distortions, directly refuting the petitioners' argument that statutory and negotiated benefits must be kept separate.

• "To compel employers simply to add on legislated increases in salary or allowances without regard to what is already paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases." — Quoted from Apex Mining, Inc. vs. NLRC, this formulation articulates the public policy rationale for considering existing and negotiated increases in the wage distortion analysis, and is frequently cited in subsequent wage distortion jurisprudence.

• "whether or not a wage distortion exists by reason of the grant of a wage increase to certain employees is essentially a question of fact. In this case, the findings of the Labor Arbiter, affirmed by the NLRC, that no wage distortion exists being based on substantial evidence, are entitled to respect and finality." — This passage establishes the evidentiary standard for wage distortion claims on review, confirming that the question is factual and that labor tribunals' findings bind the Court when supported by substantial evidence.

• Apex Mining, Inc. vs. NLRC, G.R. No. 86200, February 25, 1992, 206 SCRA 497 — Followed. The Court quoted its ruling that compelling employers to add legislated increases without regard to existing pay would penalize employers who grant more than the statutory minimum, supporting the conclusion that negotiated increases may be considered in the wage distortion analysis.
• Cardona vs. NLRC, G.R. No. 89007, March 11, 1991, 195 SCRA 92 — Followed. The Court cited this case for the proposition that no wage distortion exists where the employer made salary adjustments through restructuring of benefits and allowances and there was an increase pursuant to the CBA.
• Ilaw at Buklod ng Manggagawa vs. NLRC, G.R. No. 91980, June 27, 1991, 198 SCRA 586 — Cited in support of the legislative intent to encourage voluntary negotiation or arbitration to resolve wage distortions rather than concerted activities.
• National Federation of Labor vs. NLRC, G.R. No. 103586, July 21, 1994 — Cited in support of the public policy of encouraging employers to grant wage and allowance increases higher than statutory minimums.

• Article 124, Labor Code, as amended by R.A. No. 6727 — Defines "wage distortion" as 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, effectively obliterating distinctions based on skills, length of service, or other logical bases of differentiation. The provision also requires the employer and union to negotiate to correct distortions. The Court applied this provision to hold that negotiated wage increases are a valid mechanism for correcting wage distortions and that no distortion existed where the wage differential had actually widened.
• Republic Act No. 6727 (Wage Rationalization Act) — Granted a P25.00/day increase in the statutory minimum wage to all private-sector workers, effective July 1, 1989. The grant of this increase to Del Monte's temporary employees was the event that allegedly created the wage distortion complained of.

Narvasa, C.J., Padilla, Regalado, and Puno, JJ., concurred.