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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
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. (Prubankers Association v. Prudential Bank and Trust Company, G.R. No. 131247, 1999)
Under Republic Act No. 6727 or the Wage Rationalization Act, amending among others, Article 124 of the Labor Code, the term wage distortion was explicitly defined as a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rate 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.
The wage distortion only covers wage adjustments and increases due to a prescribed law or wage order.
In Prubankers Association v. Prudential Bank and Trust Company (G.R. No. 131247, 1999), the Supreme Court held that wage distortion presupposes a classification of positions and ranking of these positions at various levels. One visualizes a hierarchy of positions with corresponding ranks basically in terms of wages and other emoluments. Where a significant change occurs at the lowest level of positions in terms of basic wage without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof the distinction between one level of position from the next higher level and resulting in a parity between the lowest level and the next higher level or rank, between new entrants and old hires, there exists a wage distortion.
The concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employes on some relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees.
The elements of wage distortion are as follows:
- An existing hierarchy of positions with corresponding salary rates;
- A significant change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher one;
- The elimination of the distinction between the two levels; and
- The existence of the distortion in the same region of the country.
A disparity in wages between employees holding similar positions but in different regions does not constitute wage distortion as contemplated by law. It is the hierarchy of positions and the disparity of their corresponding wages and other emoluments that are sought to be preserved by the concept of wage distortion. Put differently, a wage distortion arises when a wage order engenders wage parity between employees in different rungs of the organizational ladder of the same establishment. It bears emphasis that wage distortion involves a parity in the salary rates of different pay classes which, as a result, eliminates the distinction between the different ranks in the same region.
As applied in the Prubankers case, wage 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.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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