JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners, vs. PHILIPPINE AIRLINES, INC., Respondent.

FACTS: An administrative charge was filed by PAL against its employees-herein petitioners after they were allegedly caught
in the act of sniffing shabu when a team of company security personnel and law enforcers raided the PAL Technical Centers
Toolroom Section. After due notice, PAL dismissed petitioners for transgressing the PAL Code of Discipline, prompting them
to file a complaint for illegal dismissal and damages which was resolved by the Labor Arbiter in their favor, thus ordering PAL
to immediately comply with the reinstatement aspect of the decision. Prior to the promulgation of the Labor Arbiters decision,
the SEC placed PAL which was suffering from severe financial losses. From the Labor Arbiters decision, PAL appealed to the
NLRC which reversed said decision of the Labor Arbiter and dismissed petitioners complaint for lack of merit. Petitioners
Motion for Reconsideration was denied and Entry of Judgment was issued. Subsequently, the Labor Arbiter issued a Writ of
Execution respecting the reinstatement aspect of his decision, and he issued a Notice of Garnishment. PAL thereupon moved to
quash the Writ and to lift the Notice while petitioners moved to release the garnished amount. In a related move, PAL filed an
Urgent Petition for Injunction with the NLRC which affirmed the validity of the Writ and the Notice issued by the Labor
Arbiter but suspended and referred the action to the Rehabilitation Receiver for appropriate action. PAL elevated the matter to
the appellate court which reversed the NLRCs decision. Hence, this petition.
ISSUES: (1) whether or not a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement
aspect of a labor arbiters decision? and (2) whether or not the impossibility to comply with the reinstatement order due to
corporate rehabilitation provides a reasonable justification for the failure to exercise the options under Article 223 of the Labor
Code?
HELD: Since petitioners claim against PAL is a money claim for their wages during the pendency of PALs appeal to the
NLRC, this should have been suspended pending the rehabilitation proceedings. It was then suspended while ongoing
rehabilitation. In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the remaining
issue for consideration. As to the first issue, the court held that a subsequent finding of a valid dismissal removes the basis for
implementing the reinstatement aspect of a labor arbiters decision. Based on jurisprudential trend applying par 3 of Article 223
of the Labor Code which provides that In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee shall
either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the
option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for
reinstatement provided herein. The view as maintained in a number of cases is that Even if the order of reinstatement of the
Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated
during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse
whatever salary he received for he is entitled to such, more so if he actually rendered services during the period. The provision
of Article 223 is clear that an award for reinstatement shall be immediately executory even pending appeal and the posting of a
bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an
award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of
execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object
and intent of Article 223. The reason is simple. As to the second issue, the Court held that the peculiar predicament of a
corporate rehabilitation rendered it impossible for respondent to exercise its option under the circumstances. The spirit of the
rule on reinstatement pending appeal animates the proceedings once the Labor Arbiter issues the decision containing an order of
reinstatement. Reinstatement pending appeal necessitates its immediate execution during the pendency of the appeal, if the law
is to serve its noble purpose. At the same time, any attempt on the part of the employer to evade or delay its execution, should
not be countenanced. After the labor arbiters decision is reversed by a higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on the
part of the employer. The new NLRC Rules of Procedure, now require the employer to submit a report of compliance within 10
calendar days from receipt of the Labor Arbiters decision, disobedience to which clearly denotes a refusal to reinstate. It is
apparent that there was inaction on the part of respondent to reinstate them, but whether such omission was justified depends on
the onset of the exigency of corporate rehabilitation. It is settled that upon appointment by the SEC of a rehabilitation receiver,
all actions for claims before any court, tribunal or board against the corporation shall ipso jure be suspended. Case law
recognizes that unless there is a restraining order, the implementation of the order of reinstatement is ministerial and mandatory.
This injunction or suspension of claims by legislative fiat partakes of the nature of a restraining order that constitutes a legal
justification for respondents non-compliance with the reinstatement order. Respondents failure to exercise the alternative
options of actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondents obligation to pay
the salaries pending appeal, as the normal effect of the non-exercise of the options, did not attach.

Capitol Medical Center vs. Meris

FACTS: Petitioner (Capitol) closed its Industrial Service Unit (ISU) alleging loss and extinct demand which resulted to
Respondent Dr. Meris' termination as their chief in said unit. Respondent filed a complaint for illegal dismissal. The Labor
Arbiter (LA) ruled in favor of petitioner that the dismissal was valid. NLRC set aside LA's findings and made a new
decision granting Dr. Meris' retirement pay. Undaunted by NLRC's decision, respondent elevate the case to the Court of
Appeals (CA) wherein it reversed NLRC's decision and held that there was illegal dismissal.
ISSUE: Whether or not (WON) Respondent doctor was illegally dismissed
RULING: Yes. The record shows that there was no loss nor extinct demand of the ISU. In fact, it even increases during
Dr. Meris' management. Since Petitioner Capitol failed to prove good faith in closing the ISU, it's tantamount to an illegal
dismissal.
Tirazona vs Philippine Eds Techno-Service
The petitioner’s dismissal is valid. As a general rule, any employee who has been dismissed for any of the just
causes enumerated under Art. 282 of the Labor Code is not entitled to separation pay. Only unjustly dismissed
employees are entitled to retirement benefits and other privileges including reinstatement and backwages. An
exception, is that separation pay or other financial assistance may be allowed to an employee dismissed for just
causes on the instance where the employee is validly dismissed for causes other than serious misconduct or
those reflecting to his moral character.

Prubankers Association vs Prudential Bank and Trust Company

Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy
without a corresponding raise for higher-tiered employees in the same region of the country, resulting in the
elimination or the severe diminution of the distinction between the two groups. Such distortion does not arise
when a wage order gives employees in one branch of a bank higher compensation than that given to their
counterparts in other regions occupying the same pay scale, who are not covered by said wage order. In short,
the implementation of wage orders in one region but not in others does not in itself necessarily result in wage
distortion.
Facts:
Regional Tripartite Wages and Productivity Board of Region V issued a wage order which provide a
Cost of Living Allowance (COLA) to workers in private sector who has rendered service for at least 3 months.
In which it adds P17.50 for the cities and P15.50 for the municipalities. Regional Tripartite Wages and
Productivity Board of Region VII subsequently issued also a wage order which increases the minimum wages
of all workers and employees by P10 for the cities and P5 for the municipalities.
The herein respondent comply with the order but later the herein petitioner claimed that the said wage
order created a wage distortion because it does not affect the wages outside the Region V and VII.
Issue:
Whether or not there is wage distortion.
Held: No.

Wage distortion involves four elements:

1. An existing hierarchy of positions with corresponding salary rates

2. A significant change in the salary rate of a lower pay class without a concomitant increase in the salary
rate of a higher one

3. The elimination of the distinction between the two levels

4. The existence of the distortion in the same region of the country

In this case, the court ruled that there is no wage distortion. The petitioners claim that the issuance of the
two wage orders created a discrepancy in the compensation of the employees of similar pay classification in
different region was dismissed by the court. The court held that a disparity in wages between employees holding
similar position but in different regions does not constitute wage distortion as provided in RA 6727 in which it
provides that “wages in every region must be set by the particular wage board of the region, based on the
prevailing situation therein. The same with Art. 124 of the Labor Code which fixed the minimum wage only by
Regional Board.

Bankard Employees Union-Workers Alliance vs NLRC, Bankard, Inc.

Facts:
Bankard, Inc. classifies its employees by levels, from 1 to 5. Its Board of Directors issued a “new salary
scale” which add P1000 to levels 1 and 5 and 900 to levels 2,3 and 4 for newly hired employees only but not to
regular employees in order to increase the hiring rates of new employees. The petitioners first asked for an
increase in their wages and salaries but the private respondent maintained that there was no obligation on their
part. The petitioner file a Notice of Strike on the Unfair Labor Practice (ULP) but it was declined. The
petitioner contends that the “new salary scale” creates a wage distortion specifically on the third element; the
elimination of the distinction between two level which the petitioner claims between old, regular employees and
newly hired employees.
Issue:
Whether or not there is wage distortion.
Held: No.
The court held that, in the first element there is no wage distortion because in fact the wages are
classified by levels and not by basis of their length of service.
It is true that seniority is a factor in determining the wages of the employees but for the purpose of the existence
of wage distortion, employees cannot create their own independent classification and use it as a basis. Also,
even if assuming there is a decreased in wage gap between the old, regular employee and newly hired
employees, that is not significant to be considered that there is actually wage distortion because the mere factual
existence of wage distortion does not, however, ipso facto result to an obligation to rectify it. It is the right of
the employer to increase its hiring rate, to establish minimum salaries, and adjust the rates of employees as
provided in Art. V sec. 2 of parties’ CBA.

Metrobank Employees Union vs NLRC, Metrobank

Facts:
The private respondent, Metrobank, entered into a collective bargaining agreement (CBA) with the
herein petitioner, MBTEU, granting a monthly P900 wage increase on January 1, 1989, then P600 wage
increase on Jan. 1, 1990, and P200 wage increase on Jan 1, 1991. Barely a month later, or on January 1, 1989,
RA 6727 took effect in which it fixed the new wage rates by adding P25 per day or 750 per month to all
workers and employees of private sectors.
The private respondent, gave increase to its probationary employees and newly promoted regular
employees that benefit of RA 6727 but the bank refused to gave the same increase to its regular employees who
are receiving more than P100 per day and recipients of the P900 increase. It resulted to categorization of
employees as mentioned above. The petitioner contends that there is wage distortion. The Labor Arbiter ruled in
favor of the petitioner but the NLRC reversed the decision. Thus, herein petition.
Issue:
Whether or not there is wage distortion.
Held: Yes.
The court ruled that there is in fact a wage distortion. The definition of wage distortion, show that
distortion can so exist when, as a result of an increase in the prescribed wage rate, an elimination or severe
contraction of intentional quantitative differences in wages or salary rates” would occur “between and among
employee groups in an establishment as to effectively obliterate the logical bases of differentiation.” The law
does not require that there be a total abrogation of quantitative wage or salary differences, a severe contraction
thereof is enough. Accordingly, there was a contraction between personal groupings of 83% which is
considered severe.

Ilaw at Buklod ng Manggagawa vs NLRC, San Miguel Corporation

Facts:
The herein petitioner, IBM, representing 4500 workers of the SMC demanded for correction of the
significant wage distortion in the workers’ wages pursuant to RA 6727, Wage Rationalization Act. The SMC
ignored the demand instead measly increase their wages by P7 per day, contrary to the proposal of P25 per day.
Later, the Union reduce its proposal to P15 per day but the SMC refused the said proposal. Due to the refusal of
the SMC, the Union also refused to render overtime services, as a strike, and caused substantial losses to the
Company. The SMC filed an action in the NLRC “to declare the strike as illegal” and to terminate the
employment of the union. The SMC argued that the Union’s way of compelling the company to demand for
correction of “wage distortion” is illegal.
Issue:
Whether or not strike is illegal as a mode resolving wage distortion.
Held: Yes.
The court ruled that it is true that workers shall have the right to engage in concerted activities for
mutual benefit and protection such as strike, but, under RA 6727, strikes is not provided as a solution in
resolving wage distortion. RA 6727 specifically provide a specific and detailed approach in resolving wage
distortion through collective bargaining.