NWPC vs. APL

The RTWPBs have the authority to include additional exemptible categories in their wage orders beyond those enumerated in NWPC Guidelines, provided such categories are in accord with the rationale for exemption and are reviewed and approved by the NWPC; and the NWPC's review and approval may be accomplished through its appellate decision upholding the validity of the challenged wage order provisions.

Republic Act No. 6727, enacted on June 9, 1989 and known as the Wage Rationalization Act, created the National Wages and Productivity Commission (NWPC) and the Regional Tripartite Wages and Productivity Boards (RTWPBs) to rationalize wage determination throughout the Philippines. Under Article 121 of the Labor Code, as amended by Section 3 of R.A. No. 6727, the NWPC was empowered to formulate policies and guidelines on wages and to review regional wage levels set by the RTWPBs. Under Article 122(b), the RTWPBs were tasked to determine and fix minimum wage rates in their regions and to issue corresponding wage orders subject to NWPC guidelines, as well as to receive, process, and act on applications for exemption from prescribed wage rates. The NWPC subsequently issued guidelines governing the exemption process, including NWPC Guidelines No. 01, Series of 1996, which enumerated four categories of exemptible establishments and allowed additional categories subject to review and approval by the Commission.

On October 14, 1999, the RTWPB-NCR issued Wage Order No. NCR-07, imposing an increase of P25.50 per day on the wages of all private sector workers and employees in the National Capital Region and pegging the minimum wage rate at P223.50 per day. The wage order, however, contained exclusionary and exemption provisions. Section 2(A) excluded from the wage adjustment workers in sectors that had already been granted corresponding wage increases on January 1, 1999 under the prior Wage Order No. NCR-06 — namely, agriculture workers (plantation and non-plantation), cottage/handicraft industry workers, workers in private hospitals with bed capacity of 100 or less, and retail/service establishments employing 15 or fewer workers. Section 2(B) likewise excluded workers in small establishments employing fewer than ten workers. Section 9(2) exempted exporters, including indirect exporters with at least 50% export sales and with forward contracts with foreign buyers entered into at least twelve months before the date of publication of the wage order, for the lifetime of the contract but not exceeding twelve months from the effectivity of the order.

Feeling aggrieved by their non-coverage under the wage adjustment, the Alliance of Progressive Labor (APL) and the Tunay na Nagkakaisang Manggagawa sa Royal (TNMR) filed an appeal with the NWPC on October 26, 1999, docketed as NWPC Case No. W.O.-99-001. They contended that neither the NWPC nor the RTWPB-NCR had the authority to expand the non-coverage and exemptible categories under the wage order, and that the assailed sections should be voided. The NWPC upheld the validity of the challenged sections in its decision dated February 28, 2000, finding that the RTWPB-NCR's power to determine exemptible categories was adjunct to its wage-fixing function, that such authority was recognized in NWPC Guidelines No. 01, Series of 1996, and that the RTWPB-NCR had submitted strong and justifiable reasons for the inclusion of the exemptible categories. The NWPC noted the lingering effects of the 1997 Asian economic turmoil, the 15.4% unemployment rate in July 1999, and the temporary character of the non-inclusion of certain sectors. As for the exporting firms, the NWPC reasoned that the recent wage adjustment could not have been anticipated when the forward contracts were agreed upon, and that the exemption was not automatic but subject to the RTWPB-NCR's discretion and limited to one year. The NWPC denied TNMR's motion for reconsideration on July 17, 2000.

APL and TNMR then elevated the matter to the Court of Appeals via a petition for certiorari, attributing grave abuse of discretion to the NWPC. The CA, on June 15, 2001, granted the petition and nullified Section 2(A) and Section 9(2) of Wage Order No. NCR-07, holding that the powers of the NWPC and RTWPB-NCR under R.A. No. 6727 did not include the power to grant additional exemptions, and that the statutory grant of power could not be extended by implication. The CA denied the motion for reconsideration on September 11, 2001, additionally ruling that the challenged sections were invalid for lack of prior approval by the NWPC. The NWPC and RTWPB-NCR then filed the present petition for review on certiorari before the Supreme Court.

• Statutory Authority to Exempt: Petitioners argued that Section 3 of Republic Act No. 6727 may be construed to authorize the NWPC and RTWPB to provide for additional exemptions in minimum wage adjustments such as those embodied in Wage Order No. NCR-07.
• Compliance with Approval Requirement: Petitioners maintained that the approval given by the NWPC, as contained in its decisions dated February 28, 2000 and July 17, 2000, satisfied the requirement of review and approval under Section 2 of the Revised Guidelines on Exemptions from Wage Order.

• Lack of Authority to Expand Exemptions: Respondents contended that neither the NWPC nor the RTWPB-NCR had the authority to expand the non-coverage and exemptible categories under the wage order, and that the statutory grant of power could not be extended by implication beyond what was necessary for just and reasonable execution.
• Lack of Prior NWPC Approval: Respondents argued that Section 2(A) and Section 9(2) of Wage Order No. NCR-07 were invalid for lack of prior approval by the NWPC, notwithstanding any pronouncement in Nasipit Lumber Company, Inc. vs. National Wages and Productivity Commission to the effect that the NWPC had the power to issue exemptions.

• Authority to Exempt: Whether the RTWPB-NCR had the authority to provide additional exemptions from the minimum wage adjustments embodied in Wage Order No. NCR-07 beyond the categories enumerated in NWPC Guidelines No. 01, Series of 1996.
• Compliance with Approval Requirement: Whether Wage Order No. NCR-07 complied with the requirement of review and approval by the NWPC as set forth in NWPC Guidelines No. 01, Series of 1996.

• Authority to Exempt: Yes. The RTWPBs were vested with the competence to determine both the applicable minimum wages and the industries and sectors to exempt from the coverage of their wage orders, as an adjunct to their wage-fixing function under Article 122 of the Labor Code, as amended by R.A. No. 6727, and as recognized in NWPC Guidelines No. 01, Series of 1996.
• Compliance with Approval Requirement: Yes. The NWPC's review and approval of the challenged sections was accomplished through its appellate decisions dated February 28, 2000 and July 17, 2000, in which it upheld the validity of Section 2(A) and Section 9(2) of Wage Order No. NCR-07, thereby giving the wage order the necessary legal imprimatur.

• Authority to Exempt: The NWPC's own guidelines — specifically NWPC Guidelines No. 001-95 (Revised Rules of Procedure on Minimum Wage Fixing) and NWPC Guidelines No. 01, Series of 1996 — recognized the power of the RTWPBs to issue exemptions from the application of wage orders. While Guidelines No. 01 enumerated four categories of exemptible establishments (distressed establishments, new business enterprises, retail/service establishments employing not more than ten workers, and establishments adversely affected by natural calamities), the list was expressly not exclusive. The guidelines allowed exemptible categories outside the enumerated list, provided they were in accord with the rationale for exemption and subject to review and approval by the Commission. Congress, in creating the RTWPBs through R.A. No. 6727, intended to establish full-time boards with sufficient powers to rationalize wages regionally, as articulated in Employers Confederation of the Phils. vs. National Wages and Productivity Commission, where the Court pronounced that the RTWPBs were meant to be creative in resolving wage questions without the parties resorting to Congress at every turn. The RTWPBs, being the bodies that investigate and study all pertinent facts to ascertain conditions in their respective regions, were logically vested with the competence to determine both the applicable minimum wages and the sectors to exempt. The presumption of regularity further attended the issuance of Wage Order No. NCR-07, and that presumption was strengthened by the NWPC's upholding of its validity upon review.

• Compliance with Approval Requirement: The CA reversed the NWPC decisions primarily on the ground that Section 2(A) and Section 9(2) of Wage Order No. NCR-07 had not been reviewed or approved by the NWPC. However, the NWPC stated that it had reviewed and approved the challenged sections when it upheld the validity of the wage order in its decisions of February 28, 2000 and July 17, 2000. The wage orders issued by the RTWPBs could be reviewed by the NWPC motu proprio or upon appeal under Section 6 of Rule IV of the Revised Rules of Procedure on Minimum Wage Fixing. Here, APL and TNMR appealed on October 26, 1999, submitting to the NWPC precisely the issue of the validity of the challenged sections. The NWPC, in arriving at its decision, weighed the arguments of the parties and ruled that the RTWPB-NCR had substantial and justifiable reasons for the exemptions based on public hearings, consultations, meetings, and socio-economic data gathered prior to the issuance of the wage order. The very fact that the validity of the assailed sections had been passed upon and upheld by the NWPC meant that the NWPC had already given the wage order its necessary legal imprimatur, thus satisfying the requisite approval or review.

• Adjunct Power to Exempt — The RTWPB's power to determine and fix minimum wage rates under Article 122(b) of the Labor Code, as amended by R.A. No. 6727, carries with it the adjunct authority to determine exemptible categories in their wage orders. This authority is recognized in the NWPC's own guidelines, which allow the RTWPBs to include additional exemptible categories beyond the enumerated list, provided such categories are in accord with the rationale for exemption and are subject to review and approval by the NWPC. The Court applied this doctrine by finding that the RTWPB-NCR's inclusion of Section 2(A) and Section 9(2) in Wage Order No. NCR-07 fell within this adjunct power.

• Appellate Review as Compliance with Approval Requirement — Where the NWPC's guidelines require that additional exemptible categories in a wage order be subject to review and approval by the Commission, the NWPC's appellate decision upholding the validity of the challenged provisions constitutes the necessary review and approval. The requisite legal imprimatur is satisfied when the NWPC, acting on an appeal by an aggrieved party, weighs the arguments and rules that the RTWPB had substantial and justifiable reasons for the exemptions. The Court applied this by holding that the NWPC's decisions of February 28, 2000 and July 17, 2000 constituted the required approval.

• Presumption of Validity of Wage Orders — Wage orders issued by the RTWPBs are presumed to be regularly issued in the absence of any strong showing of grave abuse of discretion. This presumption is strengthened when the validity of the wage order has been upheld by the NWPC upon review. The Court relied on this presumption in finding no basis to overturn the challenged sections.

• "In creating the RTWPBs, Congress intended to rationalize wages, firstly, by establishing full time boards to police wages round-the-clock, and secondly, by giving the boards enough powers to achieve this objective." — This passage articulates the legislative intent behind R.A. No. 6727 and supports the broad construction of RTWPB authority, including the power to determine exemptible categories.

• "The very fact that the validity of the assailed sections of Wage Order No. NCR-07 had been already passed upon and upheld by the NWPC meant that the NWPC had already given the wage order its necessary legal imprimatur." — This is the ratio decidendi on the approval issue, establishing that appellate review satisfies the guideline requirement of NWPC review and approval.

• "Hence, they are logically vested with the competence to determine the applicable minimum wages to be imposed as well as the industries and sectors to exempt from the coverage of their wage orders." — This defines the scope of RTWPB competence and links the wage-fixing function to the exemption power as a logical corollary.

• Employers Confederation of the Phils. vs. National Wages and Productivity Commission, G.R. No. 96169, September 24, 1991, 201 SCRA 759 — Followed. The Court relied on this case for the proposition that Congress intended the RTWPBs to be creative in resolving wage questions without the parties resorting to Congress, and that the RTWPBs are thinking groups guided by statutory standards and bound by NWPC rules and guidelines.

• Nasipit Lumber Company, Inc. vs. National Wages and Productivity Commission, G.R. No. 113097, April 27, 1998, 289 SCRA 667 — Referenced. The CA cited this case for the proposition that the NWPC had the power to prescribe guidelines and issue exemptions, but distinguished the CA's ruling on the ground of lack of prior NWPC approval. The Supreme Court effectively reconciled this precedent by holding that the NWPC's appellate review constituted the required approval.

• Article 121, Labor Code, as amended by Section 3 of R.A. No. 6727 — Empowers the NWPC to formulate policies and guidelines on wages, incomes, and productivity improvement, and to review regional wage levels set by the RTWPBs. Applied as the statutory basis for the NWPC's guideline-issuing authority, including the guidelines governing exemptions.

• Article 122(b), Labor Code, as amended by Section 3 of R.A. No. 6727 — Tasks the RTWPBs to determine and fix minimum wage rates in their regions, issue corresponding wage orders subject to NWPC guidelines, and receive, process, and act on applications for exemption. Applied as the statutory basis for the RTWPB-NCR's authority to include exemptible categories in Wage Order No. NCR-07.

• Article 122(e), Labor Code, as amended by R.A. No. 6727 — Recognized by the NWPC as the source of the RTWPB's power to determine exemptible categories as adjunct to its wage-fixing function.

• Section 6, Rule IV, NWPC Guidelines No. 001-95 (Revised Rules of Procedure on Minimum Wage Fixing) — Provides that wage orders issued by the RTWPBs may be reviewed by the NWPC motu proprio or upon appeal. Applied to establish that the NWPC's appellate review of Wage Order No. NCR-07 was a proper mode of exercising its review function.

• Section 1, Rule VIII, NWPC Guidelines No. 001-95 — Recognizes the power of the RTWPBs to issue exemptions from the application of wage orders, subject to guidelines issued by the NWPC. Applied to confirm the RTWPB-NCR's authority to provide exemptions.

• Section 2, NWPC Guidelines No. 01, Series of 1996 — Enumerates four categories of exemptible establishments and provides that exemptible categories outside the list may be allowed if in accord with the rationale for exemption, subject to review and approval by the Commission. Applied as the controlling guideline for determining whether the additional exemptible categories in Section 2(A) and Section 9(2) of Wage Order No. NCR-07 were validly included.

Chief Justice Maria Lourdes P. A. Sereno, Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Martin S. Villarama, Jr., and Associate Justice Bienvenido L. Reyes concurred. No separate concurring opinions were noted.