The point-of-hire classification cannot justify a disparity in salary rates between foreign-hired and locally-hired employees performing the same work under similar conditions, as this violates the fundamental principle of "equal pay for equal work" and constitutes discrimination contrary to public policy.

International School, Inc., established under P.D. 732 primarily for dependents of foreign diplomatic personnel, hires both foreign and local teachers. It uses four tests (domicile, home economy, economic allegiance, hiring location/responsibility) to classify faculty as either "foreign-hires" or "local-hires." Foreign-hires received additional benefits (housing, transport, etc.) and a 25% higher salary, which the School justified based on alleged "dislocation" and "limited tenure" disadvantages faced by foreign-hires.

• Respondent International School, Inc. employs both foreign and local teachers, classifying them as "foreign-hires" or "local-hires" based on criteria including domicile and where they were hired.
• Foreign-hires are paid 25% more in salary than local-hires and receive additional benefits like housing, transportation, shipping costs, taxes, and home leave travel allowance, which local-hires do not receive.
• The School justified the salary difference by citing the "dislocation factor" (uprooting from home country) and "limited tenure" faced by foreign-hires, arguing it was necessary to attract competent international educators.
• During the 1995 Collective Bargaining Agreement (CBA) negotiations, petitioner ISAE, the faculty union, contested the salary disparity, leading to a deadlock.
• After mediation failed, the Department of Labor and Employment (DOLE) assumed jurisdiction over the dispute.
• The DOLE Acting Secretary upheld the School's classification and salary distinction, finding it was based on reasonable grounds like limited tenure and the need to attract foreign talent, and noted that non-Filipino local-hires were paid the same as Filipino local-hires.
• The DOLE Secretary denied the motion for reconsideration, prompting the petition to the Supreme Court.

• The point-of-hire classification used by the School is discriminatory against Filipinos.
• The practice of granting higher salaries to foreign-hires constitutes racial discrimination.
• The salary difference violates the constitutionally and legally mandated principle of "equal pay for equal work."
• The classification and resulting salary disparity violate the equal protection clause of the Constitution.

• The salary difference is based on substantial distinctions between foreign-hires (limited tenure, dislocation) and local-hires (security of tenure, no dislocation), not race or nationality.
• Non-Filipino teachers hired locally receive the same salary as Filipino local-hires, proving the distinction is based on point-of-hire, not nationality.
• The "equal pay for equal work" principle does not strictly apply due to the School's unique international character and the need to attract foreign educators with competitive compensation packages.
• The higher pay and benefits for foreign-hires are necessary enticements recognized by international practice and are justified by their limited tenure and the economic disadvantages they face.
• The 1992-1995 CBA implicitly recognized the distinction between Overseas Recruited Staff (OSRS) and Locally Recruited Staff (LRS) and the 25% differential.
• Petitioner failed to provide evidence that local-hires perform work equal to that of foreign-hires.
• Foreign-hires and local-hires have different interests and conditions (e.g., tenure, benefits) and thus should not belong to the same bargaining unit.

• Whether the practice of respondent School of according foreign-hires higher salaries than local-hires violates the principle of "equal pay for equal work."
• Whether the distinction in salary rates based on point-of-hire constitutes unlawful discrimination.
• Whether foreign-hires and local-hires should belong to the same collective bargaining unit.

• Yes, the practice of paying foreign-hires higher salaries than local-hires for the same work violates the principle of "equal pay for equal work" and constitutes unlawful discrimination.
• The Court held that the principle of "equal pay for equal work," rooted in the Constitution, Labor Code, international law, and basic fairness, mandates that persons performing substantially similar work under similar conditions receive similar salaries.
• The School's point-of-hire classification is not a valid basis for salary discrimination; the presumption is that employees with the same position and rank perform equal work, and the employer bears the burden of justifying any pay difference.
• The School failed to prove that foreign-hires were more efficient or effective; the "dislocation factor" and "limited tenure" are already compensated by benefits exclusive to foreign-hires (housing, travel, etc.) and cannot justify the additional 25% salary difference.
• Using higher salaries as an enticement that prejudices local-hires performing the same services contravenes public policy.
• However, the Court agreed that foreign-hires and local-hires do not belong to the same bargaining unit due to substantial differences in their terms and conditions of employment, particularly tenure and benefits, lack of expressed intent from foreign-hires to join the unit, and historical separate treatment, thus failing the "Substantial Mutual Interests" test.
• The DOLE Orders were reversed insofar as they upheld the discriminatory salary practice.

• Equal Pay for Equal Work: This principle requires that employees performing work necessitating substantially equal qualifications, skill, effort, and responsibility under similar working conditions should be paid similar salaries. The Court applied this to find the School's salary distinction discriminatory and invalid.
• Non-Discrimination: Employers are prohibited from discriminating in terms of wages based on arbitrary classifications like point-of-hire when employees perform equal work. The Court found the School's practice discriminatory and contrary to constitutional provisions, labor laws, international covenants, and public policy.
• Reasonable Classification (related to Equal Protection): While classifications are permitted, they must be based on substantial distinctions relevant to the purpose and apply equally to all members of the class. The Court determined the School's point-of-hire classification for salary purposes was unreasonable and invalid because the services rendered were the same.
• Public Policy in Labor Relations: Labor contracts and CBAs are imbued with public interest and must conform to public policy; stipulations contrary to it are void. The Court invoked this to invalidate the salary disparity even if previously reflected in a CBA.
• Bargaining Unit Determination (Substantial Mutual Interests Rule): The appropriateness of a bargaining unit hinges on factors ensuring effective collective bargaining, including similarity of work, compensation, working conditions, employment status, and prior bargaining history. The Court applied this to rule that foreign-hires and local-hires constitute separate bargaining units due to significant differences in tenure, benefits, and overall interests, despite performing similar functions.
• Presumption of Equal Work for Equal Rank: When employees hold the same position and rank, it is presumed they perform equal work, shifting the burden to the employer to justify pay disparities. The Court used this presumption against the School's claim that the union failed to prove equal work.

• "The point is that employees should be given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of justice."
• "If an employer pays one employee less than the rest, it is not for that employee to explain why he receives less or why the others receive more... The employer has discriminated against that employee; it is for the employer to explain why the employee is treated unfairly."
• "While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same salaries as the latter."
• "In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction between the services rendered by foreign-hires and local-hires."

• Songco v. National Labor Relations Commission (183 SCRA 610): Cited to define "salary" as compensation for services rendered.
• Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Federation Labor Union (268 SCRA 573): Cited for the definition of a collective bargaining unit.
• San Miguel Corporation vs. Laguesma (236 SCRA 595): Cited for the definition and factors in determining the appropriate collective bargaining unit (including the Substantial Mutual Interests rule).
• Belyca Corporation vs. Ferrer-Calleja (168 SCRA 184): Cited for the basic test of a bargaining unit's acceptability – whether it best assures employees the exercise of their collective bargaining rights.
• River Meuse Case (PCIJ, 1937): Indirectly cited (via Defensor-Santiago) regarding equity as a general principle of law.
• Rann of Kutch Arbitration (India vs. Pakistan) (50 ILR 2): Indirectly cited (via Defensor-Santiago) regarding equity being based on reasonableness.

• Presidential Decree No. 732, Sec. 2(c): Authority for the School to hire personnel locally or abroad.
• Constitution, Art. XIII, Sec. 1: Mandate to reduce social, economic inequalities.
• Constitution, Art. XIII, Sec. 3: Right of labor to humane conditions, equality of employment opportunities, full protection.
• Constitution, Art. II, Sec. 18: State's duty to protect workers' rights and promote welfare.
• Civil Code, Art. 19: Duty to act with justice, give everyone his due, observe honesty and good faith.
• Civil Code, Art. 1700: Labor relations impressed with public interest.
• Labor Code, Art. 3: State policy for equal work opportunities and protection to labor.
• Labor Code, Art. 135: Prohibition against wage discrimination based on sex.
• Labor Code, Art. 248: Unfair labor practice of discriminating in regard to wages to discourage/encourage union membership.
• Statute of the International Court of Justice, Art. 38: Source of international law (general principles).
• Universal Declaration of Human Rights, Arts. 1, 2: Principle of equality and non-discrimination.
• International Covenant on Economic, Social, and Cultural Rights, Arts. 2, 7: Right to non-discrimination, fair wages, equal remuneration for work of equal value.
• International Convention on the Elimination of All Forms of Racial Discrimination, Art. 2: Condemnation of racial discrimination.
• Convention against Discrimination in Education, Arts. 3, 4: Obligation to eliminate discrimination in education.
• ILO Convention No. 111 (Discrimination in Employment/Occupation), Art. 2: Policy to promote equality of opportunity and treatment.
• Republic Act No. 6758 (Salary Standardization Law): Cited illustratively for government policy of equal pay for substantially equal work.
• Presidential Decree No. 985: Cited illustratively regarding government compensation systems.