G.R. No. 111399 - Pecho vs. People

Wage Order No. NCR-03 was approved on November 29, 1993, mandating, among other provisions, a wage increase for all private sector workers earning P154.00 and below daily.
The Order provided for phased wage increases, with a seventeen-peso increase set to take effect fifteen days after publication and an additional ten-peso increase scheduled for April 1, 1994.

On February 14, 1994, Joy Brothers, Inc. (the petitioner) applied for exemption from Wage Order No. NCR-03.
The petitioner asserted that it qualified as a distressed establishment under the exemption provisions because, if evaluated on a full-year basis for 1993 (i.e., up to December 31, 1993), it incurred significant losses that impaired its paid-up capital by at least 25% (reportedly a net loss of P5,260,273.00 against a paid-up capital of P15,142,531.00).

The Regional Tripartite Wages and Productivity Board conducted an evaluation of the petitioner's financial records.
Based upon the assessment, covering a period ending September 30, 1993, the Board found that the petitioner registered accumulated profits amounting to P38,381.80.
Consequently, on June 7, 1994, the Board denied the request for exemption.
A subsequent motion for reconsideration filed by the petitioner was likewise denied on January 5, 1995.

The petitioner appealed the regional decision to the National Wages and Productivity Commission (NWPC).
On August 29, 1995, the NWPC affirmed the earlier orders by relying on the financial statements that covered only the period up to September 30, 1993, which depicted a profit rather than a loss.
The NWPC reiterated that the pertinent "interim period" for the exemption was the period immediately preceding the effectivity of the Wage Order, that is, the three quarters ending September 30, 1993.

The petitioner argued that the interim period should extend either up to December 15, 1993—given that the wage order took effect on December 16, 1993—or even to December 31, 1993.
The respondent maintained that the applicable interim period for evaluation was strictly until September 30, 1993, as mandated by the guidelines and supporting documents required under the Order.

Section 5 of Wage Order No. NCR-03 and the NWPC Revised Guidelines on Exemption set forth the criteria for a distressed establishment, requiring that accumulated losses of the last two full accounting periods and any interim period immediately preceding the order have impaired the establishment’s paid-up capital (or total invested capital) by at least 25%.
The guidelines expressly require the submission of audited financial statements (for the last two full accounting periods) and interim quarterly financial statements for the period immediately preceding the effectivity of the Order (i.e., the third quarter ending on September 30, 1993).
The petitioner’s reliance on unaudited financial figures for the entire 1993 does not comply with these established document requirements.

Whether Joy Brothers, Inc. qualifies for exemption from Wage Order No. NCR-03 based on its financial condition when evaluated under the criteria established for distressed establishments.
Whether the petitioner's financial evidence, if considering the full year of 1993, would have met the 25% impairment threshold to render it a distressed establishment.

Whether the "interim period" for purposes of assessing financial impairment should extend up to September 30, 1993, December 15, 1993, or December 31, 1993.
Whether the NWPC committed grave abuse of discretion by using financial figures based solely on the period ending September 30, 1993, despite the petitioner's arguments for a later cut-off date.

Whether the petitioner’s submission of financial statements, including the period considered, complied with the requirements set forth in the NWPC Guidelines on Exemption.
Whether the deviation from the mandated interim period (i.e., presenting unaudited figures for the entire year) undermined the petitioner's claim for exemption.