SECOND DIVISION

[G.R. No. 207252. January 24, 2018.]

PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION (PGIEU) ,

petitioner, vs. CHEVRON GEOTHERMAL PHILS. HOLDINGS, INC. ,
respondent.

DECISION

REYES, JR. , J : p

This is a Petition for Review on Certiorari 1 pursuant to Rule 45 of the Rules of

Court, as amended, seeking to reverse and set aside the Decision 2 dated November 5,
2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 115796, dismissing the Petition
for Review entitled "Philippine Geothermal, Inc. Employees Union (PGIEU) vs. Chevron
Geothermal Phils. Holdings, Inc." as well as the Resolution 3 dated May 17, 2013
denying Philippine Geothermal, Inc. Employees Union's (petitioner) Motion 4 for
Reconsideration dated November 27, 2012.

The Facts

Petitioner is a legitimate labor organization and the certi ed bargaining agent of

the rank-and- le employees of Chevron Geothermal Phils. Holdings, Inc. (respondent). 5
cHECAS

On July 31, 2008, the petitioner and respondent formally executed a Collective
Bargaining Agreement (CBA) which was made effective for the period from November
1, 2007 until October 31, 2012. Under Article VII, Section 1 thereof, there is a stipulation
governing salary increases of the respondent's rank-and-file employees, as follows:
Section 1. WAGE INCREASE
The COMPANY will grant the following:
- Effective Nov. 1, 2007, P260,000.00 — lump sum payment for the 1st year of
this agreement (taxable).
- Effective Nov. 1, 2008, across the board increase on the monthly salary in the
amount of P1,500.00.
- Effective Nov. 1, 2009, across the board increase on the monthly salary in the
amount of P1,500.00. 6
In implementing the foregoing provision, the parties agreed on the following
guidelines appended as Annex D of said CBA, viz.:

Employment Status P260K P1500 P1500

Lump (Nov. 1, (Nov. 1,

Sum 2008) 2009)

Regularized on or ✓ ✓ ✓
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 before April 30,
2008

Regularized X ✓ ✓
between May 1,
2008 and October
31, 2008

Regularized on or X ✓ ✓
before April 30,
2009

Regularized X X ✓
between May 1,
2009 and October
31, 2009

Regularized on or X X ✓
before April 30,
2010

On October 6, 2009, a letter dated September 20, 2009 was sent by the
petitioner's President to respondent expressing, on behalf of its members, the concern
that the aforesaid CBA provision and implementing rules were not being implemented
properly pursuant to the guidelines and that, if not addressed, might result to a salary
distortion among union members. 7
On even date, respondent responded by letter denying any occurrence of salary
distortion among union members and reiterating its remuneration philosophy of having
"similar values for similar jobs," which means that employees in similarly-valued jobs
would have similar salary rates. It explained that to attain such objective, it made annual
reviews and necessary adjustments of the employees' salaries and hiring rates based
on the computed values for each job. 8
Finding the explanation not satisfactory, petitioner, with respondent's approval,
referred the subject dispute to the Voluntary Arbitration of the National Conciliation and
Mediation Board (NCMB). It averred that respondent breached their CBA provision on
worker's wage increase because it granted salary increase even to probationary
employees in contravention of the express mandate of that particular CBA article and
implementing guidelines that salary increases were to be given only to regular
employees. 9
To cite an example, petitioner alleged that respondent granted salary increases
of One Thousand Five Hundred Pesos (P1,500.00) each to then probationary
employees Sherwin Lanao (Lanao) and Jonel Cordovales (Cordovales) at a time when
they have not yet attained regular status. They (Lanao and Cordovales) were regularized
only on January 1, 2010 and April 16, 2010, respectively, yet they were given salary
increase for November 1, 2008. As a consequence of their accelerated increases,
wages of said probationary workers equated the wage rates of the regular employees,
thereby obliterating the wage rates distinction based on merit, skills and length of
service. Therefore, the petitioner insisted that its members' salaries must necessarily
be increased so as to maintain the higher strata of their salaries from those of the
probationary employees who were given the said premature salary increases. 1 0
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 On the other hand, respondent maintained that it did not commit any violation of
that CBA provision and its implementing guidelines; in fact, it complied therewith. It
reasoned that the questioned increases given to Lanao and Cordovales' salaries were
granted, not during their probationary employment, but after they were already
regularized. It further asseverated that there was actually no salary distortion in this
case since the disparity or difference of salaries between Lanao and Cordovales with
that of the other company employees were merely a result of their being hired on
different dates, regularization at different occasions, and differences in their hiring
rates at the time of their employment. 1 1 AHDacC

After due proceedings, the Voluntary Arbitrator rendered a Decision 1 2 dated

August 16, 2010 in favor of respondent, ruling that petitioner failed to duly substantiate
its allegations that the former prematurely gave salary increases to its probationary
employees and that there was a resultant distortion in the salary scale of its regular
employees. 1 3
Thereafter, a Petition 1 4 for Review under Rule 65 was led with the CA on
September 22, 2010.
On November 5, 2012, the CA rendered its Decision. 1 5 It dismissed the petition
for review and sustained the Voluntary Arbitrator's decision. The pertinent and
dispositive portion of the assailed decision reads as follows:
In ne, We hold that the Voluntary Arbitrator of NCMB did not commit
grave abuse of discretion in dismissing petitioner union's complaint against
respondent company. Settled is the rule that factual ndings of labor o cials
who are deemed to have acquired expertise in matters within their jurisdiction,
are generally accorded not only respect but even nality, and they are binding
when supported by substantial evidence. In this case, these ndings are
supported by competent and convincing evidence.
WHEREFORE , premises considered, the instant petition is DISMISSED .
The Decision dated 16 August 2010 of the Voluntary Arbitrator of the NCMB
Regional Branch No. IV is SUSTAINED .
SO ORDERED . 1 6
On November 28, 2012, petitioner led its Motion 1 7 for Reconsideration. This
was, however, denied by the CA in its Resolution 1 8 dated May 17, 2013.
Hence, this petition.

The Issues

I.
WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT RESPONDENT
DID NOT VIOLATE THE CBA IN GRANTING WAGE INCREASE OF P1,500.00 TO
LANAO AND CORDOVALES AT A TIME WHEN THEY HAD NOT YET ATTAINED
REGULAR STATUS
II.
WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT THE GRANT
OF WAGE INCREASE TO LANAO AND CORDOVALES IS A VALID EXERCISE OF
MANAGEMENT PREROGATIVES BY RESPONDENT
III.
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 WHETHER OR NOT THE CA ERRED IN NOT ORDERING RESPONDENT TO
LIKEWISE INCREASE THE RATES OF OTHER REGULAR EMPLOYEES IN ORDER
TO MAINTAIN THE DIFFERENCE BETWEEN THEIR RATES AND THOSE OF THE
EMPLOYEES WHO WERE ALLEGEDLY GRANTED PREMATURE WAGE
INCREASES

Ruling of the Court

The petition is devoid of merit.

Petitioner and respondent entered into an agreement whereby employees will be
granted a wage increase depending on the date of their regularization, viz.:

Employment Status P260K P1500 P1500

Lump Sum (Nov. 1, (Nov. 1,

2008) 2009)

Regularized on or
before April 30, ✓ ✓ ✓
2008

Regularized
between May 1,
X ✓ ✓
2008 and October
31, 2008

Regularized on or
before April 30, X ✓ ✓
2009

Regularized
between May 1,
X X ✓
2009 and October
31, 2009

Regularized on or
before April 30, X X ✓
2010

Petitioner claims that Lanao and Cordovales having been regularized only on
January 1, 2010 and April 16, 2010, respectively, are not covered by the P260,000.00
lump sum and the initial P1500.00 wage increase effective on Nov. 1, 2008. It appears,
however, that based on the actual pay slips of union members, Lanao and Cordovales
both received wage increase in the amount of P1500.00 effective Nov. 1, 2008 and that
such increase was immediately granted to them at the time of their hiring which
resulted to the increase of their salaries to P36,500.00 per month.
It is further stressed by petitioner that the increase granted by respondent to
Lanao and Cordovales are violative of the terms of the CBA, speci cally Section 1,
Article VII and Annex D, for the reason that these employees have not yet attained
"Regular" status at the time they were granted a wage increase and thus resulting to a
salary/wage distortion. IDSEAH

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 Respondent, for its part, claims that the alleged "increase" in the wages of these
employees was not due to application of the provisions of Article VII and Annex D of
the CBA, rather it was brought about by the increase in the hiring rates at the time these
employees were hired. As a matter of fact, a careful scrutiny of the records reveals that
respondent have complied with the terms agreed upon in the CBA.
Notably, respondent's reply to the petitioner's letter accusing them of violation of
the terms of the CBA and holding them responsible for the alleged wage distortion,
clarified the ambiguity with regard to the hiring rates, viz.:
As for the perceived salary distortion among Union members resulting
from the non-implementation of the guidelines on Article VII-Salaries and
Allowances, Section 1 — Wage Increase, Annex D of the CBA 2007-2012, we
would like to reiterate our discussion during the recent NLMC meeting of
September 16, on Chevron's remuneration philosophy of having "similar value
for similar jobs" which simply states that employees in similarly valued jobs will
have similar salary rates. Salaries and hiring rates are reviewed annually and
adjusted as necessary based on the computed values of each job. an n
employee's tenure or seniority in his/her current position will not in uence the
value of the job. 1 9 (Underlining Ours)
Clearly then, the increase in the salaries of Lanao and Cordovales was not
pursuant to the wage increase agreed upon in CBA 2007-2012 rather it was the result
of the increase in hiring rates at the time they were hired.
To illustrate, in its Reply, 2 0 respondent discussed the difference in the hiring
rates of employees Lanao and Robert Gawat, viz.:
Mr. Robert Gawat was regularized on April 16, 2007 having been hired on
October 16, 2007 while Mr. Lanao as shown in the Company's position paper
was regularized on January 1, 2010, having been hired only on July 1, 2009. At
the time of Mr. Gawat's hiring, the hiring rate for Pay Grade 12 was
P31,800.00 . On April 16, 2007, Mr. Gawat was given a CBA salary increase
under the 2002-2007 CBA of P1,700.00 per month which increased his pay to
P33,500.00 per month. He received another CBA salary increase of P1,500.00
under the 2007-2012 CBA on November 1, 2008, thus increasing his pay to
P35,000.00. On November 1, 2009, he received another salary increase of
P1,500.00 under the 2007-2012 CBA which further increased his pay to
P36,500.00 per month until the present.
On the other hand, when Mr. Lanao was hired on July 9, 2009, the
hiring rate at the time for employees falling under Pay Grade 12 was
already P35,000.00 , having been adjusted by the company in accordance
with market and industry practice. On January 1, 2010, Mr. Lanao was
regularized and as dictated by the CBA, he was given a CBA salary increase of
P1,500.00 per month effective January 1, 2010 which increased his monthly
pay at the present to P36,500.00. 2 1 (Emphasis and underlining Ours)
As shown above, the respondent never violated the CBA and in fact, complied
with it to the letter. Clearly, the petitioner only used the respondent's alleged violation of
the CBA when its true gripe is related to the respondent's prerogative of setting the
hiring rate of the employees over which the petitioner neither has the personality nor
the privilege to meddle or interfere with. 2 2
The second and third issue, being interrelated, shall be discussed jointly.
Upon the enactment of Republic Act (R.A.) No. 6727 (Wage Rationalization Act,
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 amending among others, Article 124 of the Labor Code) on June 9, 1989, the term
"Wage Distortion" was explicitly de ned 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 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." 2 3
Contrary to petitioner's claim of alleged "wage distortion," Article 124 of the
Labor Code of the Philippines only cover wage adjustments and increases due to a
prescribed law or wage order, viz.:
Article 124 . Standards/Criteria for Minimum Wage Fixing.
xxx xxx xxx
Where the application of any prescribed wage increase by virtue of a law
or Wage Order issued by any Regional Board results in distortions of the
wage structure within an establishment, the employer and union shall negotiate
to correct the distortions. Any dispute arising from the wage distortions shall be
resolved through the grievance procedure under their collective bargaining
agreement and, if it remains unresolved, through voluntary arbitration. 2 4
(Emphasis Ours)
Prubankers Association v. Prudential Bank and Trust Company 2 5 laid down the
four elements of wage distortion, to wit: (1) an existing hierarchy of positions with
corresponding salary rates; (2) a signi cant 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; and (4) the existence of the
distortion in the same region of the country.
The apparent increase in Lanao and Cordovales' salaries as compared to the
other company workers who also have the same salary/pay grade with them should not
be interpreted to mean that they were given a premature increase for November 1,
2008, thus resulting to a wage distortion. The alleged increase in their salaries was not
a result of the erroneous application of Article VII and Annex D of the CBA, rather, it was
because when they were hired by respondent in 2009, when the hiring rates were
relatively higher as compared to those of the previous years. Verily, the setting and
implementation of such various engagement rates were purely an exercise of the
respondent's business prerogative in order to attract or lure the best possible
applicants in the market and which We will not interfere with, absent any showing that it
was exercised in bad faith. aCIHcD

Management prerogative gives an employer freedom to regulate according to

their discretion and best judgment, all aspects of employment including work
assignment, working methods, the processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline, dismissal
and recall of workers. 2 6 This right is tempered only by these limitations: that it must be
exercised in good faith and with due regard to the rights of the employees. 2 7
Petitioner claims that the wages of other employees should also be increased in
order to maintain the difference between their salaries and those of employees granted
a "premature" wage increase. Such a situation may be remedied if it falls under the
concept of a wage distortion as de ned by Article 124 of the Labor Code of the
Philippines. However, as already discussed, there is no wage distortion in the case at
bench. Not all increases in salary which obliterate the salary differences of certain
employees should be perceived as wage distortion.
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 In the case of Bankard Employees Union-Workers Alliance Trade Unions v.
National Labor Relations Commission, 2 8 the Court discussed the possible implication
of an expanded interpretation of the concept of Wage Distortion, to wit:
If the compulsory mandate under Article 124 to correct "wage distortion" is
applied to voluntary and unilateral increases by the employer in xing hiring
rates which is inherently a business judgment prerogative, then the hands of the
employer would be completely tied even in cases where an increase in wages of
a particular group is justi ed due to a re-evaluation of the high productivity of a
particular group, or as in the present case, the need to increase the
competitiveness of Bankard's hiring rate. An employer would be discouraged
from adjusting the salary rates of a particular group of employees for fear that it
would result to a demand by all employees for a similar increase, especially if
the nancial conditions the business cannot address an across-the-board
increase. 2 9
The Court's ruling in the case of Bankard seek to address and resolve con icting
opinions regarding the true concept of a wage distortion like the one presented in this
case whereby a legitimate exercise by an employer of its management prerogative is
being taken against it in the guise of an allegation that it is circumventing labor laws. An
employer should not be held hostage by the whims and caprices of its employees
especially when it has faithfully complied with and executed the terms of the CBA.
It is the prerogative of management to regulate, according to its discretion and
judgment all aspects of employment. This ows from the established rule that labor
law does not authorize the substitution of the judgment of the employer in the conduct
of its business. Such management prerogative may be availed of without fear of any
liability so long as it is exercised in good faith for the advancement of the employer's
interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or agreements and are not exercised in a malicious,
harsh, oppressive, vindictive or wanton manner or out of malice or spite. 3 0
On a nal note, the Court has ruled time and again that factual ndings of labor
o cials, who are deemed to have acquired expertise in matters within their jurisdiction,
are generally accorded not only respect but even nality by the courts when supported
by substantial evidence and a rmed by the CA, in the exercise of its expanded
jurisdiction to review findings of the National Labor Relations Commission.
WHEREFORE , premises considered, the petition is DENIED . The Decision dated
November 5, 2012 of the Court of Appeals in CA-G.R. SP No. 115796 is hereby
AFFIRMED .
SO ORDERED.
Carpio, Peralta, Perlas-Bernabe and Caguioa, JJ., concur.

Footnotes

1. Rollo, pp. 3-5.

2. Id. at 223-231.
3. Id. at 235-237.
4. Id. at 232-233.

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 5. Id. at 224.
6. Id.

7. Id. at 225.
8. Id.
9. Id.
10. Id. at 226.
11. Id.

12. Id. at 119-123.

13. Id. at 227.
14. Id. at 19-25.
15. Id. at 223-231.

16. Id. at 230-231.

17. Id. at 232-233.
18. Id. at 235-237.
19. Id. at 225.
20. Id. at 98-103.

21. Id. at 100.

22. Id. at 115.
23. LABOR CODE OF THE PHILIPPINES, Article 124.
24. Id.
25. 361 Phil. 744, 757 (1999).

26. Philippine Airlines, Inc. v. NLRC, 392 Phil. 50, 56 (2000).

27. Julie's Bakeshop, et al. v. Arnaiz, et al., 682 Phil. 95, 108 (2012).
28. 467 Phil. 570 (2004).
29. Id. at 579-580.

30. Wise and Co., Inc. v. Wise and Co., Inc. Employees Union-NATU, 258-A Phil. 321-322 (1989).
n Note from the Publisher: Copied verbatim from the official copy.

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