FACTS:

This case involves a labor dispute between petitioner Pag-Asa Steel Works, Inc. (company) and respondent Pag-Asa Steel Workers Union-National Federation of Labor Unions (Union). The Union filed a complaint seeking to compel the company to implement the wage increase required by Wage Order No. NCR-08 issued by the Regional Tripartite Wages and Productivity Board (RTWPB). The company refused to comply, asserting that the wage increase in the Collective Bargaining Agreement (CBA) was sufficient. The case was brought before the Voluntary Arbitrator (VA) who ruled in favor of the company. The Union appealed to the Court of Appeals (CA) who reversed the decision of the VA, ordering the company to implement the wage increase mandated by the Wage Order. The company filed a motion for reconsideration, but it was denied by the CA.

ISSUES:

1. Whether the wage increase under Wage Order No. NCR-08 must be paid to the union members as a matter of practice.

2. Whether parol evidence can be resorted to in proving the existence of a collateral agreement or company practice for the payment of the wage increase under the wage order.

3. Whether wage distortion exists.

4. Whether the employer is obliged to grant the wage increase under Wage Order No. NCR-08 either by virtue of the CBA or as a matter of company practice.

5. Whether the CBA is ambiguous and does not reflect the true agreement of the parties.

6. Whether the company is obliged to adjust the wages of the workers in accordance with Wage Order #8.

7. Whether the increase should be implemented across-the-board based on the collective bargaining agreement (CBA).

8. Whether collateral agreements or parol/oral agreements can be admitted to vary or contradict a written collective bargaining agreement (CBA).

9. Whether extrinsic evidence can be used to determine the full agreement intended by the parties in a CBA.

10. The issue in this case is whether the granting of a wage increase under a wage order or collective bargaining agreement (CBA) automatically creates a company practice that entitles employees to the same increase in subsequent years.

RULING:

1. The Court of Appeals (CA) reversed the decision of the Voluntary Arbitrator and ordered the petitioner to pay the members of the union the wage increase prescribed under Wage Order No. NCR-08. The CA held that the Collective Bargaining Agreement (CBA) is clear in its intention to grant a wage increase ordered by the Wage Board in addition to the CBA-mandated salary increases, regardless of whether the employees are already receiving wages above the minimum wage. The CA also ruled that the employer had no valid reason not to implement the wage increase because it had been paying the wage increase provided for in the CBA even though the employees were already receiving salaries above the applicable minimum wage.

2. The employer is not obliged to grant the wage increase under Wage Order No. NCR-08 either by virtue of the CBA or as a matter of company practice.

3. The CBA is not ambiguous and reflects the true agreement of the parties.

4. The company is not obliged to adjust the wages of the workers in accordance with Wage Order #8. The provision of the wage order clearly states that only private sector workers and employees in the National Capital Region receiving the prescribed daily minimum wage rate are entitled to the increase. Since the lowest paid employee in the company already receives a wage higher than the minimum wage, the company is not obligated to grant the increase.

5. The increase should not be implemented across-the-board based on the CBA. The provision in the CBA stating that "Any Wage Order to be implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted above" cannot be interpreted to support an across-the-board increase. The company rejected the original proposal of the union for an across-the-board increase, indicating that it was never the company's intention to agree to such implementation.

6. Collateral agreements or parol/oral agreements can be admitted to vary or contradict a written CBA. The rule excluding parol evidence to vary or contradict a written agreement does not extend to preclude the admission of extrinsic evidence to show prior or contemporaneous collateral parol agreements between the parties.

7. Extrinsic evidence can be used to determine the full agreement intended by the parties in a CBA, especially if the CBA fails to state certain qualification standards. The Voluntary Arbitrator (VA) is tasked to discover the intention of the parties and may consider negotiating and contractual history, evidence of past practices, and the practices of the industry to determine the scope of the agreement.

8. The Supreme Court held that the grant of a wage increase under a wage order or CBA does not automatically create a company practice that is demandable as a matter of right. To ripen into a company practice, the giving of the increase should be by reason of an act of liberality on the part of the employer, not due to a strict legal or contractual obligation. In this case, the wage increase granted by the petitioner under a previous wage order was because it believed it was obliged to do so under the CBA, and not out of liberality. Therefore, the employees are not entitled to the same increase in subsequent years.

PRINCIPLES:

• The CBA constitutes the law between the employer and the Union.

• The intention of the parties in the CBA should be upheld and given effect.

• The employer has an obligation to implement a wage increase mandated by a Wage Order, regardless of whether the employees are already receiving wages above the minimum wage.

• The implementation of previous wage orders may have been necessary to remedy wage distortion.

• Issues not raised below cannot be raised for the first time on appeal. Points of law, theories, issues, and arguments not brought to the attention of the lower court need not be considered by the reviewing court.

• The intention of the parties to a contract is determined primarily from the language used by them and should be enforced as written when the terms of the contract are clear and leave no room for doubt as to the intention of the contracting parties.

• When the terms of a contract are clear and leave no doubt as to the intention of the parties, parol evidence cannot be used to contradict, vary, add to, or subtract from the terms of the written agreement.

• Wage orders providing for wage increases should only apply to employees receiving salaries below the prescribed minimum wage.

• The provisions of a CBA should be read in harmony with wage orders, and the benefits of the wage orders should only be given to those employees covered by them.

• Collateral agreements outside of the CBA should be rejected when the CBA already covers the subject matter.

• A CBA is more than a contract and is a generalized code to govern the employment relationship.

• If the terms of a CBA are clear, the literal meaning of its stipulations shall prevail. However, if a CBA is ambiguous on a matter, extrinsic evidence can be used to determine the intention of the parties.

• The VA must examine practices, negotiating and contractual history, and evidence of past practices to determine the scope of the agreement.

• Habit, custom, usage, or patterns of conduct must be proven like any other facts, and the examples offered must be numerous and sufficiently regular to establish a habit or pattern of conduct.

• Granting a wage increase under a wage order or CBA does not automatically create a company practice that is demandable as a matter of right.

• To ripen into a company practice, the giving of the increase should be by reason of an act of liberality on the part of the employer.

• An increase granted under a wage order or CBA due to a strict legal or contractual obligation does not ripen into a company practice.

• Company practices that are demandable as a matter of right are those that are voluntarily and consistently given by the employer without any legal or contractual obligation.