Case Digest: Bankard Employees Union Workers Alliance Trade Unions v. NLRC, G.R. No. 140689. February 17, 2004

Labor Law | Art. 125

Facts:

  • Bankard, Inc. classified its employees into levels (I to V) and approved a new salary scale in 1993, retroactive to April 1, 1993, increasing hiring rates for new employees in specific levels.
  • The Bankard Employees Union-WATU pressed for an increase in the salary of old employees, claiming wage distortion.
  • Bankard argued that there was no obligation to grant an across-the-board increase to all employees.
  • NLRC: Found no wage distortion.
  • CA: Affirmed the NLRC.
Issue:
WoN the unilateral adoption by an employer of an upgraded salary scale that increased the hiring rates of new employees without increasing the salary rates of old employees resulted in wage distortion within the contemplation of Article 124 of the Labor Code. NO

Held:

To establish wage distortion, four elements are required: (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 corresponding increase in the higher one; (3) the elimination of the distinction between the two levels; and (4) the existence of distortion in the same region. (Prubankers Association v. Prudential Bank and Trust Company)

To determine the existence of wage distortion, the historical classification of the employees prior to the wage increase must be established. Likewise, it must be shown that as between the different classification of employees, there exists a historical gap or difference.

It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of Bankard, hence, the first element of wage distortion provided in Prubankers is wanting.

While seniority may be a factor in determining the wages of employees, it cannot be made the sole basis in cases where the nature of their work differs.

Moreover, for purposes of determining the existence of wage distortion, employees cannot create their own independent classification and use it as a basis to demand an across-the-board increase in salary.

Petitioner cites Metro Transit Organization, Inc. v. NLRC to support its claim that the obligation to rectify wage distortion is not confined to wage distortion resulting from government decreed law or wage order.

Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage distortion was not by virtue of Article 124 of the Labor Code, but on account of a then existing company practice that whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory employees were, as a matter of practice, also paid the same amount plus an added premium. 

Wage distortion is a factual and economic condition that may be brought about by different causes. In Metro Transit, the reduction or elimination of the normal differential between the wage rates of rank-and-file and those of supervisory employees was due to the granting to the former of wage increase which was, however, denied to the latter group of employees.

The mere factual existence of wage distortion does not, however, ipso facto result to an obligation to rectify it, absent a law or other source of obligation which requires its rectification.

Unlike in Metro Transit then where there existed a company practice, no such management practice is herein alleged to obligate Bankard to provide an across-the-board increase to all its regular employees.

Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust the rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of Living Allowance) of the parties Collective Bargaining Agreement (CBA).

This CBA provision, which is based on legitimate business-judgment prerogatives of the employer, is a valid and legally enforceable source of rights between the parties.

In fine, absent any indication that the voluntary increase of salary rates by an employer was done arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate purpose other than to discriminate against the regular employees, this Court will not step in to interfere with this management prerogative. Employees are of course not precluded from negotiating with its employer and lobby for wage increases through appropriate channels, such as through a CBA.

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