G.R. No. 181972 - Philippine Hoteliers, Inc., Dusit Hotel Nikko-Manila vs. NUWHRAIN-Dusit Hotel Nikko Chapter

WO No. NCR-09 was approved by the Regional Tripartite Wages and Productivity Board (RTWPB) of the National Capital Region (NCR) and took effect on 5 November 2001.
The Wage Order provided for an Emergency Cost of Living Allowance (ECOLA) of P30.00 per day to private sector workers earning daily wages between P250.00 and P290.00, payable in two tranches:

On 20 March 2002, respondent NUWHRAIN-Dusit Hotel Nikko Chapter, through its president Reynaldo C. Rasing, reported to the Department of Labor and Employment-NCR (DOLE-NCR) that Dusit Hotel was not complying with the provisions of WO No. NCR-09, despite an ongoing compulsory arbitration at the NLRC regarding a bargaining deadlock.
Following the complaint, Labor Standards Officer Estrellita Natividad was dispatched by DOLE-NCR, resulting in:

A first inspection on 24 April 2002 and subsequent report on 2 May 2002 which noted that employees received wages above P290.00 and mentioned ongoing negotiations.
A second inspection on 29 May 2002 where the absence of proper payroll records was noted, and it was found that 144 employees were allegedly affected by the non-implementation of the proper ECOLA payment.

In the wake of the inspection findings, DOLE-NCR issued a Notice of Inspection Result directing Dusit Hotel to settle the discrepancies within five days, warning of a potential penalty of double indemnity under Republic Act No. 6727 (as amended by RA No. 8188).
Meanwhile, on 9 October 2002, the NLRC rendered a Decision in a separate compulsory arbitration case involving a bargaining deadlock, ordering retroactive salary increases for Dusit Hotel’s employees effective:

These retroactive increases would affect the daily wage computation, thereby influencing which employees fell within the salary bracket prescribed by WO No. NCR-09.

Dusit Hotel filed a Motion for Reconsideration contending that the NLRC retroactive salary increases rendered the ECOLA order moot since employees were already receiving higher wages.
DOLE-NCR initially set aside its Order on 27 December 2002 (based on the NLRC Decision) but later reversed this stance on 16 December 2004, reinstating the payment order.
The Union, disagreeing with the DOLE Secretary’s reversal and interpretation, filed its own Motion for Reconsideration, which was subsequently denied in an Order on 13 October 2005.

The Union appealed the DOLE Secretary’s Orders and, on 10 September 2007, the Court of Appeals ruled in its favor, highlighting:

The retroactive salary increases should indeed be taken into account in determining the eligibility for ECOLA.
Payment of employees’ share in service charges did not constitute compliance with the ECOLA requirement.
That Dusit Hotel was liable for the ECOLA payment and, initially, for double indemnity due to non-compliance with WO No. NCR-09.

In the factual dispute, a critical matter was whether to use the employees’ salary rates inclusive of the retroactive increases in determining their eligibility, which would reduce the number of employees within the P250.00–P290.00 bracket from 144 to 82.

Subsequent filings, including further motions for reconsideration by both sides, culminated in the Court of Appeals modifying the previous Orders:

Only 82 employees were determined to be eligible for ECOLA (P15.00 per day from 5 November 2001 to 31 December 2001).
The penalty of double indemnity was deleted.

The matter eventually reached the Supreme Court on a petition for review, centering on whether the retroactive salary increases should affect the computation of ECOLA and the appropriateness of the double indemnity penalty.

Whether the retroactive salary increases ordered by the NLRC (effective 1 January 2001 and 1 January 2002) should be taken into account when determining the entitlement of Dusit Hotel’s employees to the ECOLA provided under WO No. NCR-09.
Whether the receipt of service charges by the employees amounts to a substitute or substantial compliance with the ECOLA mandate under the Wage Order.
Whether the imposition of the penalty of double indemnity was proper given that the DOLE Notice of Inspection did not clearly warn Dusit Hotel that failure to correct the violation within five days would result in such penalty.