Case Digest: Nasipit Lumber Company, Inc. v. NWPC, G.R. No. 113097, April 27, 1998

Labor Law | Arts. 120-123

Facts:

  • On October 20, 1990, Region X Tripartite Wages and Productivity Board issued Wage Order No. RX-01, increasing minimum wage rates in Northern Mindanao. The order specified different wage increases for various provinces and cities in the region.
  • On November 6, 1990, a supplementary Wage Order No. RX-01-A was issued providing additional increases for certain workers already earning above the minimum wage rates.
  • Nasipit Lumber Company, Inc. (NALCO), Philippine Wallboard Corporation (PWC), and Anakan Lumber Company (ALCO) jointly applied for exemption from the wage orders as distressed establishments.
  • Opposing unions argued that these companies were not distressed since their capitalization had not been impaired by 25%.
  • RTWPB: Approved the exemption applications, citing liquidity problems and business decline in the wood-processing industry.
  • NWPC: Affirmed ALCO's exemption but reversed NALCO and PWC's applications.
    • The NWPC argued that:
      • The RTWPB's Guideline No. 3 used by RTWPB had no operative force and effect because it had not been approved by the NWPC.
      • NWPC guidelines that require a 25% impairment of capital for exemption.
      • The NWPC, not the RTWPB, had the authority to set exemption criteria.
  • Petitioners' contentions:
    • Under Art. 122 (e) of the Labor Code, RTWPB has the power to process exemption applications from prescribed wage rates as per law or wage orders.
    • No law expressly requires the approval of the NWPC for the effectivity of the RTWPB's Guideline No. 3. 
    • Even if NWPC approval was necessary, petitioners should not be prejudiced since they followed Guideline No. 3, issued on November 26, 1990, whereas NWPC guidelines came into effect on March 18, 1991.
    •  NWPC guidelines cannot have retroactive effect as it would change petitioners' vested rights.
WoN the guideline issued by an RTWPB without the approval of or, worse, contrary to the guidelines promulgated by the NWPC valid? NO.

Power to Prescribe Guidelines Lodged in the NWPC, Not in the RTWPB

The three great branches and the various administrative agencies of the government can exercise only those powers conferred upon them by the Constitution and the law. It is through the application of this basic constitutional principle that the Court resolves the instant case.

RA 6727 (the Wage Rationalization Act), amending the Labor Code, created both the NWPC and the RTWPB and defined their respective powers. Article 121 of the Labor Code lists the powers and functions of the NWPC.

The foregoing clearly grants the NWPC, not the RTWPB, the power to "prescribe the rules and guidelines" for the determination of minimum wage and productivity measures. While the RTWPB has the power to issue wage orders under Article 122 (b) of the Labor Code, such orders are subject to the guidelines prescribed by the NWPC.
 
One of these guidelines is the "Rules on Minimum Wage Fixing," which was issued on June 4, 1990. Rule IV, Section 2 thereof, allows the RTWPB to issue wage orders exempting enterprises from the coverage of the prescribed minimum wages.
However, the NWPC has the power not only to prescribe guidelines to govern wage orders, but also to issue exemptions therefrom, as the said rule provides that "whenever a wage order provides for exemption, applications thereto shall be filed with the appropriate Board which shall process the same, subject to guidelines issued by the Commission." In short, the NWPC lays down the guidelines which the RTWPB implements. Significantly, the NWPC authorized the RTWPB to issue exemptions from wage orders, but subject to its review and approval. 

Since the NWPC never assented to Guideline No. 3 of the RTWPB, the said guideline is inoperative and cannot be used by the latter in deciding or acting on petitioners' application for exemption. Moreover, Rule VIII, Section 1 of the NWPC's Rules of Procedure on Minimum Wage Fixing issued on June 4, 1990 — which was prior to the effectivity of RTWPB Guideline No. 3 — requires that an application for exemption from wage orders should be processed by the RTWPB, subject specifically to the guidelines issued by the NWPC.

To allow RTWPB Guideline No. 3 to take effect without the approval of the NWPC is to arrogate unto RTWPB a power vested in the NWPC by Article 121 of the Labor Code, as amended by RA 6727. The Court will not countenance this naked usurpation of authority. It is a hornbook doctrine that the issuance of an administrative rule or regulation must be in harmony with the enabling law. If a discrepancy occurs "between the basic law and an implementing rule or regulation, it is the former that prevails."

This is so because the law cannot be broadened by a mere administrative issuance. It is axiomatic that "an administrative agency cannot amend an act of Congress." Article 122 (e) of the Labor Code cannot be construed to enable the RTWPB to decide applications for exemption on the basis of its own guidelines which were not reviewed an approved by the NWPC, for the simple reason that a statutory grant of "powers should not be extended by implication beyond what may be necessary for their just and reasonable execution. Official powers cannot be merely assumed by administrative officers, nor can they be created by the courts in the exercise of their judicial functions."

There is no basis for petitioners' claim that their vested rights were prejudiced by the NWPC's alleged retroactive application of its own rules which were issued on February 25, 1991 and took effect on March 18, 1991. Such claim cannot stand because Guideline No. 3, as previously discussed and as correctly concluded by the NWPC,24 was not valid and, thus, cannot be a source of a right; much less, a vested one.

The Insertion in Guideline No. 3 of "Distressed Industry" as a Criterion for Exemption Void

The Court wishes to stress that the law does not automatically grant exemption to all establishments belonging to an industry which is deemed "distressed."

Hence, RX-O1, Section 3 (4), must not be construed to automatically include all establishments belonging to a distressed industry. The fact that the wording of a wage order may contain some ambiguity would not help petitioners. Basic is the rule in statutory construction that all doubts in the implementation and the interpretation of the provisions of the Labor Code, as well as its implementing rules and regulations, must be resolved in favor of labor.

By exempting all establishments belonging to a distressed industry, Guideline No. 3 surreptitiously and irregularly takes away the mandated increase in the minimum wage awarded to the affected workers. In so acting, the RTWPB proceeded against the declared policy of the State, enshrined in the enabling act, "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; . . ."

Thus, Guideline No. 3 is void not only because it lacks NWPC approval and contains an arbitrarily inserted exemption, but also because it is inconsistent with the avowed State policies protective of labor.

NWPC Decision Not Arbitrary

To justify the exemption of a distressed establishment from effects of wage orders, the NWPC requires the applicant, if a stock corporation like petitioners, to prove that its accumulated losses impaired its paid-up capital by at least 25 percent in the last full accounting period preceding the application or the effectivity of the order.

In the case at bar, it is undisputed that during the relevant accounting period, NALCO, ALCO and PWC sustained capital impairments of 1.89, 28.72, and 5.03 percent, respectively.

Clearly, it was only ALCO which met the exemption standard. Hence, the NWPC did not commit grave abuse of discretion in approving the application only of ALCO and in denying those of petitioners. Indeed, the NWPC acted within the ambit of its administrative prerogative when it set guidelines for the exemption of a distressed establishment. Absent any grave abuse of discretion, NWPC's actions will not be subject to judicial review. Accordingly, we deem the appealed Decisions to be consistent with law.

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