APEX MINING COMPANY, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND SANDIGAN NG MANGGAGAWANG PILIPINO, REPRESENTED BY RANULFO PEDRERA, PRESIDENT, RESPONDENTS.

Respondent Sandigan ng Manggagawang Pilipino (“Sandigan“)
filed before the Labor Arbiter a claim for Emergency Cost of Living Allowance
(“ECOLA”) differential against petitioner Apex Mining Company, Inc.
(“Apex”) alleging that Apex had paid its employees in its Maco, Davao
del Norte operations, between 1 November 1984 until 28 March 1985, an aggregate
cumulative daily ECOLA of only P15.00 which was P2.00 below the cumulative
minimum ECOLA of P17.00 (for non-agricultural workers) established under Wage Order
No. 6; and that petitioner had belatedly granted the additional P2.00 starting
on 29 March 1985 only.

Apex denied having failed to comply with Wage Order No. 6,
contending that it had, by previous agreement, incorporated the alleged P2.00
deficiency into the basic salary of its employees. In turn, Sandigan denied that such an agreement had been
made, but conceded that a P2.00 increase in basic salary had been made by Apex,
in compliance with a provision of the Collective Bargaining Agreement
(“CBA”) then in force between Apex and Sandigan, and not in
fulfillment of Apex’s obligation under Wage Order No. 6. Sandigan pointed out that Wage Order
No. 6 had taken effect on 1 November 1984, several months after the P2.00 had
been integrated by Apex into the basic salary of its employees.

In a supplemental memorandum, Apex reiterated that the daily
salary increase of P2.00 provided for in the then current CBA, to take effect
on 1 February 1984, had been subsequently credited as partial compliance with
the P5.00 increment mandated by Wage Order No. 5 (which took effect on
16 June 1984). Thus, Apex, in
compliance with Wage Order No. 5, accordingly increased the daily ECOLA of its
workers by P3.00 only (from P9.00 to P12.00), or P2.00 less than the legislated
ECOLA increase of P5.00 (which would have increased the total daily ECOLA from
P9.00 to P14.00). Petitioner Apex added
that the integration of P2.00 allowance into the basic salary provided for in
the CBA had been conformed to by Vicente Arniego, National President of Sandigan,
and that in any event, Wage Order No. 5 had itself authorized such
integration. Since petitioner Apex had
integrated P2.00 (out of the P5.00) ECOLA provided for in Wage Order No. 5,
when Apex complied with the additional ECOLA increase mandated by Wage Order
No. 6, the resulting figure for the total or cumulative ECOLA paid by Apex
appeared to be only P15.00, until one took into account the P2.00 (out of the
P5.00 ECOLA increase mandated by Wage Order No. 5) integrated into the employees’
basic salary. Finally, petitioner Apex
explained, it had granted members of Sandigan an additional P2.00
effective 29 March 1985 not as an admission that it had previously failed to
pay something legally due, but only as a measure to diffuse the tense atmosphere
between management and the union created by the misunderstanding over the
ostensible (as distinguished from the real) total increase paid by petitioner
Apex to its employees.

In a decision dated 19 May 1987, the Labor Arbiter held that the
wage increase given in accordance with the CBA could not be credited as
compliance with increases mandated in the Wage Orders, and ordered petitioner
Apex to pay respondent Sandigan the claimed ECOLA differential of P2.00
for the period from 1 November 1984 until 28 March 1985.

On appeal, the National Labor Relations Commission
(“NLRC”) affirmed the Labor Arbiter’s ruling.

There is no dispute that petitioner Apex, as the Labor Arbiter
had found out, had paid a P2.00 wage increase effective on 1 February
1984. There is also no question that
Apex raised the ECOLA of its workers by P3.00 starting on the effectivity date
of Wage Order No. 6 on 1 November 1984. The question to be resolved is whether or not Apex complied with the
increases mandated by Wage Orders Nos. 5 and 6. Resolution of this issue in turn hinges on the question of
whether or not the P2.00 per day increase in basic salary effective starting on
1 February 1984 granted by petitioner Apex pursuant to the CBA, was lawfully
credited towards compliance with increases in ECOLA required under Wage Orders
Nos. 5 and 6.

1. The P2.00 increase
integrated in the basic salary of Apex’s employees, effective on and after 1
February 1984, was concededly given under the provisions of the CBA. Section 4 of Article VI of the CBA provided
as follows:

“It is understood that the grant of these general increases
shall be as part of any increase in basic pay and/or allowance that may
hereafter be decreed or imposed by law.”

Both Wage Order No. 5 and Wage Order No. 6 expressly allowed the
crediting of increases in wages or allowances granted under collective
bargaining agreements towards compliance with increases in ECOLA requirements
prescribed by those Wage Orders. Section 7 of Wage Order No. 5 provided as follows:

“All increases in wages and/or allowances granted by
employers between February 1, 1984 and the effectivity of this order [16
June 1984] shall be credited as compliance with the minimum wage
and allowance adjustments prescribed herein x x x. Such increases shall not include anniversary
wage increases provided in collective bargaining agreements unless the
agreements expressly provide otherwise.

x x x x x x x x x.”

(Underscoring and brackets supplied)

Section 4 of Wage Order No. 6 had very similar language:

“All increases in wages and/or allowances granted by
employers between June 17, 1984 and the effectivity of this order [November 1,
1984] shall be credited as compliance with the minimum wage and
allowance adjustments prescribed herein, provided that where the increases
are less than the applicable amount provided in this order, the employer shall
pay the difference. Such increases
shall not include anniversary wage increases provided in collective bargaining
agreements unless the agreements expressly provide otherwise.

This Section shall not apply to merit wage increases and those
resulting from the regularization or promotion of employees.”
(Underscoring and brackets supplied)

It is important to note that the creditability provisions in Wage
Orders Nos. 5 and 6 (as well as the parallel provisions in Wage Orders Nos. 2,
3 and 4) are grounded in an important public policy. That public policy may be seen to be the encouragement of
employers to grant wage and allowance increases to their employees higher than
the minimum rates of increases prescribed by statute or administrative
regulation. To obliterate the
creditability provisions in the Wage Orders through interpretation or
otherwise, and to compel employers simply to add on legislated increases in salaries
or allowances without regard to what is already being paid, would be to
penalize employers who grant their workers more than the statutorily prescribed
minimum rates of increases. Clearly,
this would be counter-productive so far as securing the interests of labor is
concerned. The creditability provisions
in the Wage Orders prevent the penalizing of employers who are industry leaders
and who do not wait for statutorily prescribed increases in salary or allowances
and pay their workers more than what the law or regulations require.

2. Sandigan, however, argues that to
consider the P2.00 increase in basic salary effective 1 February 1984 provided
by the CBA as compliance with the requirements of Wage Orders Nos. 5 and 6,
would be to violate Article 100 of the Labor Code as well as Section 6 of the
Rules Implementing Wage Order No. 6. These provisions read respectively:

“Art. 100. Prohibition
against elimination or diminution of benefits – Nothing in [Book Three –
Conditions of Employment] shall be construed to eliminate or in any way
diminish supplements, or other employee benefits being enjoyed at the
time of promulgation of this Code.” (Underscoring supplied)

“Section 6. Non-diminution
of benefits – The statutory minimum wage rates shall be exclusive of
whatever supplements and other benefits the workers are enjoying
without cost at the time of the effectivity of this Order.”
(Underscoring supplied)

Clearly, the prohibition against
elimination or diminution of benefits set out in Article 100 of the Labor Code
is specifically concerned with benefits already enjoyed at the time of the
promulgation of the Labor Code. Article
100 does not, in other words, purport to apply to situations arising after the
promulgation date of the Labor Code. Section 6 of the Rules Implementing Wage Order No. 6 relates to
“supplements and other benefits” which employees are already
“enjoying without cost at the time of the effectivity of [Wage]
Order [No. 6].” Such benefits which employees are already enjoying
“without cost” could not, under Section 6, suddenly be ascribed
monetary value so as to offset or diminish increases in the minimum wage rates
prescribed by statute. Clearly, once
more, Section 6 does not relate to the problem at hand.

3. Sandigan further contends that the 1
February 1984 P2.00 increase in basic salary was actually an “anniversary
wage increase,” and therefore not creditable under Section 7 of Wage Order
No. 5 and under Section 4 of Wage Order No. 6.

The P2.00 increase was given by petitioner Apex under Section 3,
Rule VI of the CBA which reads as follows:

“SECTION 3. The
COMPANY agrees to grant general wage increases to all employees within
bargaining unit as follows:

a) Two Pesos (P2.00) general
increase per day upon the effectivity of this Agreement (February 1, 1984);

b) One Peso and Fifty Centavos (P1.50) general
increase per day effective on the first anniversary date of this
Agreement (February 1, 1985);

c) One Peso and Fifty Centavos (P1.50) general
increase per day effective on the second anniversary date of this
Agreement (February 1, 1986).”^[1]
(Underscoring supplied)

It appears clear to the Court from an
inspection of the above-quoted Section 3 that the P2.00 increase effective on 1
February 1984 was distinguishable from the two (2) increases of P1.50 each, the
first being effective on the first anniversary date of the CBA (1 February
1985) and the second being effective on the second anniversary dated (1
February 1986). In other words, the two
(2) increases of P1.50 each, one being effective on 1 February 1985 and the
second effective on 1 February 1986 were precisely the non-creditable
“anniversary wage increases.” Even if it be assumed, however, that
the 1 February 1984 P2.00 increase were regarded (improperly) as an “anniversary
wage increase” still that P2.00 increase would be creditable towards the
statutorily mandated increases. For
Wage Orders Nos. 5 and 6 themselves allowed crediting of “anniversary wage
increases” stipulated in a CBA towards statutory increases, if the
CBA itself (as here) expressly allowed such crediting. Section 4, Article VI of the CBA, quoted
earlier, authorized the crediting of “general increases” towards
statutorily mandated increases in basic pay or allowance. At the same time, Section 3 of Article VI of
the CBA, quoted above, described the two (2) anniversary wage increases of
P1.50 each, and the one-time P2.00 increase, as each constituting a
“general increase.”

4. What petitioner Apex
did may perhaps be most economically presented in the following tabular
form:

ECOLA
Increases Statutorily Mandated

by
Wage Orders Nos. 4, 5, and 6

(For
non-agricultural workers outside

Metro Manila)

The respondent Sandigan did not question
the fact that petitioner Apex was in compliance with the requirements of Wage
Order No. 4.

In respect of Wage Order No. 5, Apex credited the P2.00 increase
in basic salary, effective 1 February 1984, towards compliance with the
statutorily prescribed ECOLA increase of P5.00. Thus, the apparent cumulated increase in ECOLA, as shown
in Apex’s books, was only P12.00. However, the actual increases — the composite of basic salary and
ECOLA — aggregated P14.00. Since
such crediting was expressly allowed under Wage Order No. 5, it follows that
petitioner Apex was in compliance with Wage Order No. 5. No differential was therefore due
thereunder.

When Wage Order No. 6 was promulgated, it prescribed an increase
of P3.00 in ECOLA. Apex paid this
mandatory increase and denominated all of it as ECOLA. Thus, the apparent cumulated increase was
P15.00. Since, however, Apex had
previously increased the basic salary by P2.00 effective 1 February 1984, the
aggregate actual increase (in basic salary plus ECOLA) was P17.00,
the same total or cumulated increase contemplated by Wage Orders Nos. 5 and
6. Thus, again, Apex was actually in
compliance with the requirements of Wage Order No. 6, with the result that no
differential was actually due from it.

It remains only to note that Section 7 of Wage Order No. 5 and
Section 4 of Wage Order No. 6 expressly authorized the crediting of all the
increases “in wages” or “allowances.” Thus, the fact that
Apex had denominated the P2.00 increase effective 1 February 1984, as an
increase in basic salary, rather than in ECOLA, made no legal
difference so far as concerns the creditability of such increase. Indeed, integration of the P2.00 into the
basic salary of the employees was more beneficial to them than granting the
P2.00 as part of their ECOLA: the
integration increased the base wage for purposes of computation of such items
as overtime and premium pay, fringe benefits and maternity pay. In fact, the Implementing Rules of Wage
Order No. 5, and Wage Order No. 6 itself,^[4] expressly authorized increases in
basic salary in lieu of increases in ECOLA, provided the amounts thereof were
not less than the amounts required by the Wage Orders.

5. Lastly, Sandigan invokes Filipino
Pipe Workers Union (NLU) v. Batario, Jr.,^[5]
where the Court, through its Third Division, made the broad statement that
statutory wage increases are to be considered separate from increases granted
through the medium of CBAs.

In Filipino Pipe
Workers, the NLRC
ordered the inclusion in its award in favor of the union of a wage increase of
P3.00 per day mandated by Wage Orders Nos. 2 and 3, which took effect after the
finality of the Labor Arbiter’s decision but pending its execution. In sustaining the award of the NLRC, the
Court, through former Chief Justice Fernan, said:

“In his Comment on the petition, the Solicitor General stated
that the said P3.00 a day increase was made pursuant to Wage Orders Nos. 2
and 3, which took effect after the finality of the Labor Arbiter’s decision but
pending its execution. A common
section found in both Wage Orders Nos. 2 and 3, as well as in the subsequent
Wage Orders Nos. 5 and 6 uniformly provides that all increases and/or
allowances granted by employers within a specified period ‘shall be credited as
compliance with the minimum wage and allowance adjustments prescribed herein,
provided that where the increases are less than the applicable amount provided
in this Order, the employer shall pay the difference. Such increases shall not include anniversary wage increases
provided in collective bargaining agreements unless the agreement expressly
provide otherwise.’ (Underscoring in the original)

We interpret the above section to mean that every grant of daily
increase in statutory minimum wage rates and living allowance must be
considered as independent, separate or apart from the wage increases in the
collective bargaining agreement and must be integrated into the salary
scale of the employees to the end that the desired rates decreed by the
National Wages Council are attained.”^[6]
(Underscoring supplied)

It is
apparent from the foregoing that the issue of creditability of an
increase in basic salary or allowance given pursuant to a CBA towards compliance with a statutorily prescribed increase
in emergency cost of living allowances (ECOLA) was not at all involved
and that the Court was not striking down the creditability provisions in
Wage Orders Nos. 2, 3, 5 and 6. All
that the NLRC was saying was that a wage increase which had come into effect
after the Labor Arbiter’s decision could be included in the award and execution
for the aggregate amounts due obtained. In fact, the above underscored paragraph was entirely obiter in
character.

Petitioner Apex having lawfully credited the P2.00 increase in
basic salary towards compliance of the increase in ECOLA prescribed by Wage Orders Nos. 5 and 6, it follows that
respondent Sandigan‘s claim to a differential in ECOLA lacks
basis in fact and in law.

ACCORDINGLY, the Court Resolved to GRANT the
Petition for Certiorari. The
Decision of the NLRC in Case No. 2915-MC-XI-86, dated 9 September 1988, and its
Resolution dated 28 October 1988, denying petitioner’s motion for
reconsideration, are hereby SET ASIDE and ANNULLED. No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., (Chairman), Bidin, Davide, Jr., and Romero, JJ., concur.

^[1]
Rollo, p. 107.

^[2]
As found by the Senior Labor Arbitration Analyst.

^[3]
Aggregate [ECOLA plus basic salary] actual increase.

^[4]
Chapter III, Section 4 (b), Rules Implementing Wage Order No. 5; Section 5,
Wage Order No. 6.

^[5]
163 SCRA 789 (1988).

^[6]
163 SCRA at 796-797.