G.R. No. 102636 - Metropolitan Bank and Trust Company Employees Union-ALU-TUCP vs. National Labor Relations Commission

Case Summary (G.R. No. 102636)

Petitioner

Metropolitan Bank & Trust Company Employees Union–ALU‑TUCP and Antonio V. Balinang, asserting that the bank’s partial implementation of RA 6727 caused a wage distortion that reduced an intentional CBA wage gap and seeking correction under RA 6727 and its implementing rules.

Respondent

National Labor Relations Commission (Second Division) which reviewed and reversed the Labor Arbiter’s decision; and Metropolitan Bank & Trust Company, which implemented the RA 6727 increase selectively and resisted CBA claims by the union.

Key Dates and Relevant Transactions

25 May 1989: Bank and MBTCEU entered into a CBA granting P900 monthly increase effective 1 January 1989, P600 effective 1 January 1990, and P200 effective 1 January 1991; the bank refused to extend the P900 increase to probationary employees.
1 July 1989: Effectivity of RA 6727 (statutory P25/day increase).
5 February 1991: Labor Arbiter Eduardo J. Carpio issued decision finding wage distortion and ordering correction.
31 May 1991: NLRC Second Division reversed the Labor Arbiter (2–1 decision).
10 September 1993: Supreme Court resolution granting certiorari, modifying remedy and setting aside NLRC decision (decision date falls after 1990; analysis based on the 1987 Constitution).

Applicable Law and Rules

Republic Act No. 6727 and its implementing rules, including Section 4 (a) and (d) provisions quoted in the record (mandatory P25/day increase; credit for employer increases within three months prior to the Act; requirement to correct wage distortions through voluntary settlement or compulsory arbitration; mandatory NLRC disposition within 20 calendar days for such disputes).
Definition under the Rules Implementing RA 6727: “Wage distortion” means a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment, thereby effectively obliterating distinctions based on skills, length of service, or other logical bases.
Relevant Labor Code provision referenced (Article 263(g) cited as procedural authority on Secretary of Labor’s jurisdiction), and Art. 124 (as amended by RA 6727) as indicated in the record.
Interpretation influenced by the constitutional and statutory policy favoring labor and encouraging voluntary employer wage increases beyond statutory minima.

Procedural Posture

The bank sought ministerial intervention to avert strike and referenced Secretary of Labor jurisdiction; parties agreed to compulsory arbitration before the NLRC. The Labor Arbiter found a wage distortion and ordered restoration of the P900 CBA gap by granting affected regular employees a P750 monthly increase effective 1 July 1989. The NLRC (majority) reversed and dismissed the complaint; Presiding Commissioner Edna Bonto‑Perez dissented, acknowledging a severe contraction but rejecting a straight across‑the‑board remedy and proposing a proportional formula for correction. The union petitioned the Supreme Court via certiorari alleging grave abuse of discretion by the NLRC in failing to acknowledge and correct the wage distortion.

Issue Presented

Whether the bank’s selective implementation of RA 6727 (granting the P25/day increase to probationary employees and certain promoted employees but not to regular employees who had received the earlier P900 CBA increase) produced a wage distortion that legally requires correction; and if so, what is the appropriate corrective measure consistent with RA 6727 and its implementing rules.

Labor Arbiter’s Reasoning and Disposition

The Labor Arbiter concluded a wage distortion existed because the statutory increase contracted an “intentional quantitative difference” set by the CBA (a P900 gap) down to an insubstantial gap (from P900 to about P150), thereby undermining an intentionally agreed differentiation between regular employees as of 1 January 1989 and those who were not. The arbiter held that protection must be accorded to the intentional quantitative distinctions embodied in the CBA and ordered restoration of the P900 gap by granting the affected regular employees a P750 monthly increase effective 1 July 1989.

NLRC Majority Reasoning and Disposition

The NLRC majority reversed, applying the definition of wage distortion to require an obliteration or severe contraction of intentional quantitative differences founded on logical bases such as skills or length of service. The majority found that, although some wage gaps decreased, the preserved gaps between multiple levels (e.g., Levels 6 and 7, 5 and 6) showed that intentional quantitative distinctions were maintained and that reductions in some gaps were not sufficiently significant to constitute obliteration or severe contraction. The majority further rejected the labor arbiter’s across‑the‑board P750 cure as unsupported by law.

NLRC Dissenting Opinion (Presiding Commissioner Bonto‑Perez)

The dissent agreed that a contraction did occur and characterized the contraction between the pertinent groupings as approximately eighty‑three percent—well within the statutory meaning of “severe contraction.” However, the dissent rejected the labor arbiter’s across‑the‑board remedy as inequitable and not the intent of RA 6727. The dissent endorsed a proportional correction methodology, referring to a formula used in Wage Order No. IV‑02 issued by the Regional Tripartite Wages and Productivity Commission for correcting pay structures in distortion cases: a proportional adjustment computed by reference to prescribed minimums, the actual salary, and the measured distortion (as expressed in the decision).

Supreme Court’s Standard of Review

The Court reaffirmed that determinations of whether a wage distortion exists are largely factual and within the statutory competence of labor tribunals; judicial review is limited to assessing the sufficiency of evidence supporting the NLRC’s findings and whether decisions are free from arbitrariness or unfairness. Where members of the same labor tribunal disagree, the Court is especially cautious in substituting its own factual conclusions.

Supreme Court’s Analysis and Reasoning

The Court applied the statutory definition of “wage distortion” and emphasized that the law requires correction when a statutory increase results in elimination or a “severe contraction” of intentional quantitative wage differences; total elimination is not a prerequisite—severe contraction suffices.
The Court accepted that the P900 differential under the CBA constituted an intentional quantitative difference arrived at through collective bargaining and deserving of protection unless compelling reasons indicate otherwise.
The Court recognized the policy consideration that employers who voluntarily grant increases above statutory minima should not be penalized by a mechanical imposition of additional statutory increases without crediting such voluntary grants; thus an across‑the‑board grant of P750 to reinstate the P900 gap risked undermining incentives for employers to grant above‑minimum increases.
Balancing these principles, the Court found the dissenting commissioner’s proportional formula to be the appropriate and equitable means of correcting the distortion while preserving the policy of encouraging voluntary employer wage enhancements and giving effect to both statutory minima and CBA

Case Syllabus (G.R. No. 102636)

Facts

On 25 May 1989, Metropolitan Bank & Trust Company (the bank) entered into a collective bargaining agreement (CBA) with Metropolitan Bank & Trust Company Employees Union-ALU-TUCP (MBTCEU).
The CBA granted a monthly P900 wage increase effective 01 January 1989, a P600 increase effective 01 January 1990, and a P200 increase effective 01 January 1991.
MBTCEU had bargained for the inclusion of probationary employees in the beneficiaries of the P900 increase, but the bank refused; thus only employees who were regular as of 01 January 1989 received the P900 increase.
On 01 July 1989, Republic Act No. 6727 took effect, mandating an increase of P25 per day (P750 per month) for certain private sector employees and containing provisions on crediting increases granted within three months before effectivity and on resolving distortions in wage structure.
Pursuant to RA 6727, the bank granted the P25/day increase (P750/month) to probationary employees and those promoted to regular status before 01 July 1989 whose daily rate was P100 and below.
The bank refused to extend the RA 6727 increase to regular employees who were receiving more than P100 per day and were recipients of the P900 CBA increase.
MBTCEU contended the bank’s partial implementation resulted in categorization of employees into two groups (probationary and certain low-paid promoted regulars; and regulars as of 01 January 1989 receiving above P100/day) and that the salary gap between these groups was substantially reduced, creating a wage distortion.
To avoid a strike, the bank petitioned the Secretary of Labor to assume jurisdiction or certify the dispute to the NLRC; the parties ultimately agreed to compulsory arbitration before the NLRC and the case was assigned to Labor Arbiter Eduardo J. Carpio.

Relevant Statutory Provisions (as quoted in the source)

RA 6727, Section 4(a): Upon effectivity, statutory minimum wage rates of all private-sector workers shall be increased by P25 per day; provided that those already receiving above minimum up to P100 shall also receive P25/day.
RA 6727, Section 4(d): If expressly provided for and agreed upon in CBAs, increases granted by employers within three months before effectivity may be credited as compliance; where such increases are less than prescribed increases, employer shall pay the difference. Such increases exclude anniversary, merit, or those from regularization or promotion. Where application of increases results in "distortions" in wage structure and gives rise to dispute, the dispute shall first be settled voluntarily and, if deadlocked, finally resolved through compulsory arbitration by the regional branches of the NLRC, which shall decide within 20 calendar days from formal submission. Pendency of dispute shall not delay applicability of the prescribed increase.
Definition of "Wage Distortion" (Rules Implementing RA 6727, as quoted): "Wage Distortion means a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills, length of service, or other logical bases of differentiation."

Procedural History

Labor Arbiter Eduardo J. Carpio conducted proceedings and issued decision on 05 February 1991.
The bank appealed to the NLRC (Second Division).
NLRC Second Division rendered its decision on 31 May 1991, reversing the Labor Arbiter by a vote of 2–1 and dismissing the complaint for lack of merit.
Presiding Commissioner Edna Bonto-Perez dissented in the NLRC.
MBTCEU filed a motion for reconsideration of the NLRC decision which was denied.
MBTCEU and its president then filed a petition for certiorari before the Supreme Court, alleging grave abuse of discretion by the NLRC in refusing to acknowledge wage distortion and in refusing an across-the-board P25/day increase for their members.
The Solicitor General manifested in favor of the petition, and the Supreme Court (Vitug, J.) issued the present resolution on 10 September 1993 (G.R. No. 102636).

Labor Arbiter Findings and Ruling

The labor arbiter held that it was unnecessary for a large number or a majority of employees to benefit from the statutory increase before a wage distortion could be found; even a small group could cause distortion if the increase resulted in severe contraction of an intentional quantitative difference in wage rates between employee groups.
He emphasized that the P900.00 wage gap intentionally provided in the CBA between those who were regular employees as of 01 January 1989 and those who were not was a logical basis of differentiation deserving protection from distorting statutory wage increases.
Finding the subjective quantitative difference reduced from P900.00 to about P150.00, the labor arbiter concluded that correction pursuant to Section 4(c) of the Rules Implementing RA 6727 should be made.
Disposition by the labor arbiter: directed the bank to restore to complainants and their members the P900 CBA wage gap b