G.R. No. 102636 September 10, 1993
METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V. BALINANG, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and TRUST COMPANY, respondents.

FACTS

On May 25, 1989, Metropolitan Bank and Trust Company (the bank) entered into a Collective Bargaining Agreement (CBA) with the Metropolitan Bank & Trust Company Employees Union-ALU-TUCP (MBTCEU). The CBA granted a monthly P900 wage increase effective January 1, 1989, a P600 increase effective January 1, 1990, and a P200 increase effective January 1, 1991. The union’s attempt to include probationary employees in the first P900 increase was refused by the bank; consequently, only regular employees as of January 1, 1989 received the increase.
On June 1, 1989, Republic Act No. 6727 (the Wage Rationalization Act) took effect. Section 4(a) of the law mandated a P25 per day increase for workers receiving up to P100 per day. Pursuant to this, the bank granted the P25 daily increase to its probationary employees and to those promoted to regular status before July 1, 1989, whose daily rate was P100 or below. The bank refused to grant the same increase to regular employees who were already receiving more than P100 per day and who were recipients of the P900 CBA increase.
The union contended that this partial implementation created a wage distortion, severely contracting the intentional P900 wage gap between regular employees (as of January 1, 1989) and other employee groups. To avert a strike, the bank petitioned the Secretary of Labor, and the parties agreed to refer the issue for compulsory arbitration to the National Labor Relations Commission (NLRC).
Labor Arbiter Eduardo J. Carpio ruled in favor of the union, finding that a wage distortion existed as the statutory increase reduced the intentional quantitative wage difference from P900 to about P150. He directed the bank to restore the P900 wage gap by granting the regular employees a P750 monthly increase effective July 1, 1989.
On appeal, the NLRC Second Division, by a 2-1 vote, reversed the Labor Arbiter’s decision. The majority held that the reduction in wage gaps between certain employee levels was not significant enough to obliterate or result in a severe contraction of intentional quantitative differences, thus no wage distortion existed. Presiding Commissioner Edna Bonto-Perez dissented, opining that a severe contraction (of about 83%) did occur, warranting correction. She proposed using a specific formula for correction rather than an across-the-board P750 increase. The union’s motion for reconsideration was denied, prompting this petition for certiorari.

ISSUE

Whether or not the implementation by Metropolitan Bank and Trust Company of Republic Act No. 6727 created a wage distortion that would require an adjustment in the wages of its other various groups of employees.

RULING

Yes, the Supreme Court found merit in the petition and granted due process. The Court set aside the questioned NLRC decision and reinstated the decision of the Labor Arbiter, subject to modification.
The Court agreed with the Solicitor General that the petition was meritorious. It defined “wage distortion” under the Rules Implementing R.A. 6727 as a situation where a wage increase results in the elimination or severe contraction of intentional quantitative differences in wage rates between employee groups based on skills, length of service, or other logical bases of differentiation.
The Court found that the bank’s implementation of the statutory wage increase did create a wage distortion. The intentional quantitative difference of P900, established by the CBA as a logical basis of differentiation between regular employees (as of January 1, 1989) and other groups, was severely contracted. The Court rejected the bank’s argument that the distortion was insignificant because only a small percentage of employees benefited, stating that the number of beneficiaries is immaterial; what matters is the effect on the wage structure.
To correct the distortion, the Court adopted the formula suggested in the dissenting opinion of Presiding Commissioner Edna Bonto-Perez, which was also the standard considered by the Regional Tripartite Wages and Productivity Commission. The formula is: (Minimum Wage / Actual Salary) x Prescribed Increase = Distortion Adjustment. The Court deemed this formula just, equitable, and appropriate to balance the contentions of the parties. The decision was ordered immediately executory.