Title
Cagayan Sugar Milling Co. vs. Secretary of Labor and Employment
Case
G.R. No. 128399
Decision Date
Jan 15, 1998
CARSUMCO contested DOLE's wage order enforcement, alleging non-compliance with procedural requirements. Supreme Court ruled in favor, invalidating Wage Order RO2-02-A due to lack of public consultation, upholding CARSUMCO's compliance with RO2-02.
wage order
public consultation
newspaper publication

Case Summary (G.R. No. 128399)

Parties, Venue, and Governing Law

The petition was filed against Secretary of Labor and Employment, Director Ricardo S. Martinez, Sr., and the CARSUMCO Employees Union. The principal statutory provision invoked was Art. 123 of the Labor Code, which prescribes the procedure for wage orders, including public hearings/consultations, giving notice to employees’ and employers’ groups, and the requirement that the wage order takes effect only after fifteen days from its complete publication in at least one newspaper of general circulation in the region.

Factual Background: Issuance of Wage Orders and Inspection Findings

Regional Wage Order No. RO2-02, issued on November 16, 1993, provided, among others, for an increase in the statutory minimum wage rates applicable to private sector workers and employees in Region II, stating that “1.2 P14.00 per day … Cagayan” would take effect under its terms. On September 12 and 13, 1994, labor inspectors from the DOLE Regional Office examined CARSUMCO’s books to assess compliance. The inspectors found that CARSUMCO violated the wage order because it allegedly did not implement an across-the-board increase in the salary of its employees.

The Regional Director’s Order and the Amending Wage Order

At the hearing at the DOLE Regional Office, CARSUMCO maintained that it complied with Wage Order RO2-02 because it paid the mandated increase in the minimum wage. Despite this defense, the Regional Director Ricardo S. Martinez, Sr., in an Order dated December 16, 1994, ruled that CARSUMCO violated RO2-02 by failing to implement an across-the-board increase. He ordered the company to pay the deficiency in the total amount of P555,133.41.

On January 6, 1995, the company appealed to Labor Secretary Leonardo A. Quisumbing. On the same date, the Regional Wage Board issued Wage Order No. RO2-02-A, which amended RO2-02 by stating that Section 1 of RO2-02 shall now provide for an across the board wage increase and further declared that the amendment was “curative in nature” and would retroact to the date of effectivity of Wage Order No. RO2-02.

Secretary of Labor’s Decision and Subsequent Execution

On October 8, 1996, the Secretary of Labor dismissed CARSUMCO’s appeal and affirmed the Regional Director’s order. The company’s motion for reconsideration was denied. Subsequently, on February 12, 1997, the CARSUMCO Employees Union moved for execution of the December 16, 1994 order. The Regional Director granted the motion and issued a writ of execution.

On March 4, 1997, CARSUMCO moved for reconsideration to set aside the writ. On March 5, the DOLE regional sheriff served a notice of garnishment of the company’s account with Far East Bank and Trust Company. On March 10, the sheriff seized CARSUMCO’s dump truck and scheduled a public sale on March 20, 1997. CARSUMCO then filed the present petition and prayed for a temporary restraining order (TRO).

Court’s TRO and Suspension of Enforcement

On April 3, 1997, the Court issued a TRO enjoining the respondents from enforcing the writ of execution. On July 16, upon CARSUMCO’s motion, the Court amended the TRO to also enjoin the respondents from enforcing the Secretary’s Decision of October 8, 1996 and from conducting further proceedings until further orders from the Court.

Issues Raised by Petitioner

CARSUMCO argued that (i) Wage Order RO2-02 was null and void for having been issued in violation of the procedure provided by law and in violation of the company’s right to due process; (ii) RO2-02 “clearly provided for” fixing of a statutory minimum wage rate and not an across-the-board wage increase; and (iii) the Secretary of Labor’s decision was null and void for lack of legal basis.

The Court’s Ruling on the Validity of Wage Order RO2-02-A

The Court found that the petition had merit. It noted that RO2-02 originally provided for an increase in statutory minimum wage rates for Region II. More than a year later, on January 6, 1995, the Regional Board issued RO2-02-A amending RO2-02 and providing instead for an across-the-board wage increase of employees in Region II, and making it retroactive to the effectivity of RO2-02.

The Court held that CARSUMCO’s challenge to RO2-02-A was anchored on the absence of the required public consultation and newspaper publication. It cited Art. 123 of the Labor Code, which required the Regional Board to investigate and study pertinent facts, to conduct public hearings/consultations and give notices to employees’ and employers’ groups and other interested parties, and to provide that any wage order takes effect only after fifteen days from its complete publication in at least one newspaper of general circulation in the region.

The Court ruled that the record showed no prior public consultation or hearings and no newspaper publication with respect to RO2-02-A. It further observed that the allegations were not denied by public respondents. Public respondents claimed that compliance was unnecessary because RO2-02-A merely clarified an ambiguous provision in RO2-02. The Court rejected this position. It found that RO2-02 contained no ambiguity because it provided in clear and categorical terms for an increase in statutory minimum wage for the region. The Court reasoned that the later enactment of RO2-02-A therefore did not clarify the earlier order; it actually amended it and changed the essence of the original wage order.

The Court held that in passing RO2-02-A without the legally mandated process of consultation, hearings, and publication, the Regional Board deprived employers of due process because they were not given the opportunity to ventilate their positions regarding the proposed wage increase. It emphasized that in wage-fixing, factors such as fair return of capital invested, the need to induce industries to invest in the countryside, and the capacity of employers to pay are among those considered. It underscored that these considerations explain the establishment of Regional Tripartite Boards so that all sides are heard. Applying Art. 123, it treated public consultation, hearings, and newspaper publication as fundamental fairness requirements.

The Court then concluded that it was indisputable that RO2-02-A had not been subjected to public consultation or hearing. It also found non-publication in a newspaper of general circulation, noting that this was attested in the February 3, 1995 minutes of the Regional Wage Board, which stated that the lack of publication was arrived at by consensus of the board members. On that basis, the Court ruled that RO2-02-A must be struck down for violation of Art. 123 of the Labor Code.

Effect on CARSUMCO’s Liability Under the Original Wage Order

Because the Court invalidated RO2-02-A, it addressed whether CARSUMCO could nonetheless be held liable under RO2-02. The Court rejected the stance of public respondents that, despite RO2-02’s wording, its “real intention” had been to require an across-the-board increase and that CARSUMCO therefore remained liable for failing to implement such increase.

The Court held that CARSUMCO clearly complied with RO2-02 as written, since RO2-02 provided for an increase in statutory minimum wage rates for employees in Region II. It held that it would be unjust to expect CARSUMCO to interpret RO2-02 as authorizing a

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