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METRO TRANSIT ORGANIZATION v. NLRC

FACTS:

The case involves a wage distortion issue between Metro Transit Organization Inc. (Metro) and private respondent Supervisors Employees Association of Metro Transit Organization (SEAM). On April 17, 1989, the rank-and-file employees were granted a salary increase of P500.00 per month under their collective bargaining agreement (CBA), while no corresponding increase was given to the supervisory employees. SEAM argues that this wage distortion created an inequitable pay gap between the two groups. Metro, on the other hand, contends that the grant of a corresponding increase to supervisory employees is not compulsory and is a discretionary act of generosity.

The case also involves a dispute between Metro Drug Corporation and its supervisory employees represented by the Supervisory Employees Association of Metro (SEAM). Metro Drug Corporation granted a salary increase to its rank-and-file employees, resulting in wage distortion as the salaries of the supervisory employees were not adjusted accordingly. SEAM demanded a salary increase of Php 550.00 for the supervisory employees to correct the wage distortion. Metro Drug Corporation argued that the increase was a bonus and not a demandable right.

It was found that the increases in salaries for the rank-and-file employees were part of the wage structure of supervisory employees. Thus, the demanded increase was not a bonus but an enforceable obligation for the supervisory employees of Metro. It was further established that the supervisory employees had the right to rely on the company practice of unilaterally correcting wage distortion effects by giving them a corresponding salary increase plus a premium. However, the court held that the Php 550.00 increase was only demandable by SEAM from April 17, 1989, to November 30, 1989.

ISSUES:

  1. Whether the demanded increase for supervisory employees is a bonus or an enforceable obligation

  2. Whether the wage distortion was effectively rectified by the CBA provisions

  3. Whether the difference in pay between rank-and-file employees and supervisory employees is a significant differential that distinguishes them.

  4. Whether the first year salary increase of P800.00 per month for supervisory employees covered or took the place of the P550.00 increase due to them.

    • Whether the wage distortion in the present case was completely and permanently corrected
    • Whether Metro Transit Organization, Inc. (Metro) is liable to its supervisory employees for a P550.00 monthly increase beyond 1 December 1989 and onwards
    • Whether Metro is liable to pay an additional P600.00 per month to supervisory employees starting from 1 December 1990 and onwards

RULING:

  1. The demanded increase for supervisory employees is an enforceable obligation. It is not a bonus that is generally not demandable as a matter of right. Based on the company practice of granting a salary increase to supervisory employees whenever rank-and-file employees were granted a salary increase, it is evident that those increases were part of the wage structure of supervisory employees.

  2. The wage distortion was effectively rectified by the CBA provisions. The CBA between Metro and SEAM, together with the increase of P550.00 per month from 17 April 1989 to 1 December 1989, adequately corrected the wage distortion. The provisions of the CBA granted supervisory employees an aggregate monthly increase of P2,800.00 over three (3) years, while the rank-and-file employees were granted monthly increases totaling P1,850.00 over the same period.

  3. Yes, the difference in pay between rank-and-file employees and supervisory employees amounting to P1,500.00 per month is a significant differential that distinguishes them.

  4. Yes, the first year salary increase of P800.00 per month for supervisory employees should be deemed to cover the P550.00 increase due to them.

  5. The Supreme Court held that the wage distortion in the present case was completely and permanently corrected. Therefore, Metro is not liable to its supervisory employees for a P550.00 monthly increase beyond 1 December 1989 and onwards. Regarding the additional P600.00 per month, the Court ruled that Metro should not be compelled to pay it starting from 1 December 1990 and onwards. The payments made from 17 April 1990 up to 1 December 1990 should be deemed included in the P1,000.00 monthly increase effective from 1 December 1990 and onwards.

PRINCIPLES:

  • The rectification of wage distortion may be done by re-establishing a substantial or significant gap between the wage rates of different classes of employees, rather than restoring the historical gap.

  • Wage distortions can arise from government-decreed increases in minimum wages or from other causes such as mergers of companies with differing classifications of employees and wage rates.

  • The rectification of wage distortions can be done through grievance procedures or collective bargaining negotiations.

  • A significant differential in pay between rank-and-file employees and supervisory employees distinguishes them, based on pay scales.

  • Increases in wages essential for correcting wage distortions may be credited against CBA-mandated increases, in line with the public policy encouraging employers to grant wage and allowance increases higher than the minimum rates prescribed by law.

  • Wage distortion can arise not only due to a government-decreed increase in minimum wages but also due to a failure to synchronize the collective bargaining agreement (CBA)-stipulated increases for different categories of employees.

  • Employers can unilaterally or through collective bargaining negotiations provide wage increases to correct wage distortions.

  • The National Labor Relations Commission (NLRC) should not disregard the rectification of wage distortion and hold an employer liable when it has been corrected.

  • Compelling an employer to pay both the stipulated CBA increase and an additional increase amounts to allowing unjust enrichment of employees at the expense of the employer.

  • The decision of the Court is without prejudice to any increase of wages already being enjoyed by employees at the time of promulgation.