P I Manufacturing Inc V P I Supervisors & Formen Assoc.

GR 167217 Feb 4, 2008 J Sandoval-Gutierrez

Facts: Wage distortion means the disappearance or virtual disappearance of pay differentials between lower and
higher positions in an enterprise because of compliance with a wage order. To correct a wage distortion, the basic
salary of employees must be correspondingly increased. In this case of the supervisors and foremen of an
appliance manufacturer (PMI) however this rule was not applied. Lets find out why.

This case arose when Republic Act 6640 was signed into law on December 10, 1987 providing among others an
increase in statutory minimum wage and salary rates of employees and workers in the private sector of P10 per
day for those receiving wages of P100 and below per day.

After the passage of the law or on December 18, 1987, PMI and the Union of Supervisors and Foremen (Union)
entered into a new Collective Bargaining Agreement (CBA) wherein the Supervisors were granted an increase of
P625 per month and the Foremen P475 per month. The increases were made retroactive to May 12, 1987 or prior
to the passage of R.A. 6640 and every year thereafter until July 26, 1989. It was also provided in the CBA that the
Union absolves, quit claims and releases the PMI for any monetary claim they have, if any there might be or might
have been previous to its signing.

At the time of the passage of R.A. 6640, PMI had 13 Supervisors and 5 Foremen but only three of them were
receiving daily wage rates below P100. They were Val, a Supervisor, receiving P99.01, and two foremen, Andy and
Rene, receiving P96.45 and P94.93 respectively per day. The rest were receiving over P100 per day. Hence only Val,
Andy and Renes daily wage rates were increased by P10. As a result, Vals wage rate became P109.01 while those
of Foremen Andy and Rene became P106.45 and P104.93. Since the next lowest paid employees after them were
Benny, a Supervisor who was receiving P102.38 per day, Danny a foreman receiving P107.14 a day and Mar,
another Supervisor receiving P108.80, the increased wage rates of Foremen Andy and Rene exceeded that of
Supervisor Benny. Also the increased wage rate of Val exceeded those of Supervisors Benny and Mar. Like a
domino effect the intended quantitative differences between and among the wage rates of all the 18 Supervisors
and Foremen were altered, reduced or eliminated, thus resulting in wage distortion.

Hence to avoid a wage distortion, the Union filed a complaint against PMI asking that all its members be given the
equivalent percentage of wage increases of their basic pay they were receiving prior to December 10, 1987 to cure
the wage distortion.

The Labor Arbiter granted their prayer and ordered a wage increase of 13.5% of the basic pay of all union
members. This was affirmed by the NLRC. On further appeal, the wage increase was further increased by the Court
of Appeals (CA) to 18.5% considering that the P10 a day increase on the prior minimum wage is 18.5% not 13.5%.
The CA said that such increase to correct the wage distortion arising from the implementation of R.A. 6640 cannot
be waived. So the CBA provision to this effect is ineffective.

Issue: W/N the implementation of R.A. No. 6640 resulted in a wage distortion and whether such distortion was
cured or remedied by the 1987 CBA.|||

Held: Yes. Court of Appeals correctly ruled that a wage distortion occurred due to the implementation of R.A. No.
6640.||| While there is wage distortion, the same was cured or remedied by the CBA entered into after the
effectivity of R.A. 6640. The CBA increased the monthly salaries of the supervisors by P625 and the foremen by
P475 effective May 12, 1987. These increases re-established and broadened the gap not only between the
supervisors and foremen but also between them and the rank and file employees. These wage increase almost
doubled that of the P10 increase under R.A. 6640. The P625 per month means P24.03 increase per day for
supervisors while the P475 per month means P18.26 increase per day for the foremen. Such gap as re-established
by the CBA is more than substantial compliance with the law.

Requiring PMI to pay all union members a wage increase of 18.5% over and above the negotiated wage increases
provided under the CBA is highly unfair and oppressive to the former. To be sure, only those receiving wages P100
and below are entitled to the P10 wage increase. Almost all the union members have been receiving wage rates
above P100 and therefore not entitled to the P10 increase. Only three of them are receiving wage rates below
P100 and thus entitled to such increase. To direct PMI to grant an across the board increase to all of them
regardless of the amount of wages they are already receiving would be harsh and unfair. It would be penalizing
employers who grant their workers more than the statutory prescribed minimum wage rate increases.

A CBA constitutes the law between the parties when freely and voluntary entered into. The Union cannot invoke
the beneficial provisions of the CBA but disregard the concessions it voluntary extended to PMI, particularly the
waiver and quitclaim