Labor Law: Wage Rationalization Act (R.A. No. 6727) and its Implementing Rules

 [REPUBLIC ACT NO. 6727]

AN ACT TO RATIONALIZE WAGE POLICY DETERMINATION BY ESTABLISHING THE MECHANISM AND PROPER STANDARDS THEREFOR, AMENDING FOR THE PURPOSE ARTICLE 99 OF, AND INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126 AND 127 INTO, PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE INCENTIVES FOR INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER PURPOSES

SECTION 1. This Act shall be known as the “Wage Rationalization Act.”

SEC. 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through industry dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.

The State shall promote collective bargaining as the primary mode of settling wages and other terms and conditions of employment; and whenever necessary, the minimum wage rates shall be adjusted in a fair and equitable manner, considering existing regional disparities in the cost of living and other socio-economic factors and the national economic and social development plans.

SEC. 3. In line with the declared policy under this Act, Article 99 of Presidential Decree No. 442, as amended, is hereby amended and Articles 120, 121, 122, 123, 124, 126 and 127 are hereby incorporated into Presidential Decree No. 442, as amended, to read as follows:

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SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all workers and employees in the private sector, whether agricultural or non-agricultural, shall be increased by twenty-five pesos (P25.00) per day, except that workers and employees in plantation agricultural enterprises outside of the National Capital Region (NCR) with an annual gross sales of less than five million pesos (P5,000,000.00) in the preceding year shall be paid an increase of twenty pesos (P20.00), and except further that workers and employees of cottage/handicraft industries, non-plantation agricultural enterprises, retail/service establishments regularly employing not more than ten (10) workers, and business enterprises with a capitalization of not more than five hundred thousand pesos (P500,000.00) and employing not more than twenty (20) employees, which are located or operating outside the NCR, shall be paid only an increase of fifteen pesos (P15.00): Provided, That those already receiving above the minimum wage rates up to one hundred pesos (P100.00) shall also receive an increase of twenty-five pesos (P25.00) per day, except that the workers and employees mentioned in the first exception clause of this Section shall also be paid only an increase of twenty pesos (P20.00), and except further that those employees enumerated in the second exception clause of this Section shall also be paid an increase of fifteen pesos (P15.00): Provided, further, That the appropriate Regional Board is hereby authorized to grant additional increases to the workers and employees mentioned in the exception clauses of this Section if, on the basis of its determination pursuant to Article 124 of the Labor Code such increases are necessary.

(b) The increase of twenty-five pesos (P25.00) prescribed under this Section shall apply to all workers and employees entitled to the same in private educational institutions as soon as they have increased or are granted authority to increase their tuition fees during school year 1989-1990. Otherwise, such increase shall be so applicable not later than the opening of the next school year beginning 1990.

(c) Exempted from the provisions of this Act are household or domestic helpers and persons employed in the personal service of another, including family drivers.

Retail/service establishments regularly employing not more than ten (10) workers may be exempted from the applicability of this Act upon application with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission. Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application for exemption by the appropriate Regional Board.

In the event that applications for exemptions are not granted, employees shall receive the appropriate compensation due them as provided for by this Act plus interest of one per cent (1%) per month retroactive to the effectivity of this Act.

(d) If expressly provided for and agreed upon in the collective bargaining agreements, all increases in the daily basic wage rates granted by the employers three (3) months before the effectivity of this Act shall be credited as compliance with the increases in the wage rates prescribed herein, provided that, where such increases are less than the prescribed increases in the wage rates under this Act, the employer shall pay the difference. Such increases shall not include anniversary wage increases, merit wage increases and those resulting from the regularization or promotion of employees.

Where the application of the increases in the wage rates under this Section results in distortions as defined under existing laws in the wage structure within an establishment and gives rise to a dispute therein, such dispute shall first be settled voluntarily between the parties and in the event of a deadlock, the same shall be finally resolved through compulsory arbitration by the regional branches of the National Labor Relations Commission (NLRC) having jurisdiction over the workplace.

It shall be mandatory for the NLRC to conduct continuous hearings and decide any dispute arising under this Section within twenty (20) calendar days from the time said dispute is formally submitted to it for arbitration. The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of the increase in the wage rates prescribed under this Section.

SEC. 5. Within a period of four (4) years from the effectivity of this Act and without prejudice to collective bargaining negotiations or agreements or other employment contracts between employers and workers, new business enterprises that may be established outside the NCR and export processing zones whose operation or investments need initial assistance as may be determined by the Department of Labor and Employment in consultation with the Department of Trade and Industry or the Department of Agriculture, as the case may be, shall be exempt from the applicability of this Act for not more than three (3) years from the start of their operations: Provided, That such new business enterprises established in Region III (Central Luzon) and Region IV (Southern Tagalog) shall be exempt from such increases only for two (2) years from the start of their operations, except those established in the Provinces of Palawan, Oriental Mindoro, Occidental Mindoro, Marinduque, Romblon, Quezon and Aurora, which shall enjoy such exemption for not more than three (3) years from the start of their operations.

SEC. 6. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client fails to pay the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his principal or client.

SEC. 7. Upon written permission of the majority of the employees or workers concerned, all private establishments, companies, businesses, and other entities with twenty five (25) or more employees and located within one (1) kilometer radius to a commercial, savings or rural bank shall pay the wages and other benefits of their employees through any of said banks and within the period of payment of wages fixed by Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines.

SEC. 8. Whenever applicable and upon request of a concerned worker or union, the bank shall issue a certification of the record of payment of wages of a particular worker or workers for a particular payroll period.

SEC. 9. The Department of Labor and Employment shall conduct inspections as often as possible within its manpower constraint of the payroll and other financial records kept by the company or business to determine whether the workers are paid the prescribed minimum wage rates and other benefits granted by law or any Wage Order. In unionized companies, the Department of Labor and Employment inspectors shall always be accompanied by the president or any responsible officer of the recognized bargaining unit or of any interested union in the conduct of the inspection. In non-unionized companies, establishments or businesses, the inspection should be carried out in the presence of a worker representing the workers in the said company. The workers’ representative shall have the right to submit his own findings to the Department of Labor and Employment and to testify on the same if he cannot concur with the findings of the labor inspector.

SEC. 10. The funds necessary to carry out the provisions of this Act shall be taken from the Compensation and Organizational Adjustment Fund, the Contingent Fund, and other savings under the Republic Act No. 6688, otherwise known as the General Appropriations Act of 1989, or from any unappropriated funds of the National Treasury: Provided, That the funding requirements necessary to implement this Act shall be included in the annual General Appropriations Act for the succeeding years.

SEC. 11. The National Wages Council created under Executive Order No. 614 and the National Productivity Commission created under Executive Order No. 615 are hereby abolished. All properties, records, equipment, buildings, facilities, and other assets, liabilities and appropriations of and belonging to the abovementioned offices, as well as other matters pending therein, shall be transferred to the Commission. All personnel of the above abolished offices shall continue to function in a holdover capacity and shall be preferentially considered for appointments to or placement in the Commission.

Any official or employee separated from the service as a result of the abolition of office pursuant to this Act shall be entitled to appropriate separation pay and retirement and other benefits accruing to them under existing laws. In lieu, thereof, at the option of the employee, he shall be preferentially considered for employment in the government or in any of its subdivisions, instrumentalities, or agencies, including government-owned or controlled corporations and their subsidiaries.

SEC. 12. Any person, corporation, trust, firm, partnership, association or entity which refuses or fails to pay any of the prescribed increases or adjustments in the wage rates made in accordance with this Act shall be punished by a fine not exceeding twenty five thousand pesos (P25,000.00) and/or imprisonment of not less than one (1) year nor more than two (2) years: Provided, That any person convicted under this Act shall not be entitled to the benefits provided for under the Probations Law.

If the violation is committed by a corporation, trust or firm, partnership, association or any other entity, the penalty of imprisonment shall be imposed on the entity’s responsible officers, including, but not limited to, the president, vice-president, chief executive officer, general manager, managing director or partner.

SEC. 13. The Secretary of Labor and Employment shall promulgate the necessary rules and regulations to implement the provisions of this Act.

SEC. 14. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with the provisions of this Act are hereby repealed, amended or modified accordingly. If any provision or part of this Act, or the application thereof to any person or circumstance, is held invalid or unconstitutional, the remainder of this Act or the application of such provision or part thereof to other persons or circumstances shall not be affected thereby.

RULES IMPLEMENTING REPUBLIC ACT NO. 6727

Chapter I - Wage Increase

Section 1. - Coverage. The wage increase prescribed under the Act shall apply to all workers and employees in the private sector regardless of their position, designation or status, and irrespective of the method by which their wages are paid, except

 a) Household or domestic helpers, including family drivers and workers in the personal service of another;

 b) Workers and employees in retail/service establishments regularly employing not more than 10 workers, when exempted from compliance with the Act, for a period fixed by the Commission/Boards in accordance with Section 4(c) of the Act and Section 15, Chapter I of this Rules; 

 c) Workers and employees in new business enterprises outside the National Capital Region and export processing zones for a period of not more than two or three years, as the case may be, from the start of operations when exempted in accordance with Section 5 of the Act and Section 15, Chapter I of this Rules; 

 d) Workers and employees receiving a basic wage of more than P100.00 pesos per day. 

Section 6. Suggested Formula in Determining the Equivalent Monthly Statutory Minimum Wage Rates. Without prejudice to existing company practices, agreements or policies, the following formula may be used as guides in determining the equivalent monthly statutory minimum wage rates: 

xxx to supply formula xxxx

Section 7. Basis of Minimum Wage Rates. The statutory minimum wage rates prescribed under the Act shall be for the normal working hours, which shall not exceed eight hours worka day. 

Section 8. Creditable Wage Increase. 

a) No wage increase shall be credited as compliance with the increases prescribed under the Act unless expressly provided under collective bargaining agreements; and, such wage increase was granted not earlier than April 1,1989 but not later than July 1,1989. Where the wage increase granted is less than the prescribed increase under the Act, the employer shall pay the difference. 

b) Anniversary wage increase provided in collective agreements, merit wage increase, and those resulting from the regularization or promotion of employees shall not be credited as compliance thereto.

Section 9. Workers Paid by Results. 

a) All workers paid by results, including those who are paid on piecework, takay, pakyaw, or task. basis, shall receive not less than the applicable statutory minimum wage rates prescribed under the Act for the normal working hours which shall not exceed eight hours work a day, or a proportion thereof for work of less than the normal working hours. The adjusted minimum wage rates for workers paid by results shall be computed in accordance with the following steps:

xxx to supply formula xxxx