G.R. No. 118463 - Philippine Airlines, Inc. vs. National Labor Relations Commission

Case Summary (G.R. No. 118463)

Factual Background

The dispute arose from a series of collective bargaining agreements and government-mandated increases in minimum wages between 1979 and 1985. On February 23, 1979, PHILIPPINE AIRLINES, INC. and PALEA agreed to extend their then-current collective bargaining agreement (CBA) until September 30, 1980, and PAL agreed to conduct a Job Evaluation Program to provide the basis for a new payscale retroactive to November 1, 1978. PAL prepared and implemented a revised payscale acceptable to PALEA. Between 1979 and 1981, Presidential Decrees and Wage Orders increased minimum wages and mandatory emergency living allowances. PAL and PALEA negotiated and signed a new CBA on May 18, 1981, with across-the-board increases effective October 1, 1980 and a commitment to revise the payscale effective October 1, 1982 after consultation with the union.

Developments Leading to the Complaint

PAL attempted to implement a revised payscale in October 1982, and exchanged correspondence with PALEA concerning consultation and slotting of employees. Subsequent Wage Orders Nos. 2 and 3 in 1983 and further Wage Orders Nos. 4 to 6 in 1984 increased statutory minimums and integrated emergency allowances. PALEA maintained that the revised payscale should preserve a P135 difference between the new payscale minimum and the statutory minimum, and that PAL’s implementation produced wage distortions. PALEA served a counter-payscale and requested convening of the negotiating panel.

Filing of the Complaint and Abeyance

PALEA filed a complaint with the NLRC dated December 29, 1983, docketed as NLRC Case No. 12-5704-83, alleging that PAL committed an unfair labor practice by implementing the payscale without consulting the union and by failing to cure wage distortions mandated by Wage Orders. The parties agreed to hold the case in abeyance during negotiations for a new CBA covering 1983 to 1986.

New CBA and Resumption of Proceedings

On September 14, 1984, PAL and PALEA executed a new CBA covering October 1, 1983 to September 30, 1986, which granted across-the-board increases and seniority pay intended to preserve wage differentials. The ULP case was resumed on April 15, 1985, with PALEA adding claims that PAL violated additional Wage Orders, failed to provide information on the new payscale, and compounded wage distortions.

Labor Arbiter Proceedings and Findings

Labor Arbiter Teodorico Ruiz heard the matter and on April 28, 1986 issued an order. The Arbiter rejected PAL’s contention that the 1983–1986 CBA cured wage distortions. He found that the pay increases were retroactive only to October 1, 1983, and that such adjustments did not correct distortions that should have been made effective October 1, 1982 pursuant to the parties’ earlier commitment. The Arbiter declared that a wage distortion existed. He directed the parties to sit within five days to discuss and update the payscale to cure distortions and to apply the corrected scale effective October 1, 1982. He further ordered the Office of the Socio-Economic Analyst to compute the wage distortion and amounts due, and awarded attorneys’ fees equivalent to ten percent of the amount involved.

NLRC Ruling on Appeal

The National Labor Relations Commission, sitting en banc, affirmed the Labor Arbiter’s findings by a resolution promulgated on November 2, 1988, but revised the dispositive portion to clarify sequencing. The NLRC directed: first, that the parties sit within five days to discuss and update the payscale to cure distortions attributable to the cited Presidential Decrees and Wage Orders and to apply the corrections effective October 1, 1982; second, that thereafter the Office of the Socio-Economic Analyst proceed to compute the wage distortion and amounts due; and third, that respondents pay ten percent attorneys’ fees of the amount involved.

Motion for Reconsideration, Legislative Amendment, and Subsequent Proceedings

PAL filed a motion for reconsideration dated November 21, 1988. While that motion was pending, Republic Act No. 6715 was published on March 6, 1989 and took effect on March 21, 1989. R.A. 6715 amended the Labor Code to except from Labor Arbiter competence cases arising from the interpretation or implementation of collective bargaining agreements and company personnel policies, and vested original and exclusive jurisdiction over such unresolved grievances in voluntary arbitrators or panels thereof under Art. 261. The NLRC denied PAL’s motion for reconsideration on September 30, 1994.

Petition for Certiorari and Questions Presented

PAL filed a petition for certiorari in the Supreme Court dated January 16, 1995 seeking annulment of the NLRC resolution of November 2, 1988 and the NLRC order of September 30, 1994 denying reconsideration, and seeking dismissal of PALEA’s complaint. PAL argued that the Labor Arbiter and NLRC exceeded jurisdiction by taking cognizance of an action properly seeking correction of wage distortions, that the statutory remedy for wage distortion in unionized establishments was negotiation under the wage orders with recourse to grievance machinery or voluntary arbitration, and that, alternatively, the findings of wage distortion were unsupported. PALEA countered that the complaint charged an unfair labor practice arising from failure to bargain collectively and thus fell within the original jurisdiction of Labor Arbiters under Art. 217. PALEA further argued that PAL was estopped from challenging jurisdiction. The Solicitor General supported the NLRC and recommended implementation of the NLRC directive while the Commission submitted its report if requested.

Legal Issues and Applicable Law

The Court identified two principal legal issues: first, whether the Labor Arbiter and the NLRC had jurisdiction to entertain and decide the complaint in view of the procedural scheme established by the wage orders and by R.A. 6715; and second, whether the Labor Arbiter and the NLRC gravely abused their discretion in declaring the existence of wage distortions. The Court examined the implementing rules of the wage orders, notably provisions directing that where application of new minimum wage rates resulted in distortions, the employer and union shall negotiate to correct them and that disputes shall be resolved through grievance machinery or voluntary arbitration. The Court also considered the amendment by R.A. 6715 which removed from Labor Arbiter competence disputes arising from interpretation or implementation of CBAs except gross violations, and vested exclusive jurisdiction in voluntary arbitrators under Art. 261.

Court's Analysis on Jurisdiction and Estoppel

The Court acknowledged that at the time the proceedings began and at the time the Labor Arbiter decided the case, the law had not been amended by R.A. 6715. The Court therefore held that PAL could not be estopped from raising the jurisdictional issue because R.A. 6715 became effective on March 21, 1989 only after PAL’s motion for reconsideration of November 21, 1988 was filed and while it awaited resolution. The Court recognized that R.A. 6715 reclassified most violations of CBAs as grievances to be resolved by grievance machinery or voluntary arbitration, with an exception for gross violations. The Court nevertheless declined to dismiss the case for want of jurisdiction on purely procedural grounds.

Court'

Case Syllabus (G.R. No. 118463)

Parties and Procedural Posture

PHILIPPINE AIRLINES, INC. was the petitioner and NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA) were the respondents.
PALEA filed a complaint with the NLRC dated December 29, 1983, docketed as NLRC Case No. 12-5704-83.
Labor Arbiter Teodorico Ruiz rendered an order on April 28, 1986 declaring wage distortion and directing parties to confer and the NLRC Socio Economic Analyst to compute amounts due.
The NLRC affirmed the Labor Arbiters order in an En Banc resolution promulgated on November 2, 1988 but revised the dispositive to sequence the parties' conference and the Socio Economic Analysts computation.
PHILIPPINE AIRLINES, INC. filed a motion for reconsideration on November 21, 1988 which the NLRC denied on September 30, 1994.
PHILIPPINE AIRLINES, INC. filed a petition for certiorari with the Supreme Court on January 16, 1995, which the Court dismissed and affirmed the NLRC resolution.

Key Facts

The parties executed a written extension of their CBA on February 23, 1979, and agreed to a Job Evaluation Program to serve as basis for a new payscale retroactive to November 1, 1978.
Several statutory minimum wage increases followed, including PD 1614, PD 1713, PD 1751, and Wage Orders Nos. 1 to 6, which altered minimum wages and emergency living allowances between 1979 and 1985.
Negotiations on May 14, 1981 produced a minutes provision that set out across-the-board increases and a revision of the payscale effective October 1, 1982, subject to consultation with the union.
PAL implemented revised payscales without obtaining the union’s full concurrence and delayed consultation, prompting PALEA to submit a Counter-Payscale on August 29, 1983 and to request convening of the negotiating panel.
PALEA alleged unfair labor practice and violations of Wage Orders in its 1983 complaint and supplemented the complaint in 1985 to include additional Wage Orders and failures to furnish payscale information.
The parties executed a new CBA on September 14, 1984 that granted across-the-board increases and seniority pay and contained a mutual waiver clause addressing subjects covered by the agreement.
The Labor Arbiter found that the 1983–1986 CBA did not cure wage distortions claimed to have arisen from the statutory wage increases and directed remedial action and computation of amounts due.

Statutory Framework

The wage adjustments and obligations arose in the context of Presidential Decrees 1614, 1713, 1751, and Wage Orders Nos. 1 to 6 as referenced in the pleadings and decisions.
Rules implementing the wage orders incorporate remedies for wage distortion, notably Section 5, Chapter IV of the Rules Implementing Wage Order No. 2 requiring negotiation between employer and union and resolution through the grievance machinery or voluntary arbitration.
Article 217 of the Labor Code originally conferred on Labor Arbiters original and exclusive jurisdiction over unfair labor practice cases and certain money claims.
Republic Act No. 6715 took effect on March 21, 1989 and amended jurisdictional rules by excluding from the Arbiters competence cases arising from the interpretation or implementation of collective bargaining agreements, thereby vesting such matters with voluntary arbitrators as reflected in Article 261.
The exclusion under Article 261 leaves only gross violations of a CBA as potentially treated as unfair labor practice.

Issues Presented

Whether the Labor Arbiter and the NLRC had jurisdiction to adjudicate PALEAs complaint alleging wage distortion and unfair labor practice.
Whether the Labor Arbiter and the NLRC gravely abused their discretion in fi