ITC vs NLRC

8/12/2019 ITC vs NLRC

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INDUSTRIAL TIMBER CORPORATION and LORENZO TANGSOC,petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,CONCORDIA DOS PUEBLOS and LOLITA SANCHEZ,respondents.

Puruganan, Chato, Chato & Tan for petitioners.

Estanislao G. Ebarle, Jr. for private respondents.

GANCAYCO,J.:

The issue presented in this petition is whether or not the NationalLabor Relations Commission committed a grave abuse of discretionin ruling that private respondents were employees of petitioners andas such were illegally dismissed.

The background facts of the case as narrated in public respondent'sdecision are not in dispute. Thus, sucinctly stated, the pertinent factsof this case are as follows:

A written contract was entered into by and between petitionerIndustrial Timber Corporation (ITC) and Engineer Azarias D. Dosdos

who represented ADD Technical and Labor Service Consultancy.1

Insaid agreement, ADD Technical and Labor Service Consultancy, whichwas engaged in technical as well as labor services, assented to run andman the plywood plant of petitioner ITC in Agusan Pequeno, Butuan Cityfor a period of one year, from July 31, 1985.

Sometime in August, 1985, private respondent Concordia DosPueblos and Lolita Sanchez were employed as Accounting/ PayrollClerk and SSS/Medicare Clerk-Cashier, respectively, by petitioner.2

On April 20, 1986, the workers and employees of ITC staged a strike.The strike was amicably settled on April 26, 1986 by virtue of aMemorandum of Agreement entered into between Lorenzo Tangsoc,as owner and operator of petitioner ITC and of both Stanply Plant andthe Butuan Logs, Inc. Plant, and the striking workers/employees ofStanply and Butuan Logs, Inc., wherein the private respondents wereamong those employed by Stanply. The pertinent provision of the


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Memorandum of Agreement reads in part:

To resolve the issues of the strike the parties have agreed as follows:

1. All employees in Butuan Logs and Stanply shall be absorbed and

considered as employees of the administration. No contractual workshall be allowed or instituted in all aspects of production.

2. The Industrial Timber Corporation reserves the right to hire itsemployees in STANPLY and BUTUAN LOGS. However, in the matterof hiring, top priority and preference shall be given to the strikingemployees whose names appear in the list appended hereto.

Management shall not engage or hire the services of other

employees unless the aforementioned list has been exhausted.Security of tenure shall be respected.

xxx xxx xxx

4. All workers hired by management shall undertake a probationaryperiod of two months from their hiring. Thereafter, all said workersshall be considered and treated as regular employees. 3

Pursuant to the aforementioned Memorandum of Agreement,

petitioners admitted almost all of the striking workers, back to work,except private respondents. Hence, private respondents were forcedto plead for their reinstatement. However, the same proved futileeven after the lapse of seven (7) months of waiting and incessantfollow-ups.

On November 10, 1986, private respondents filed with the ArbitrationBranch of the National Labor Relations Commission (NLRC) acomplaint for illegal dismiss and reinstatement with backwagesagainst petitioner ITC. The case was heard on compulsory arbitration

by Hearing Officer-Designate Atty. Nolasco D. Discipulo of theAgusan del Norte/Sur Provincial Office of the Ministry of Labor andEmployment, Butuan City. Discipulo's report eventually became thebasis of the decision rendered by Labor Arbiter Amado M. Solamo.

Records show that the case was scheduled for conciliationconference/investigation on November 17, 1986. The parties agreed


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to reset the same for possible amicable settlement on November 24,1986. Petitioners, however, failed to appear at the scheduledconference. Due to said non-appearance by petitioners, privaterespondents amended their complaint to include a prayer for

damages.

The hearing officer issued an order instructing private respondents tosubmit a position paper within ten (10) days from receipt of saidorder. Likewise, petitioners were ordered to submit their positionpaper within ten (10) days from receipt of the position paper of privaterespondents.

On December 11, 1986, private respondents filed their position paperby registered mail. The same was received by the office of the

hearing officer on December 15, 1986. Petitioners, however, failed tofile their position paper despite their receipt of the position paper ofprivate respondents. Thus, the hearing officer made the followingobservations: 4

Due to the preceding events, private respondents filed on January 8,1987 a motion and manifestation stating among other things thatsince the receipt by petitioner of the copy of private respondentsposition paper up to the date of said motion, a period of twenty- six(26) regular days, or thirteen (13) working days had elapsed thus

necessitating the promulgation of a decision favoring privaterespondents. 5

Acting on the manifestation of private respondents, the hearing officerreported that reinstatement with full backwages, as claimed, was butthe natural consequence of the act of illegal dismissal committed bypetitioners, to be reckoned from April 30, 1986 until actualreinstatement of private respondents. It was also reported that sincethe claims for damages were presumably based on legal and factual

foundations, the said claims should likewise be given due course.

6

Labor Arbiter Amado M. Solamo found the report of Hearing Officer-Designate Atty. Nolasco D. Discipulo to be in order and supported bysubstantial evidence. Thus, the same was adopted in the decision ofthe labor arbiter except for the award of damages which wasmodified, Accordingly, it was ordered that: private respondents be


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reinstated to their former positions without loss of seniority rights andprivileges and that private respondents were to be paid theirbackwages, ECOLA, 13th month pay, holiday pay, vacation and sickleave pay in the amounts of TWENTY-FOUR THOUSAND THREE

HUNDRED PESOS (P24,300.00) each, as well as TEN THOUSANDPESOS (P10,000.00) each as moral and exemplary damages, andten percent of the total awards as attorney's fees.

Petitioners elevated the decision of the labor arbiter to the NLRC. In aresolution promulgated on January 22, 1988, the NLRC sustained thedecision of the labor arbiter on the ground that there was no reasonto alter or modify, much less reverse the said decision. SaidCommission found petitioner company guilty of illegal dismissal sinceit violated Sections 1 and 2 of the Memorandum of Agreement.

Hence, the present petition. On June 27, 1988, this Court issued atemporary restraining order enjoining the execution of the resolutionof the NLRC upon a bond in the amount of P30,000.00 to be filed bypetitioner.

In the resolution of this case, this Court must determine whether ornot private respondents were employees of the petitioners. This mainissue has been approached by the parties from almost diametricalpoints, thereby bringing into focus the sub-issue of whether or not a

previous quitclaim agreed upon between the parties is valid.

We will now discuss seriatimthe questions just adverted to.

It is the petitioners contention that private respondents had noemployment relationship since the latter were hired and paid by ADDTechnical and Labor Service Consultancy, and thus, the right todismiss them belonged to the said employer, but not to thepetitioners. If ever petitioners terminated private respondents'employment, such termination was done according to law.

In maintaining their position, petitioners posit the theory that theMemorandum of Agreement entered into by petitioners and thestriking workers on April 26, 1986 shows that petitioners neveragreed to absorb and consider the private respondents as theiremployees. Petitioners averred that it was the clear intent of thestriking employees and petitioners to treat the employees in Butuan


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Logs and Stanply differently from that of the contract workersprovided by Engineer Dosdos in that the employees in Butuan Logsand Stanply were to be absorbed and considered as employees ofpetitioners while private respondents as contract workers, were still to

be hired giving them top priority and preference since their namesappeared in the list appended to the agreement.

On the other hand, it is private respondents' trenchant claim that theyare employees of petitioner ITC and that the present issue involvesquestions of fact which have been ruled upon by Arbiter Solamo andthe NLRC. The NLRC ruled that private respondents were employeesof ITC and that the former's findings are supported by substantialevidence. Private respondents also submit that the findings of factmade by Arbiter Solamo must be appreciated with greater weight

since he had the opportunity to observe the demeanor of thewitnesses.

A judicious review of the records of this case convinces this Courtthat there is no merit in the arguments of petitioners. No cogentreason exists why the findings of fact made by the labor arbiter to theeffect that an employer-employee relationship existed between theparties should be reversed. The findings of fact of quasi-judicialbodies are generally binding on the courts. 7The question of whether ornot an employer-employee relationship existed between the parties is a

question of fact. 8

However, this Court has never hesitated to exercise its correctivepowers and to reverse administrative decisions in the following cases:(1) the conclusion is a finding grounded on speculations, surmisesand conjectures; (2) the inferences made are manifestly mistaken,absurd, or impossible; (3) there is a grave abuse of discretion; (4)there is a misapprehension of facts; (5) the court in arriving at itsfindings went beyond the issues of the case and the same are

contrary to the admissions of the parties or the evidence presented;(6) where respondent commission has sustained irregular proceduresand through the invocation of summary methods, including rules onappeal, has affirmed an order which tolerates a violation of dueprocess and (7) where the rights of a party were prejudiced becausethe administrative findings, conclusions or decision were in violationof constitutional provisions, in excess of statutory authority, or


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jurisdiction, made upon irregular procedure, vitiated by fraud,imposition or mistake, not supported by substantial evidence adducedat the hearing or contained in the records or disclosed to the parties,or arbitrary, or capricious. 9

None of the abovementioned grounds are present which wouldwarrant a reversal of the findings made by respondent Commissionthat an employer-employee relationship existed between the partiesconcerned.

Granting, arguendo, that private respondents were employed byEngineer Dosdos, petitioners would still be liable to privaterespondents since the indices of a "labor only" contracting situationwill apply to the present case. "Labor-only" contracting is defined in

Section 9, Rule VIII, Book III of the Omnibus Rules. Implementing theLabor Code in the following terms:

Sec. 9. Labor-only contracting. (a) Any person who undertakes tosupply workers to an employer shall be deemed to be engaged inlabor-only contracting where such person:

(1) Does not have substantial capital or investment in the form oftools, equipment, machineries, work premises and other materials;and

(2) The workers recruited and placed by such person are performingactivities which are directly related to the principal business oroperations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited andthe person acting as contractor shall be considered merely as anagent or intermediary of the employerwho shall be responsible to theworker in the same manner and extent as if the latter were directlyemployed by him.

x x x x x x x x x. (Emphasis supplied.)

The legal effect of a finding that a contractor is not a true independentcontractor or "job contractor" but merely a "labor-only" contractor wasexpounded upon inPhilippine Bank of Communications vs. NLRC 10to wit:


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... The labor-only' contractor i.e., 'the person or intermediary isconsidered 'merely as an agent of the employer.' The employer ismade by the statute responsible to the employees of the labor-only'contractor as if such employees had been directly employed by the

employer.Thus, where 'labor-only' contracting exists in a given case,the statute itself implies or establishes an employer-employeerelationship between the employer (the owner of the project) and theemployees of the 'labor-only' contractor, this time for acomprehensive purpose: 'employer for purposes of this Code, to

prevent any violation or circumvention of any provision of this Code.'The law in effect holds both the employer and the 'labor-only'contractor responsible to the latter's employees for the more effectivesafeguarding of the employees' rights under the Labor Code.'

Hence, a finding that a contractor is a "labor-only" contractor isequivalent to a finding that there exists an employer-employeerelationship between the owner of the project and the employees ofthe 'labor only contractor since that relationship is defined andprescribed by the law itself.

Prescinding from the foregoing, the ineluctable conclusion is that anemployer-employee relationship existed between petitioner andprivate respondents. Engineer Dosdos had no substantial capitalinvestment in the form of tools, equipment, machineries, work

premises and other materials since the plywood plant and panelswere all supplied by petitioner. Likewise, the activities undertaken bythe contractor were petitioners' business.

Coming now to the second sub-issue, petitioners allege that they didfile a position paper albeit late in this case refuting therein the claimsof the private respondents. However, petitioners filed the said positionpaper on January 13, 1987 with the District Labor Office at ButuanCity and not in the office of the labor arbiter in Cagayan de Oro City

which was then handling the cases. The said position paper alsocontained a quitclaim wherein private respondents allegedly admittedthat they were workers/employees of ADD Technical and LaborServices and that for a consideration, the employees signed on May17, 1986, quitclaims forever discharging and releasing petitionersfrom any and all claims arising from any source, particularly from theiremployment.


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Petitioners state that even if they filed their position paper belatedly,proceedings before the respondent Commission are not governed bythe technical rules on evidence applied in courts of law. Furthermore,private respondents supposedly benefited from the quitclaim and

received their separation pay as such, they cannot be allowed torepudiate the authenticity of the quitclaim deed after benefiting fromit.

On the other hand, respondents state that this petition should not begiven due course since petitioners failed to seasonably file theirposition paper with the District Labor Office. Furthermore, they statethat the signatures appearing on the quitclaim deed are dubious incharacter and that the said signatures are either forged or signedunder certain anomalous circumstances.

At the onset, this Court was predisposed to dismiss the petition sinceITC's position paper containing the quitclaim was filed much too late.However, there appears to be a waiver. It is noted that the NLRCresolution stated that the record also shows that complainants (hereinprivate respondents) signed quitclaim deeds and received theirseparation pay. 11 The private respondents even filed a rejoindertraversing petitioners' late position paper with respect to the issue on thequitclaim.

The determination of the validity of the quitclaim is essential towardsa just determination of this case. The Labor Arbiter should haveconducted a hearing to determine the veracity of the denials of theprivate respondents rather than resolve these intricate issues basedwholly on the position paper of private respondents.

The appraisal of the situation by the NLRC and the Labor Arbiterlacks precision, giving rise to an ambiguity that lends plausibility tothe present proceeding. As there are matters regarding the quitclaimthat still need to be clarified, equity calls for a remand of the instantcase to the NLRC for an ascertainment in greater detail of thecircumstances surrounding the execution of the quitclaim.

Certiorarito that extent lies. So this Court rules.

There will be an element of unfairness at this stage if this Court willdisregard the quitclaim and thus enable private respondents to


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unjustly benefit if indeed they signed the quitclaim. What is vital andindispensable then is a determination of the validity of the quitclaim.

WHEREFORE, the assailed resolution of the respondent NationalLabor Relations Commission is AFFIRMED only as to the finding thatpetitioner is the employer of private respondents. The case isREMANDED to the National Labor Relation Commission for aninquiry with deliberate dispatch on the validity of the quitclaim. Therestraining order issued by the Court is made permanent. Nopronouncement as to costs.

SO ORDERED.

Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

METROPOLITAN BANK and TRUST COMPANY, INC., Petitioner,vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION andREGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD -REGION II,Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45of the Revised Rules of Court seeking the reversal of the Decision1ofthe Court of Appeals (CA) dated July 19, 2000 in CA-G.R. SP No.42240 which denied the petition for certiorari and prohibition ofMetropolitan Bank and Trust Company, Inc. (petitioner).

The procedural antecedents and factual background of the case areas follows:

On October 17, 1995, the Regional Tripartite Wages and ProductivityBoard, Region II, Tuguegarao, Cagayan (RTWPB), by virtue ofRepublic Act No. 6727 (R.A. No. 6727), otherwise known as theWage Rationalization Act,2 issued Wage Order No. R02-03 (WageOrder), as follows:


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Section 1. Upon effectivity of this Wage Order, all employees/workersin the private sector throughout Region II, regardless of the status ofemployment are granted an across-the-board increase of P15.00daily.3

The Wage Order was published in a newspaper of general circulationon December 2, 19954 and took effect on January 1, 1996.5 ItsImplementing Rules6 were approved on February 14, 1996.7 PerSection 13 of the Wage Order, any party aggrieved by the WageOrder may file an appeal with the National Wages and ProductivityCommission (NWPC) through the RTWPB within 10 calendar daysfrom the publication of the Wage Order.

In a letter-inquiry to the NWPC dated May 7, 1996, the Bankers'

Council for Personnel Management (BCPM), on behalf of its member-banks, requested for a ruling on the eligibility of establishments withhead offices outside Region II to seek exemption from the coverageof the Wage Order since its member-banks are already paying morethan the prevailing minimum wage rate in the National Capital Region(NCR), which is their principal place of business.8

In a letter-reply dated July 16, 1996, the NWPC stated that themember-banks of BCPM are covered by the Wage Order and do notfall under the exemptible categories listed under the Wage Order.9

In a letter-inquiry to the NWPC dated July 23, 1996, petitioner soughtfor interpretation of the applicability of said Wage Order.10The NWPCreferred petitioner's inquiry to the RTWPB.

In a letter-reply dated August 12, 1996, the RTWPB clarified that theWage Order covers all private establishments situated in Region II,regardless of the voluntary adoption by said establishments of thewage orders established in Metro Manila and irrespective of theamounts already paid by the petitioner.11

On October 15, 1996, the petitioner filed a Petition for CertiorariandProhibition with the CA seeking nullification of the Wage Order ongrounds that the RTWPB acted without authority when it issued thequestioned Wage Order; that even assuming that the RTWPB wasvested with the authority to prescribe an increase, it exceeded itsauthority when it did so without any ceiling or qualification; that the


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implementation of the Wage Order will cause the petitioner, and othersimilarly situated employers, to incur huge financial losses and sufferlabor unrest.12

On March 24, 1997, the Office of the Solicitor General (OSG) filed aManifestation and Motion in lieu of Comment affirming the petitioner'sclaim that the RTWPB acted beyond its authority in issuing the WageOrder prescribing an across-the-board increase to all workers andemployees in Region II, effectively granting additional or otherbenefits not contemplated by R.A. No. 6727.13

In view of the OSG's manifestation, the CA directed respondentsNWPC and RTWPB to file their comment.14

On September 22, 1997, respondents filed their Comment prayingthat the petition should be dismissed outright for petitioner'sprocedural lapses; that certiorari and prohibition are unavailing sincepetitioner failed to avail of the remedy of appeal prescribed by theWage Order; that the Wage Order has long been in effect; and thatthe issuance of the Wage Order was performed in the exercise of apurely administrative function.15

On July 19, 2000, the CA rendered its Decision denying the petition.The appellate court held that a writ of prohibition can no longer be

issued since implementation of the Wage Order had long become faitaccompli, the Wage Order having taken effect on January 1, 1996and its implementing rules approved on February 14, 1996; that a writof certiorari is improper since the Wage Order was issued in theexercise of a purely administrative function, not judicial or quasi-

judicial; that the letter-query did not present justiciable controversiesripe for consideration by the respondents in the exercise of theirwage-fixing function, since no appeal from the Wage Order was filed;that petitioner never brought before the said bodies any formal and

definite challenge to the Wage Order and it cannot pass off the letter-queries as actual applications for relief; that even if petitioner'sprocedural lapse is disregarded, a regional wage order prescribing awage increase across-the-board applies to banks adopting a unifiedwage system and a disparity in wages between employees holdingsimilar positions in different regions is not wage distortion.16


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Hence, the present petition anchored on the following grounds:

4.1 THE COURT OF APPEALS ERRED IN REFUSING TODECLARE WAGE ORDER NO. R02-03 NULL AND VOID AND OFNO LEGAL EFFECT.

4.1.1 THE BOARD, IN ISSUING WAGE ORDER NO. R02-03,EXCEEDED THE AUTHORITY DELEGATED TO IT BYCONGRESS.

4.1.2 WAGE ORDER NO. R02-03 IS AN UNREASONABLEINTRUSION INTO THE PROPERTY RIGHTS OF PETITIONER.

4.1.3 WAGE ORDER NO. R02-03 UNDERMINES THE VERY

ESSENCE OF COLLECTIVE BARGAINING.

4.1.4 WAGE ORDER NO. R02-03 FAILS TO TAKE INTO ACCOUNTTHE VERY RATIONALE FOR A UNIFIED WAGE STRUCTURE.

4.2 PETITIONER'S RECOURSE TO A WRIT OF CERTIORARI ANDPROHIBITION WAS PROPER.17

Following the submission of the Comment18and Reply19 thereto, theCourt gave due course to the petition and required both parties to

submit their respective memoranda.20

In compliance therewith,petitioner and respondents submitted their respective memoranda.21

Petitioner poses two issues for resolution, to wit: (1) whether WageOrder No. R02-03 is void and of no legal effect; and (2) whetherpetitioner's recourse to a petition for certiorari and prohibition with theCA was proper.

Anent the first issue, petitioner maintains that the RTWPB, in issuingsaid Wage Order, exceeded the authority delegated to it under R.A.

No. 6727, which is limited to determining and fixing the minimumwage rate within their respective territorial jurisdiction and withrespect only to employees who do not earn the prescribed minimumwage rate; that the RTWPB is not authorized to grant a generalacross-the-board wage increase for non-minimum wage earners; thatEmployers Confederation of the Philippines v. National Wages andProductivity Commission22 (hereafter referred to as "ECOP") is not


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authority to rule that respondents have been empowered to fix wagesother than the minimum wage since said case dealt with an across-the-board increase with a salary ceiling, where the wage adjustmentis applied to employees receiving a certain denominated salary

ceiling; that the Wage Order is an unreasonable intrusion into itsproperty rights; that the Wage Order undermines the essence ofcollective bargaining; that the Wage Order fails to take into accountthe rationale for a unified wage structure.

As to the second issue, petitioner submits that ultra vires acts ofadministrative agencies are correctible by way of a writ of certiorariand prohibition; that even assuming that it did not observe the properremedial procedure in challenging the Wage Order, the remedy ofcertiorari and prohibition remains available to it by way of an

exception, on grounds of justice and equity; that its failure to observeprocedural rules could not have validated the manner by which thedisputed Wage Order was issued.

Respondents counter that the present petition is fatally defective frominception since no appeal from the Wage Order was filed bypetitioner; that the letter-query to the NWPC did not constitute theappeal contemplated by law; that the validity of the Wage Order wasnever raised before the respondents; that the implementation of theWage Order had long become fait accompli for prohibition to prosper.

Respondents insist that, even if petitioner's procedural lapses aredisregarded, the Wage Order was issued pursuant to the mandate ofR.A. No. 6727 and in accordance with the Court's pronouncements inthe ECOP case;23that the Wage Order is not an intrusion on propertyrights since it was issued after the required public hearings; that theWage Order does not undermine but in fact recognizes the right tocollective bargaining; that the Wage Order did not result in wagedistortion.

The Court shall first dispose of the procedural matter relating to thepropriety of petitioner's recourse to the CA before proceeding with thesubstantive issue involving the validity of the Wage Order.

Certiorari as a special civil action is available only if the followingessential requisites concur: (1) it must be directed against a tribunal,board, or officer exercising judicial or quasi-judicial functions; (2) the


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tribunal, board, or officer must have acted without or in excess ofjurisdiction or with grave abuse of discretion amounting lack orexcess of jurisdiction; and (3) there is no appeal nor any plain,speedy, and adequate remedy in the ordinary course of law.24

On the other hand, prohibition as a special civil action is availableonly if the following essential requisites concur: (1) it must be directedagainst a tribunal, corporation, board, officer, or person exercisingfunctions, judicial, quasi-judicial, or ministerial; (2) the tribunal,corporation, board or person has acted without or in excess of its

jurisdiction, or with grave abuse of discretion amounting lack orexcess of jurisdiction; and (3) there is no appeal or any other plain,speedy, and adequate remedy in the ordinary course of law.25

A respondent is said to be exercising judicial function where he hasthe power to determine what the law is and what the legal rights ofthe parties are, and then undertakes to determine these questionsand adjudicate upon the rights of the parties.26Quasi-judicial functionis a term which applies to the action, discretion, etc., of publicadministrative officers or bodies, who are required to investigate factsor ascertain the existence of facts, hold hearings, and drawconclusions from them as a basis for their official action and toexercise discretion of a judicial nature.27 Ministerial function is onewhich an officer or tribunal performs in the context of a given set of

facts, in a prescribed manner and without regard to the exercise ofhis own judgment upon the propriety or impropriety of the act done.28

In the issuance of the assailed Wage Order, respondent RTWPB didnot act in any judicial, quasi-judicial capacity, or ministerial capacity. Itwas in the nature of subordinate legislation, promulgated by it in theexercise of delegated power under R.A. No. 6727. It was issued inthe exercise of quasi-legislative power. Quasi-legislative or rule-making power is exercised by administrative agencies through the

promulgation of rules and regulations within the confines of thegranting statute and the doctrine of non-delegation of certain powersflowing from the separation of the great branches of thegovernment.29

Moreover, the rule on the special civil actions of certiorari andprohibition equally mandate that these extra-ordinary remedies are


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available only when "there is no appeal or any other plain, speedy,and adequate remedy in the ordinary course of law." A remedy isconsidered plain, speedy and adequate if it will promptly relieve thepetitioner from the injurious effects of the judgment or rule, order or

resolution of the lower court or agency.

30

Section 13 of the assailed Wage Order explicitly provides that anyparty aggrieved by the Wage Order may file an appeal with theNWPC through the RTWPB within 10 days from the publication of thewage order.31 The Wage Order was published in a newspaper ofgeneral circulation on December 2, 1995.32

In this case, petitioner did not avail of the remedy provided by law. Noappeal to the NWPC was filed by the petitioner within 10 calendar

days from publication of the Wage Order on December 2, 1995.Petitioner was silent until seven months later, when it filed a letter-inquiry on July 24, 1996 with the NWPC seeking a clarification on theapplication of the Wage Order. Evidently, the letter-inquiry is not anappeal.

It must also be noted that the NWPC only referred petitioner's letter-inquiry to the RTWPB. Petitioner did not appeal the letter-reply dated

August 12, 1996 of the RTWPB to the NWPC. No direct action wastaken by the NWPC on the issuance or implementation of the Wage

Order. Petitioner failed to invoke the power of the NWPC to reviewregional wage levels set by the RTWPB to determine if these are inaccordance with prescribed guidelines. Thus, not only was it improperto implead the NWPC as party-respondent in the petition before theCA and this Court, but also petitioner failed to avail of the primary

jurisdiction of the NWPC under Article 121 of the Labor Code, to wit:

ART. 121. Powers and Functions of the Commission. - TheCommission shall have the following powers and functions:

x x x x

(d) To review regional wage levels set by the Regional TripartiteWages and Productivity Boards to determine if these are inaccordance with prescribed guidelines and national developmentplans;


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x x x x

(f) To review plans and programs of the Regional Tripartite Wagesand Productivity Boards to determine whether these are consistentwith national development plans;

(g) To exercise technical and administrative supervision over theRegional Tripartite Wages and Productivity Boards;

x x x x

(Emphasis supplied)

Under the doctrine of primary jurisdiction, courts cannot and will notresolve a controversy involving a question which is within the

jurisdiction of an administrative tribunal, especially where thequestion demands the exercise of sound administrative discretionrequiring the special knowledge, experience and services of theadministrative tribunal to determine technical and intricate matters offact.33

Nevertheless, the Court will proceed to resolve the substantial issuesin the present petition pursuant to the well-accepted principle thatacceptance of a petition for certiorari or prohibition as well as the

grant of due course thereto is addressed to the sound discretion ofthe court.34It is a well-entrenched principle that rules of procedure arenot inflexible tools designed to hinder or delay, but to facilitate andpromote the administration of justice. Their strict and rigid application,which would result in technicalities that tend to frustrate, rather thanpromote substantial justice, must always be eschewed.35

As to respondents' submission that the implementation of the WageOrder can no longer be restrained since it has become fait accompli,the Wage Order having taken effect on January 1, 1996 and its

implementing rules approved on February 14, 1996, suffice it to statethat courts will decide a question otherwise moot if it is capable ofrepetition yet evading review.36Besides, a case becomes moot andacademic only when there is no more actual controversy between theparties or no useful purpose can be served in passing upon themerits. Such circumstances do not obtain in the present case. Theimplementation of the Wage Order does not in any way render the


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case moot and academic, since the issue of the validity of the wageorder subsists even after its implementation and which has to bedetermined and passed upon to resolve petitioner's rights andconsequent obligations therein.

It is worthy to quote the Court's pronouncements in Tan v.Commission on Elections,37thus:

For this Honorable Court to yield to the respondents' urging that, asthere has been fait accompli, then this Honorable Court shouldpassively accept and accede to the prevailing situation is anunacceptable suggestion. Dismissal of the instant petition, asrespondents so propose is a proposition fraught with mischief.Respondents' submission will create a dangerous precedent. Should

this Honorable Court decline now to perform its duty of interpretingand indicating what the law is and should be, this might tempt againthose who strut about in the corridors of power to recklessly and withulterior motives commit illegal acts, either brazenly or stealthily,confident that this Honorable Court will abstain from entertainingfuture challenges to their acts if they manage to bring about a faitaccompli.38

Having disposed of this procedural issue, the Court now comes to thesubstance of the petition.

R.A. No. 6727 declared it a policy of the State to rationalize the fixingof minimum wages and to promote productivity-improvement andgain-sharing measures to ensure a decent standard of living for theworkers and their families; to guarantee the rights of labor to its justshare in the fruits of production; to enhance employment generationin the countryside through industrial dispersal; and to allow businessand industry reasonable returns on investment, expansion andgrowth.39

In line with its declared policy, R.A. No. 672740created the NWPC,41vested with the power to prescribe rules and guidelines for thedetermination of appropriate minimum wage and productivitymeasures at the regional, provincial or industry levels;42 andauthorized the RTWPB to determine and fix the minimum wage ratesapplicable in their respective regions, provinces, or industries therein


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and issue the corresponding wage orders, subject to the guidelinesissued by the NWPC.43 Pursuant to its wage fixing authority, theRTWPB may issue wage orders which set the daily minimum wagerates,44based on the standards or criteria set by Article 12445of the

Labor Code.

In ECOP,46 the Court declared that there are two ways of fixing theminimum wage: the "floor-wage" method and the "salary-ceiling"method. The "floor-wage" method involves the fixing of a determinateamount to be added to the prevailing statutory minimum wage rates.On the other hand, in the "salary-ceiling" method, the wageadjustment was to be applied to employees receiving a certaindenominated salary ceiling. In other words, workers already beingpaid more than the existing minimum wage (up to a certain amount

stated in the Wage Order) are also to be given a wage increase.47

To illustrate: under the "floor wage method", it would have beensufficient if the Wage Order simply set P15.00 as the amount to beadded to the prevailing statutory minimum wage rates, while in the"salary-ceiling method", it would have been sufficient if the WageOrder states a specific salary, such as P250.00, and only thoseearning below it shall be entitled to the salary increase.

In the present case, the RTWPB did not determine or fix the minimum

wage rate by the "floor-wage method" or the "salary-ceiling method"in issuing the Wage Order. The RTWPB did not set a wage level nora range to which a wage adjustment or increase shall be added.Instead, it granted an across-the-board wage increase of P15.00 toall employees and workers of Region 2. In doing so, the RTWPBexceeded its authority by extending the coverage of the Wage Orderto wage earners receiving more than the prevailing minimum wagerate, without a denominated salary ceiling. As correctly pointed out bythe OSG, the Wage Order granted additional benefits not

contemplated by R.A. No. 6727.

In no uncertain terms must it be stressed that the function ofpromulgating rules and regulations may be legitimately exercised onlyfor the purpose of carrying out the provisions of a law. The power ofadministrative agencies is confined to implementing the law or puttingit into effect. Corollary to this guideline is that administrative


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regulation cannot extend the law and amend a legislativeenactment.48 It is axiomatic that the clear letter of the law iscontrolling and cannot be amended by a mere administrative ruleissued for its implementation.49 Indeed, administrative or executive

acts, orders, and regulations shall be valid only when they are notcontrary to the laws or the Constitution.50

Where the legislature has delegated to an executive or administrativeofficers and boards authority to promulgate rules to carry out anexpress legislative purpose, the rules of administrative officers andboards, which have the effect of extending, or which conflict with theauthority-granting statute, do not represent a valid exercise of therule-making power but constitute an attempt by an administrativebody to legislate.51

It has been said that when the application of an administrativeissuance modifies existing laws or exceeds the intended scope, as inthis case, the issuance becomes void, not only for being ultra vires,but also for being unreasonable.52

Thus, the Court finds that Section 1, Wage Order No. R02-03 is voidinsofar as it grants a wage increase to employees earning more thanthe minimum wage rate; and pursuant to the separability clause53ofthe Wage Order, Section 1 is declared valid with respect to

employees earning the prevailing minimum wage rate. 1awphi1.net

Prior to the passage of the Wage Order, the daily minimum wagerates in Region II was set at P104.00 for the Province of Isabela,P103.00 for the Province of Cagayan, P101.00 for the Province ofNueva Vizcaya, and P100.00 for the Provinces of Quirino andBatanes.54Only employees earning the above-stated minimum wagerates are entitled to the P15.00 mandated increase under the WageOrder.

Although the concomitant effect of the nullity of the Wage Order tothose employees who have received the mandated increase was notput in issue, this Court shall make a definite pronouncement thereonto finally put this case to rest. As ruled by the Court in LatchmeMotoomull v. Dela Paz,55 "the Court will always strive to settle theentire controversy in a single proceeding leaving no root or branch to


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bear the seeds of future litigation."56

Applying by analogy, the Court's recent pronouncement in PhilippinePorts Authority v. Commission on Audit,57thus:

In regard to the refund of the disallowed benefits, this Court holds thatpetitioners need not refund the benefits received by them based onour rulings in Blaquera v. Alcala, De Jesus v. Commission on Auditand Kapisanan ng mga Manggagawa sa Government ServiceInsurance System (KMG) v. Commission on Audit.

In Blaquera, the petitioners, who were officials and employees ofseveral government departments and agencies, were paid incentivebenefits pursuant to EO No. 292 and the Omnibus Rules

Implementing Book V of EO No. 292. On January 3, 1993, thenPresident Fidel V. Ramos issued Administrative Order (AO) No. 29authorizing the grant of productivity incentive benefits for the year1992 in the maximum amount of P1,000. Section 4 of AO No. 29directed all departments, offices and agencies which authorizedpayment of CY 1992 Productivity Incentive Bonus in excess ofP1,000 to immediately cause the refund of the excess. Respondentheads of the departments or agencies of the government concernedcaused the deduction from petitioners' salaries or allowances of theamounts needed to cover the overpayments. Petitioners therein filed

a petition for certiorari and prohibition before this Court to preventrespondents therein from making further deductions from theirsalaries or allowances. The Court ruled against the refund, thus:

Considering, however, that all the parties here acted in goodfaith, we cannot countenance the refund of subject incentivebenefits for the year 1992, which amounts the petitioners havealready received. Indeed, no indiciaof bad faith can be detectedunder the attendant facts and circumstances. The officials and

chiefs of offices concerned disbursed such incentive benefits inthe honest belief that the amounts given were due to therecipients and the latter accepted the same with gratitude,confident that they richly deserve such benefits.

The said ruling in Blaquera was applied in De Jesus.

In De Jesus, COA disallowed the payment of allowances and


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bonuses consisting of representation and transportation allowance,rice allowance, productivity incentive bonus, anniversary bonus, year-end bonus and cash gifts to members of the interim Board ofDirectors of the Catbalogan Water District. This Court affirmed the

disallowance because petitioners therein were not entitled to othercompensation except for payment of per diem under PD No. 198.However, the Court ruled against the refund of the allowances andbonuses received by petitioners, thus:

This ruling in Blaqueraapplies to the instant case. Petitioners herereceived the additional allowances and bonuses in good faithunder the honest belief that LWUA Board Resolution No. 313authorized such payment. At the time petitioners received theadditional allowances and bonuses, the Court had not yet

decided Baybay Water District. Petitioners had no knowledgethat such payment was without legal basis. Thus, being in goodfaith, petitioners need not refund the allowances and bonusesthey received but disallowed by the COA.

Further, in KMG, this Court applied the ruling in Blaquera and DeJesus in holding that the Social Insurance Group (SIG) personnel ofthe Government Service Insurance System need not refund thehazard pay received by them although said benefit was correctlydisallowed by COA. The Court ruled:

The Court however finds that the DOH and GSIS officialsconcerned who granted hazard pay under R.A. No. 7305 to theSIG personnel acted in good faith, in the honest belief that therewas legal basis for such grant. The SIG personnel in turnaccepted the hazard pay benefits likewise believing that theywere entitled to such benefit. At that time, neither the concernedDOH and GSIS officials nor the SIG personnel knew that thegrant of hazard pay to the latter is not sanctioned by law. Thus,

following the rulings of the Court in De Jesus v. Commission onAudit, and Blaquera v. Alcala, the SIG personnel who previouslyreceived hazard pay under R.A. No. 7305 need not refund suchbenefits.

In the same vein, the rulings in Blaquera, De Jesus and KMG apply tothis case. Petitioners received the hazard duty pay and birthday cash


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gift in good faith since the benefits were authorized by PPA SpecialOrder No. 407-97 issued pursuant to PPA Memorandum Circular No.34-95 implementing DBM National Compensation Circular No. 76,series of 1995, and PPA Memorandum Circular No. 22-97,

respectively. Petitioners at that time had no knowledge that thepayment of said benefits lacked legal basis. Being in good faith,petitioners need not refund the benefits they received.58 (Emphasissupplied)

employees, other than minimum wage earners, who received thewage increase mandated by the Wage Order need not refund thewage increase received by them since they received the wageincrease in good faith, in the honest belief that they are entitled tosuch wage increase and without any knowledge that there was no

legal basis for the same.

Considering the foregoing, the Court need not delve on the otherarguments raised by the parties.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decisionof the Court of Appeals dated July 19, 2000 in CA-G.R. SP No. 42240is MODIFIED. Section 1 of Wage Order No. R02-03 issued onOctober 17, 1995 by the Regional Tripartite Wages and ProductivityBoard for Region II, Tuguegarao, Cagayan is declared VALIDinsofar

as the mandated increase applies to employees earning theprevailing minimum wage rate at the time of the passage of the WageOrder and VOID with respect to its application to employees receivingmore than the prevailing minimum wage rate at the time of thepassage of the Wage Order.

No costs.

SO ORDERED.

Documents

ITC vs NLRC