Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 128845 June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment;
HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and
Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of International
School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be
given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a
principle that rests on fundamental notions of justice. That is the principle we uphold
today.1âwphi1.nêt

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents. 1 To enable the School to continue carrying out its
educational program and improve its standard of instruction, Section 2(c) of the same decree
authorizes the School to

employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the protection
of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying
the same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine
whether a faculty member should be classified as a foreign-hire or a local hire:

a. What is one's domicile?

b. Where is one's home economy?

c. To which country does one owe economic allegiance?

d. Was the individual hired abroad specifically to work in the School and was the School
responsible for bringing that individual to the Philippines? 2
 Should the answer to any of these queries point to the Philippines, the faculty member is
classified as a local hire; otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path — all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance for
the education of one's children, adequate insurance against illness and death, and of course the primary
benefit of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his
term: that he will eventually and inevitably return to his home country where he will have to confront the
uncertainty of obtaining suitable employment after along period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education. 3

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members" 4 of the School, contested the difference in salary rates
between foreign and local-hires. This issue, as well as the question of whether foreign-hires should
be included in the appropriate bargaining unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in
favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's
motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all,
with nationalities other than Filipino, who have been hired locally and classified as local hires. 5 The
Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the
Filipino local-hires.

The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth
to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local hires. 6

The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:

The Principle "equal pay for equal work" does not find applications in the present case. The international
character of the School requires the hiring of foreign personnel to deal with different nationalities and
different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be provided to
 these people in order to entice them to render their services in the Philippines and in the process remain
competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would also
require parity in other terms and conditions of employment which include the employment which include
the employment contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with
Appendix C hereof provided that the Superintendent of the School has the discretion to
recruit and hire expatriate teachers from abroad, under terms and conditions that are
consistent with accepted international practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS)
salary schedule. The 25% differential is reflective of the agreed value of system
displacement and contracted status of the OSRS as differentiated from the tenured status
of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two
types of employees, hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of equal protection of the laws is not violated by
legislation or private covenants based on reasonable classification. A classification is reasonable if it is
based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial
distinction between foreign hires and local hires, the former enjoying only a limited tenure, having no
amenities of their own in the Philippines and have to be given a good compensation package in order to
attract them to join the teaching faculty of the School. 7

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution 8 in the Article on Social Justice and
Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect
and enhance the right of all people to human dignity, reduce social, economic, and political
inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe
honesty and good faith.

International law, which springs from general principles of law, 9 likewise proscribes discrimination.
General principles of law include principles of
equity, 10 i.e., the general principles of fairness and justice, based on the test of what is reasonable. 11
The Universal Declaration of Human Rights, 12 the International Covenant on Economic, Social, and
Cultural Rights, 13 the International Convention on the Elimination of All Forms of Racial
Discrimination, 14 the Convention against Discrimination in Education, 15 the Convention (No. 111)
Concerning Discrimination in Respect of Employment and Occupation 16 — all embody the general
principle against discrimination, the very antithesis of fairness and justice. The Philippines, through its
Constitution, has incorporated this principle as part of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.
The Constitution 17 specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace — the factory, the office or the field — but
include as well the manner by which employers treat their employees.

The Constitution 18 also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code 19 provides that the State shall "ensure equal work opportunities regardless
of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the
State, in spite of its primordial obligation to promote and ensure equal employment opportunities,
closes its eyes to unequal and discriminatory terms and conditions of employment. 20

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes 21 the payment of lesser compensation to a female employee as
against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or discourage membership in any
labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7
thereof, provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in particular:

a. Remuneration which provides all workers, as a minimum, with:

(i) Fair wages and equal remuneration for work of equal value without
distinction of any kind, in particular women being guaranteed conditions
of work not inferior to those enjoyed by men, with equal pay for equal
work;

xxx xxx xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism
of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort
and responsibility, under similar conditions, should be paid similar salaries. 22 This rule applies to the
School, its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires. 23 The Court finds this argument a little cavalier. If an employer accords
employees the same position and rank, the presumption is that these employees perform equal work.
This presumption is borne by logic and human experience. If the employer pays one employee less
than the rest, it is not for that employee to explain why he receives less or why the others receive
more. That would be adding insult to injury. The employer has discriminated against that employee; it
is for the employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-
hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar
functions and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration
paid at regular intervals for the rendering of services." In Songco v. National Labor Relations
Commission, 24 we said that:

"salary" means a recompense or consideration made to a person for his pains or industry in
another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the
pay of the Roman soldier, it carries with it the fundamental idea of compensation for services
rendered. (Emphasis supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires
and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in
salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately
compensated by certain benefits accorded them which are not enjoyed by local-hires, such as
housing, transportation, shipping costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare," 25 "to
afford labor full protection." 26 The State, therefore, has the right and duty to regulate the relations
between labor and capital. 27 These relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining agreements included, must yield to the
common good. 28 Should such contracts contain stipulations that are contrary to public policy, courts
will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of
the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does
not deserve the sympathy of this Court.

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer, indicate to be the best suited to
serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the
law." 29 The factors in determining the appropriate collective bargaining unit are (1) the will of the
employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status. 30 The
basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the exercise of their collective bargaining rights.
31

It does not appear that foreign-hires have indicated their intention to be grouped together with local-
hires for purposes of collective bargaining. The collective bargaining history in the School also shows
that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar functions under the same working conditions
as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These
benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are
reasonably related to their status as foreign-hires, and justify the exclusion of the former from the
latter. To include foreign-hires in a bargaining unit with local-hires would not assure either group the
exercise of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART.
The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are
hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of
according foreign-hires higher salaries than local-hires.

SO ORDERED.

Puno and Pardo, JJ., concur.

Davide, Jr., C.J., on official leave.

Ynares-Santiago, J., is on leave.

Footnotes

1 Issued on June 19, 1975 (Authorizing International School, Inc. to Donate Its Real Properties to the
Government of the Republic of the Philippines and Granting It Certain Rights.)

2 Rollo, p. 328.

3 Id., at 324.

4 Id., at 8.

5 Id., at 325. The breakdown is as follows:

Americans — 17

Australian — 2

Belgian — 1

British — 2

Burmese — 1

Canadian — 2

Chinese — 2

French — 1

German — 1

Indian — 5

Japanese — 1

Malaysian — 1

New Zealander — 1

Spanish — 1

6 Id., at 39.
7 Id., at 38-39.

8 In Section 1, Article XII thereof.

9 Statute of the International Court of Justice, art. 38.

10 M. DEFENSOR-SANTIAGO, International Law 75 (1999), citing Judge Hudson in River Meuse Case,
(1937) Ser. A/B No. 70.

11 Ibid., citing Rann of Kutch Arbitration (India vs. Pakistan), 50 ILR 2 (1968).

12 Adopted by the General Assembly of the United Nations on December 10, 1948. Article 1 thereof
states: "All human beings are born free and equal in dignity and rights. Article 2 provides, "1. Everyone is
entitled to all the rights and freedoms set forth in this Declaration, without distinction of any kind, such as
race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or
other status."

13 Adopted by the General of the United Nations in Resolution 2200 (XXI) of 16 December 1966. Article 2
provides: "2. The States Parties to the present Covenant undertake to guarantee that the rights
enunciated in the present Covenant will be exercised without discrimination of any kind as to race, colour,
sex, language, religion, political or other opinion, national or social origin, property, birth or other status."

14 Adopted by the General assembly of the United Nations in Resolution 2106 (XX) 21 December 1965.
Article 2 of the Convention states: "States Parties condemn racial discrimination and undertake to pursue
by all appropriate means and without delay a policy of eliminating racial discrimination in all its forms and
promoting understanding among all races . . . ."

15 Adopted at Paris, December 14, 1960. Under Article 3, the States Parties undertake, among others,
"to abrogate any statutory provisions and any administrative instructions and to discontinue any
administrative practices which involve discrimination in education." Under Article 4, "The States Parties to
this Convention undertake further more to formulate, develop and apply a national policy which, by
methods appropriate to the circumstances and to national usage, will tend to promote equality of
opportunity and of treatment in the matter of education . . . ."

16 Adopted by the General Conference of the International Labor Organization at Geneva, June 25, 1958.
Article 2 provides that, "Each Member for which this Convention is in force undertakes to declare and
pursue a national policy designed to promote, by methods appropriate to national condition and practice,
equality of opportunity and treatment in respect of employment and occupation, with a view to eliminating
any discrimination in respect thereof.

17 In Article XIII, Section 3 thereof.

18 Id.

19 In Article 3 thereof.

20 E.g., Article 135 of the Labor Code declares it unlawful for the employer to require, not only as a
condition of employment, but also as a condition for the continuation of employment, that a woman shall
not get married.

21 In relation to Articles 288 and 289 of the same Code.

22 Indeed, the government employs this rule in fixing the compensation of government employees. Thus,
Republic Act No. 6758 (An Act Prescribing a Revised Compensation and Position Classification System
in the Government and for Other Purposes) declares it "the policy of the State to provide equal pay for
substantially equal work and to base differences in pay upon substantive differences in duties and
responsibilities, and qualification requirements of the positions. See also the Preamble of Presidential
Decree No. 985 (A Decree Revising the Position Classification and Compensation Systems in the
National Government, and Integrating the same).1âwphi1.nêt
23 Rollo, p. 491.

24 183 SCRA 610 (1990).

25 In Section 18, Article II thereof.

26 In Section 3, Article XIII thereof. See also Article 3 of the Labor Code.

27 See Sec. 3, Article XIII, Constitution. Article 3 of the Labor Code.

28 Art. 1700, Civil Code.

29 Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Federation Labor Union and the
Secretary of Labor and Employment, 268 SCRA 573 (1997); San Miguel Corporation vs. Laguesma, 236
SCRA 595 (1994).

30 San Miguel Corporation vs. Laguesma, supra.

31 Belyca Corporation vs. Ferrer-Calleja, 188 SCRA 184 (1988).