B. Wages

Frequency: ★★★☆☆

Concepts

Wage – paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of board, lodging, or other facilities customarily furnished by the employer to the employee. “Fair and reasonable value” shall not include any profit to the employer, or to any person affiliated with the employer. (Article 97 [f], Labor Code)

Salary – is defined in Black’s Law Dictionary (5th ed.) as “a reward or recompense for services performed.” Similarly, the Philippine Legal Encyclopedia states that “salary” is the “[c]onsideration paid at regular intervals for the rendering of services.” (International School Alliance of Educators [ISAE] v. Quisumbing, G.R. No. 128845, 01 June 2000)

The word “salary’ is defined as “a reward or recompense for services performed. In a more limited sense, a fixed periodical compensation paid for services rendered.” (Ifurung v. Carpio, En Banc, G.R. No. 232131, 24 April 2018)

Broadly, the word “salary” means a recompense or consideration made to a person for his pains or industry in another man’s business. Whether it be derived from “salarium,” or more fancifully from “sal,” the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. (Songco v. NLRC, G.R. No. L-50999, 23 March 1990)

General rule: The words “wages” and “salary” are in essence synonymous… “Salary,” the etymology of which is the Latin word “salarium,” is often used interchangeably with “wage”, the etymology of which is the Middle English word “wagen”. Both words generally refer to one and the same meaning, that is, a reward or recompense for services performed. Likewise, “pay” is the synonym of “wages” and “salary” (Black’s Law Dictionary, 5th Ed.). Inasmuch as the words “wages”, “pay” and “salary” have the same meaning, and commission is included in the definition of “wage”, the logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should include also their earned sales commissions. (Songco v. NLRC, supra.)
Exception: When distinction matters: Garnishment, Execution
The laborer’s wage shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance. (ART. 1708, Civil Code)
Article 1708 used the word “wages” and not “salary” in relation to “laborer” when it declared what are to be exempted from attachment and execution. The term “wages” as distinguished from “salary”, applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while “salary” denotes a higher degree of employment, or a superior grade of services, and implies a position of office: by contrast, the term wages “indicates considerable pay for a lower and less responsible character of employment,” while “salary” is suggestive of a larger and more important service (GAA v. CA, G.R. No. L-44169, 03 December 1985)
Article 1708 does not operate in favor of any person but those who are laboring men or women in the sense that their work is manual. Persons belonging to this class usually look to the reward of a day’s labor for immediate or present support, and such persons are more in need of the exemption than any others. (Ibid.)

Basic salary – as used in P.D. No. 851 and Memorandum Order No. 28, is not to be confused with the term “fixed or guaranteed wage.” The term “basic salary” is used to distinguish wage or salary from “fringe benefits” which are not integrated into “basic salary” for certain specific purposes. (Philippine Duplicators, Inc. v. NLRC, Philippine Duplicators Employees Union-TUPAS, G.R. No. 110068, 11 November 1993)

In San Miguel Corporation v. Inciong, the catch-all phrase “allowances” and “monetary benefits” which are deemed not considered or integrated as part of “basic salary” was construed to refer to “any and all additions which may be in the form of allowances or ‘fringe’ benefits.” These fringe benefits include payments for sick leave, vacation leave or maternity leave; premium pay for work performed on rest day and special holidays; premium pay for regular holidays and night differential pay; and cost of living allowances. (Ibid.)

1. Payment of wages

Forms of payment

No employer shall pay the wages of an employee by means of promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even when expressly requested by the employee. (Article 102, Labor Code)

Payment of wages by check or money order shall be allowed when such manner of payment is customary on the date of effectivity of this Code, or is necessary because of special circumstances as specified in appropriate regulations to be issued by the Secretary of Labor and Employment or as stipulated in a collective bargaining agreement. (Ibid.)

Time of payment

Wages shall be paid at least once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days. If on account of force majeure or circumstances beyond the employer’s control, payment of wages on or within the time herein provided cannot be made, the employer shall pay the wages immediately after such force majeure or circumstances have ceased. No employer shall make payment with less frequency than once a month.

The payment of wages of employees engaged to perform a task which cannot be completed in two (2) weeks shall be subject to the following conditions, in the absence of a collective bargaining agreement or arbitration award:
1) That payments are made at intervals not exceeding sixteen (16) days, in proportion to the amount of work completed;
2) That final settlement is made upon completion of the work. (Article 103, Ibid.)

Place of payment

Payment of wages shall be made at or near the place of undertaking, except as otherwise provided by such regulations as the Secretary of Labor and Employment may prescribe under conditions to ensure greater protection of wages. (Article104, Ibid.)

Direct payment of wages

General Rule: Wages shall be paid directly to the workers to whom they are due.
Exception: … except:
1) In cases of force majeure rendering such payment impossible or under other special circumstances to be determined by the Secretary of Labor and Employment in appropriate regulations, in which case, the worker may be paid through another person under written authority given by the worker for the purpose; or
2) Where the worker has died, in which case, the employer may pay the wages of the deceased worker to the heirs of the latter without the necessity of intestate proceedings. The claimants, if they are all of age, shall execute an affidavit attesting to their relationship to the deceased and the fact that they are his heirs, to the exclusion of all other persons. If any of the heirs is a minor, the affidavit shall be executed on his behalf by his natural guardian or next-of-kin. The affidavit shall be presented to the employer who shall make payment through the Secretary of Labor and Employment or his representative. The representative of the Secretary of Labor and Employment shall act as referee in dividing the amount paid among the heirs. The payment of wages under this Article shall absolve the employer of any further liability with respect to the amount paid. (Article 105, Ibid.)

Worker preference in case of bankruptcy

In the event of bankruptcy or liquidation of an employer’s business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid. (Article 101, Ibid.)

•••••

BAR EXAM QUESTION

(Question VI[A], Labor Law, 2017 Bar Exam)

Tarcisio was employed as operations manager and received a monthly salary of ₱25,000.00 through his payroll account with DB Bank. He obtained a loan from Roberto to purchase a car. Tarcisio failed to pay Roberto when the loan fell due. Roberto sued to collect, and moved to garnish Tarcisio’s payroll account. The latter vigorously objected and argued that salaries were exempt from garnishment. Is Tarcisio correct? Explain your answer. (3%)

SUGGESTED ANSWER:

No. Answer

Under the Civil Code, the laborer’s wage shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance. In jurisprudence, the exemption covers only wages, and not salary. It has been held that the term “wages” as distinguished from “salary”, applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while “salary” denotes a higher degree of employment, or a superior grade of services, and implies a position of office. Rule

In the case at bar, Tarciso is an operations manager who works at an office and not a manual laborer. He earns a salary, and not a wage. A salary is not exempt from garnishment. Apply

Thus, Tarcisio is not correct. Conclusion

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3) Sales commissions

Sales commissions form part of the “wage” or “salary” of salesmen and are not in the nature of an “allowance” or “additional fringe” benefit. Once more, we note that in the instant case, sales commissions form the bulk of the salaries or wages of petitioner’s salesmen. (Ibid.)

2. Prohibitions regarding wages

Non-interference in disposal of wages

No employer shall limit or otherwise interfere with the freedom of any employee to dispose of his wages. He shall not in any manner force, compel, or oblige his employees to purchase merchandise, commodities or other property from any other person, or otherwise make use of any store or services of such employer or any other person. (Article 112, Ibid.)

Wage deduction

No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except:
1) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance;
2) For union dues, in cases where the right of the worker or his union to checkoff has been recognized by the employer or authorized in writing by the individual worker concerned; and
3) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment. (Article 113, Ibid.)

Deposits for loss or damage. No employer shall require his worker to make deposits from which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or equipment supplied by the employer, except when the employer is engaged in such trades, occupations or business where the practice of making deductions or requiring deposits is a recognized one, or is necessary or desirable as determined by the Secretary of Labor and Employment in appropriate rules and regulations. (Article 114, Ibid.)

Limitations on deductions. No deduction from the deposits of an employee for the actual amount of the loss or damage shall be made unless the employee has been heard thereon, and his responsibility has been clearly shown. (Article 115, Ibid.)

Withholding of wages and kickbacks, prohibited

It shall be unlawful for any person, directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other. (Article 116, Ibid.)

Deductions to ensure employment

It shall be unlawful to make any deduction from the wages of any employee for the benefit of the employer or his representative or intermediary as consideration of a promise of employment or retention in employment. (Article 117, Ibid.)

Retaliatory measures, prohibited

It shall be unlawful for an employer to refuse to pay or reduce the wages and benefits, discharge or in any manner discriminate against any employee who has filed any complaint or instituted any proceeding under this Title or has testified or is about to testify in such proceedings. (Article 118, Ibid.)

3. Facilities vs. supplements

Concepts

Facilities – are items of expense necessary for the laborer’s and his family’s existence and subsistence so that by express provision of law, they form part of the wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the same. (Atok-Big Wedge Mutual Benefit Association v. Atok-Big Wedge Mining Company, Incorporated, G.R. No. L-7349, 19 July 1955)

Facilities include articles or services for the benefit of the employee or his family but exclude tools of the trade or articles or services primarily for the benefit of the employer or necessary to the conduct of the employer’s business. (Our Haus Realty Development Corporation v. Parian, supra.)

Supplements – constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or wages. (Atok-Big Wedge Mutual Benefit Association v. Atok-Big Wedge Mining Company, Incorporated, supra.)

The law also prescribes that the computation of wages shall exclude whatever benefits, supplements or allowances given to employees. Supplements are paid to employees on top of their basic pay and are free of charge. Since it does not form part of the wage, a supplement’s value may not be included in the determination of whether an employer complied with the prescribed minimum wage rates. (Ibid.)

Purpose as key differentiator

Under the law, only the value of the facilities may be deducted from the employees’ wages but not the value of supplements. (Our Haus Realty Development Corporation v. Parian, G.R. No. 204651, 06 August 2014)

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part of the laborers’ basic wages, it is a facility. The distinction lies not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for which it is given. (Our Haus Realty Development Corporation v. Parian, supra.)

Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given by the employer. If it is primarily for the employee’s gain, then the benefit is a facility; if its provision is mainly for the employer’s advantage, then it is a supplement. Again, this is to ensure that employees are protected in circumstances where the employer designates a benefit as deductible from the wages even though it clearly works to the employer’s greater convenience or advantage. (Ibid.)

Facilities

Requirements for facilities:
1) Proof must be shown that such facilities are customarily furnished by the trade;
2) The provision of deductiblefacilities must be voluntarily accepted in writingby the employee; and
3) The facilities must be charged at fair and reasonable value.

Proof must be shown that such facilities are customarily furnished by the trade. One of the badges to show that a facility is customarily furnished by the trade is the existence of a company policy or guideline showing that provisions for a facility were designated as part of the employees’ salaries. (Our Haus Realty Development Corporation v. Parian, G.R. No. 204651, 06 August 2014)

Apart from company policy, the employer may also prove compliance with the first requirement by showing the existence of an industry-wide practice of furnishing the benefits in question among enterprises engaged in the same line of business. If it were customary among construction companies to provide board and lodging to their workers and treat their values as part of their wages, we would have more reason to conclude that these benefits were really facilities. (Ibid.)

Our Haus Realty Development Corporation v. Parian (August 2014)
Our Haus could not really be expected to prove compliance with the first requirement since the living accommodation of workers in the construction industry is not simply a matter of business practice. Peculiar to the construction business are the occupational safety and health (OSH) services which the law itself mandates employers to provide to their workers. This isto ensure the humane working conditions of construction employees despite their constant exposure to hazardous working environments. Under Section 16 of DOLE Department Order (DO) No. 13, series of 1998,43 employers engaged in the construction business are required to provide the following welfare amenities: … 16.1 Adequate supply of safe drinking water… 16.2 Adequate sanitary and washing facilities… 16.3 Suitable living accommodation for workers, and as may be applicable, for their families… 16.4 Separate sanitary, washing and sleeping facilities for men and women workers.
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation of DOLE DO No. 13, mandates that the cost of the implementation of the requirements for the construction safety and health of workers, shall be integrated to the overall project cost. The rationale behind this is to ensure that the living accommodation of the workers is not substandard and is strictly compliant with the DOLE’s OSH criteria.
As part of the project cost that construction companies already charge to their clients, the value of the housing of their workers cannot be charged again to their employees’ salaries. Our Haus cannot pass the burden of the OSH costs of its construction projects to its employees by deducting it as facilities. This is Our Haus’ obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose test set by jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the employer’s convenience, it will not be considered as a facility but a supplement. Here, careful consideration is given to the nature of the employer’s business in relation to the work performed by the employee. This test is used to address inequitable situations wherein employers consider a benefit deductible from the wages even if the factual circumstances show that it clearly redounds to the employers’ greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test additionally recognizes that the employer and the employee do not stand at the same bargaining positions on benefits that must or must not form part of an employee’s wage. In the ultimate analysis, the purpose test seeks to prevent a circumvention of the minimum wage law.
Under the purpose test, substantial consideration must be given to the nature of the employer’s business in relation to the character or type of work performed by the employees involved.
Our Haus is engaged in the construction business, a labor-intensive enterprise. The success of its projects is largely a function of the physical strength, vitality and efficiency of its laborers. Its business will be jeopardized if its workers are weak, sickly, and lack the required energy to perform strenuous physical activities. Thus, by ensuring that the workers are adequately and well fed, the employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies heavily and directly on the physical capacity and endurance of its workers. This is not to say that desk jobs do not require muscle strength; we simply emphasize that in the construction business, bulk of the work performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the problem of meeting target deadlines. More often than not, work is performed continuously, day and night, in order to finish the project on the designated turn-over date. Thus, it will be more convenient to the employer if its workers are housed near the construction site to ensure their ready availability during urgent or emergency circumstances. Also, productivity issues like tardiness and unexpected absences would be minimized. This observation strongly bears in the present case since three of the respondents are not residents of the National Capital Region. The board and lodging provision might have been a substantial consideration in their acceptance of employment in a place distant from their provincial residences.
Based on these considerations, we conclude that even under the purpose test, the subsidized meals and free lodging provided by Our Haus are actually supplements. Although they also work to benefit the respondents, an analysis of the nature of these benefits in relation to Our Haus’ business shows that they were given primarily for Our Haus’ greater convenience and advantage. If weighed on a scale, the balance tilts more towards Our Haus’ side. Accordingly, their values cannot be considered in computing the total amount of the respondents’ wages. Under the circumstances, the daily wages paid to the respondents are clearly below the prescribed minimum wage rates in the years 2007-2010.

The provision of deductible facilities must be voluntarily accepted in writing by the employee. A facility may only be deducted from the wage if the employer was authorized in writing by the concerned employee. As it diminishes the take-home pay of an employee, the deduction must be with his express consent. (Ibid.)

The facilities must be charged at fair and reasonable value. –

Our Haus Realty Development Corporation v. Parian (August 2014)
Our Haus admitted that it deducted the amount of ₱290.00 per week from each of the respondents for their meals. But it now submits that it did not actually withhold the entire amount as it did not figure in the computation the money it expended for the salary of the cook, the water, and the LPG used for cooking, which amounts to ₱249.40 per week per person. From these, it appears that the total meal expense per week for each person is ₱529.40, making Our Haus’ ₱290.00 deduction within the 70% ceiling prescribed by the rules.
However, Our Haus’ valuation cannot be plucked out of thin air. The valuation of a facility must be supported by relevant documents such as receipts and company records for it to be considered as fair and reasonable.
In the present case, Our Haus never explained how it came up with the values it assigned for the benefits it provided; it merely listed its supposed expenses without any supporting document. Since Our Haus is using these additional expenses (cook’s salary, water and LPG) to support its claim that it did not withhold the full amount of the meals’ value, Our Haus is burdened to present evidence to corroborate its claim. The records however, are bereft of any evidence to support Our Haus’ meal expense computation. Even the value it assigned for the respondents’ living accommodations was not supported by any documentary evidence. Without any corroborative evidence, it cannot be said that Our Haus complied with this third requisite.

Supplements

Covered by non-diminution of benefits rule. Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer. Thus, any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, 01 April 2013)

•••••

BAR EXAM QUESTION

(Question IV, Labor Law, 2018 Bar Exam)

Nelda worked as a chambermaid in Hotel Neverland with a basic wage of PhP560.00 for an eight-hour workday. On Good Friday, she worked for one (1) hour from 10:00 PM to 11:00 PM. Her employer paid her only PhP480.00 for each 8-hour workday, and PhP70.00 for the work done on Good Friday. She sued for underpayment of wages and non-payment of holiday pay and night shift differential pay for working on a Good Friday. Hotel Neverland denied the alleged underpayment, arguing that based on long-standing unwritten tradition, food and lodging costs were partially shouldered by the employer and partially paid for by the employee through salary deduction. According to the employer, such valid deduction caused the payment of Nelda’s wage to be below the prescribed minimum. The hotel also claimed that she was not entitled to holiday pay and night shift differential pay because hotel workers have to work on holidays and may be assigned to work at night.

(a) Does the hotel have valid legal grounds to deduct food and lodging costs from Nelda’s basic salary? (2.5%)

SUGGESTED ANSWER:

No. Answer

Under the law, supplements provided by the employer are not deductible against the wages of the employees, while facilities may be deducted from the employees’ wages. If it is primarily for the employee’s gain, then the benefit is a facility; if its provision is mainly for the employer’s advantage, then it is a supplement. Rule

In the case at bar, the food and lodging costs are for the employer’s benefit. Good Friday is a regular holiday during a holy week, which may result in increase in hotel bookings and/or difficulty of obtaining transportation and food. Thus, it is for the employer’s interest to ensure manpower during such day by providing food and lodging. Apply

Thus, the hotel has no valid legal grounds to deduct food and lodging costs from Nelda’s basic salary. Conclusion

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4. Minimum wage

Wage Order

Regional Tripartite Wages and Productivity Boards (RTWPB). Whenever conditions in the region so warrant, the [Regional Tripartite Wages and Productivity Boards] shall investigate and study all pertinent facts; and based on the standards and criteria herein prescribed, shall proceed to determine whether a Wage Order should be issued. (Article 123, Labor Code)

15-day publication for effectivity. Any such Wage Order shall take effect after fifteen (15) days from its complete publication in at least one (1) newspaper of general circulation in the region. (Ibid.)

Appealable within calendar 10 days. Any party aggrieved by the Wage Order issued by the Regional Board may appeal such order to the National Wages and Productivity Commission (NWPC) within ten (10) calendar days from the publication of such order. It shall be mandatory for the Commission to decide such appeal within sixty (60) calendar days from the filing thereof. (Paragraph 3, Article 123, Ibid.)

Appeal does not stay the order. The filing of the appeal does not stay the order unless the person appealing such order shall file with the Commission, an undertaking with a surety or sureties satisfactory to the Commission for the payment to the employees affected by the order of the corresponding increase, in the event such order is affirmed. (Paragraph 4, Article 123, Ibid.)

Frequency of Wage Order

General rule: 12-month gap.
Any Wage Order issued by the Board may not be disturbed for a period of twelve (12) months from its effectivity, and no petition for wage increase shall be entertained within the said period. (Section 3, Rule IV, Rules of Procedure on Minimum Wage Fixing)
Exception: supervening conditions
In the event, however, that supervening conditions, such as extraordinary increase in prices of petroleum products and basic goods/services, demand a review of the minimum wage rates as determined by the Board and confirmed by the Commission, the Board shall proceed to exercise its wage fixing function even before the expiration of the said period. (Ibid.)

•••••

BAR EXAM QUESTION

(Question IV, Labor Law, 2017 Bar Exam)

The Regional Tripartite Wages and Productivity Board (RTWPB) for Region 3 issued a wage order on November 2, 2017 fixing the minimum wages for all industries throughout Region 3.

(a) Is the wage order subject to the approval of the National Wages and Productivity Commission before it takes effect? (2%)

(b) The law mandates that no petition for wage increase shall be entertained within a period of 12 months from the effectivity of the wage order. Under what circumstances may the Kilusang Walang Takot, a federation of labor organizations that publicly and openly assails the wage order as blatantly unjust, initiate the review of the wage increases under the wage order without waiting for the end of the 12-month period? Explain your answer. (3%)

SUGGESTED ANSWER:

(a) No. Under the Labor Code, the Regional Tripartite Wages and Productivity Board (RTWPB) has the authority and power to issue wage orders and such are not subject to approval of the National Wages and Productivity Commission (NWPC). Once the wage order is published, it takes effect after 15 days without any other condition.

(b) The 12-month period is subject to the exception of when there is a supervening condition, such as an extraordinary increase in prices of petroleum products and basic goods and services. In such a circumstance, the federation may file a petition for review.

•••••

5. Wage distortion

Concept

Wage distortion – refers to a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in 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. (Paragraph 7, Article 124, Labor Code)

Correction of Wage Distortion

If organized.Where the application of any prescribed wage increase by virtue of a Wage Order issued by the Board results in distortions of the wage structure within an establishment, the employer and the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be resolved through the grievance procedure under their collective bargaining agreement and, if it remains unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing, such dispute shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within ten (10) days from the time said dispute was referred to voluntary arbitration. (Section 1, Rule VII, Ibid.)

If unorganized and no collective argreements. In cases where there are no collective agreements or recognized labor unions, the employers and workers shall endeavor to correct such distortions. Any dispute arising therefrom shall be settled through the National Conciliation and Mediation Board and, if it remains unresolved after ten (10) days of conciliation, shall be referred to the appropriate branch of the National Labor Relations Commissions (NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and decide the dispute within twenty (20) days from the time said dispute is submitted for compulsory arbitration. (Paragraph 2, Section 1, Rule VII, Ibid.)

The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of any increase in prescribed wage rates pursuant to the provisions of law or wage order. (Paragraph 6, Article 124, Labor Code)

•••••

BAR EXAM QUESTION

(Question B.14[b], Part II, Labor Law, 2019 Bar Exam)

Upon a review of the wage rate and structure pertaining to its regular rank and file employees, K Corporation found it necessary to increase its hiring rates for employees belonging to the different job classification levels to make their salary rates more competitive in the labor market.

After the implementation of the new hiring salary, Union X, the exclusive bargaining agent of the rank and file employees, demanded a similar salary adjustment for the old employees. It argued that the increase in hiring rates resulted in wage distortion since it erased the wage gap between the new and old employees. In other words, new employees would enjoy almost the same salary rates as K Corporation’s old employees.

(a) What is wage distortion? (2%)

(b) Did a wage distortion arise under the circumstances which legally obligated K Corporation to rectify the wages of its old employees? Explain. (3%)

SUGGESTED ANSWER:

(a) Wage distortion – refers to a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in 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.

(b) No. Answer

Under the Labor Code, the condition precedent for a wage distortion is the issuance of a wage order. Rule

In the case at bar, there is no such issuance of a wage order. The increase in hiring rates resulted from the review of the wage rate and structure by the employer, K Corporation. Apply

Thus, there was no wage distortion that arose. Conclusion

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6. Non-diminution of benefits

Concept

The principle of non-diminution of benefits is actually founded on the Constitutional mandate to protect the rights of workers, to promote their welfare, and to afford them full protection. In turn, said mandate is the basis of Article 4 of the Labor Code which states that “all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be rendered in favor of labor.” (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, 01 April 2013)

The application of the prohibition against the diminution of benefits presupposes that a company practice, policy or tradition favorable to the employees has been clearly established; and that the payments made by the employer pursuant to the practice, policy, or tradition have ripened into benefits enjoyed by them. (Philippine Journalists, Inc. v. Journal Employees Union [JEU], G.R. No. 192601, 03 June 2013)

Requisites

There is diminution of benefits when the following requisites are present:
1) The grant or benefit is founded on a policy or has ripened into a practice over a long period of time;
2) The practice is consistent and deliberate;
3) The practice is not due to error in the construction or application of a doubtful or difficult question of law; and
4) The diminution or discontinuance is done unilaterally by the employer. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., supra.)

Company practice

To be considered as a practice, policy or tradition, however, the giving of the benefits should have been done over a long period of time, and must be shown to have been consistent and deliberate. It is relevant to mention that we have not yet settled on the specific minimum number of years as the length of time sufficient to ripen the practice, policy or tradition into a benefit that the employer cannot unilaterally withdraw. (Philippine Journalists, Inc. v. Journal Employees Union [JEU], supra.)

To be considered as a regular company practice, the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to the length of time that company practice should have been exercised in order to constitute voluntary employer practice. The common denominator in previously decided cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time. (Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc., supra.)

•••••

BAR EXAM QUESTION

(Question A.6, Part I, Labor Law, 2019 Bar Exam)

D, one of the sales representatives of OP, Inc., was receiving a basic pay of ₱50,000.00 a month, plus a 1% overriding commission on his actual sales transactions. In addition, beginning three (3) months ago, or in August 2019, D was able to receive a monthly gas and transportation allowance of ₱5,000.00 despite the lack of any company policy therefor.

In November 2019, D approached his manager and asked for his gas and transportation allowance for the month. The manager declined his request, saying that the company had decided to discontinue the aforementioned allowance considering the increased costs of its overhead expenses. In response, D argued that OP, Inc.’s removal of the gas and transportation allowance amounted to a violation of the rule on non-diminution of benefits.

Is the argument of D tenable? Explain. (2.5%)

SUGGESTED ANSWER:

No. Answer

Under the Labor Code, the principle of non-diminution of benefits prohibits the elimination or in any way diminishment of supplements or other employee benefits. Rule

In the case at bar, the monthly gas and transportation allowance are not considered or integrated as part of the regular or basic salary of D. Instead, it is an allowance that is not integrated as part of the wage and thus may be withdrawn by the employer. The said allowance is thus not a benefit and thus not covered by the principle of non-diminution of benefits. Apply

Thus, D’s argument is not tenable. Conclusion

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Related: Labor Law

A. Security of tenure

Frequency: ★★★★★ 1. Categories of employment as to tenure a. Regular 1) Under the Labor Code Under Article 295 of

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Syllabus-based

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V. Writs of habeas corpus, kalikasan, habeas data, and amparo

Except as otherwise expressly provided by law, the writ of habeas corpus shall extend to all cases of illegal confinement or detention by which any person is deprived of his liberty, or by which the rightful custody of any person is withheld from the person entitled thereto. (Section 1, Rule 102, Rules of Court)

N. Rights of the accused

No person shall be held to answer for a criminal offense without due process of law. (Section 14[1], Article III, 1987 Constitution)

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