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AT A GLANCE:
The four elements of wage distortion are:
(1) an existing hierarchy of positions with corresponding salary rates;
(2) a significant change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher one;
(3) the elimination of the distinction between the two levels; and
(4) the existence of the distortion in the same region of the country.
Facts:
Petitioner Philippine Geothermal, Inc. Employees Union (PGIEU) is a legitimate labor organization and the certified bargaining agent of the rank-and-file employees of the Respondent Chevron Geothermal Phils. Holdings, Inc.
The Petitioner and Respondent formally executed a Collective Bargaining Agreement (CBA) which was made effective for the period from November 1, 2007 until October 31, 2012. The CBA included a stipulation governing salary increases of the Respondent’s rank-and-file employees, particularly lump sum payment of P260,000.00 for the 1st year of the agreement, and across the board increase of P1,500.00 for the monthly salary effective November 1, 2008 and November 1, 2009.
The Petitioner’s President contended that the aforesaid CBA provision and implementing rules were not being implemented properly pursuant to the guidelines and that, if not addressed, might result to a salary distortion among union members. To cite an example, petitioner alleged that respondent granted salary increases of One Thousand Five Hundred Pesos (P1,500.00) each to then probationary employees Sherwin Lanao (Lanao) and Jonel Cordovales (Cordovales) at a time when they have not yet attained regular status. They (Lanao and Cordovales) were regularized only on January 1, 2010 and April 16, 2010, respectively, yet they were given salary increase for November 1, 2008. As a consequence of their accelerated increases, wages of said probationary workers equated the wage rates of the regular employees, thereby obliterating the wage rates distinction based on merit, skills and length of service. Therefore, the petitioner insisted that its members’ salaries must necessarily be increased so as to maintain the higher strata of their salaries from those of the probationary employees who were given the said premature salary increases.
Issues:
- Whether or not the Respondent violated the CBA in granting wage increase of P1,500.00 to Lanao and Cordovales at a time when they had not yet attained regular status.
- Whether or not there was wage distortion.
Ruling:
1. The Respondent did not violate the CBA in granting wage increase of P1,500.00 to Lanao and Cordovales.
Respondent, for its part, claims that the alleged “increase” in the wages of these employees was not due to application of the provisions of Article VII and Annex D of the CBA, rather it was brought about by the increase in the hiring rates at the time these employees were hired. As a matter of fact, a careful scrutiny of the records reveals that Respondent have complied with the terms agreed upon in the CBA.
As for the perceived salary distortion among Union members resulting from the non-implementation of the guidelines on Article VH-Salaries and Allowances, Section 1 – Wage Increase, Annex D of the CBA 2007-2012, the Court reiterated Chevron’s remuneration philosophy of having “similar value for similar jobs” which simply states that employees in similarly valued jobs will have similar salary rates. Salaries and hiring rates are reviewed annually and adjusted as necessary based on the computed values of each job, an employee’s tenure or seniority in his/her current position will not influence the value of the job.
Clearly then, the increase in the salaries of Lanao and Cordovales was not pursuant to the wage increase agreed upon in CBA 2007-2012 rather it was the result of the increase in hiring rates at the time they were hired.
2. There was no wage distortion.
Upon the enactment of the Republic Act (R.A.) No. 6727 (Wage Rationalization Act, amending among others, Article 124 of the Labor Code) on June 9, 1989, the term “Wage Distortion” was explicitly 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 rate between and among employee groups 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.”
The apparent increase in Lanao and Cordovales’ salaries as compared to the other company workers who also have the same salary/pay grade with them should not be interpreted to mean that they were given a premature increase for November 1, 2008, thus resulting to a wage distortion. The alleged increase in their salaries was not a result of the erroneous application of Article VII and Annex D of the CBA, rather, it was because when they were hired by respondent in 2009, when the hiring rates were relatively higher as compared to those of the previous years. Verily, the setting and implementation of such various engagement rates were purely an exercise of the respondent’s business prerogative in order to attract or lure the best possible applicants in the market and which We will not interfere with, absent any showing that it was exercised in bad faith.
Management prerogative gives an employer freedom to regulate according to their discretion and best judgment, all aspects of employment including work assignment, working methods, the processes to be followed, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. This right is tempered only by these limitations: that it must be exercised in good faith and with due regard to the rights of the employees.
RELATED ARTICLES:
- WHAT IS WAGE DISTORTION? – ALBURO ALBURO AND ASSOCIATES LAW OFFICES
- Wages vs. Salary – ALBURO ALBURO AND ASSOCIATES LAW OFFICES
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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