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PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION v. CHEVRON GEOTHERMAL PHILS. HOLDINGS, INC. G.R. No. 207252 | 2018

Labor Dispute on Wage Distortion: Philippine Geothermal Employees Union vs. Chevron Geothermal

PGIEU vs. Chevron Geothermal Phils.: Supreme Court Upholds Management Prerogative Over Wage Adjustment

Case Title: Philippine Geothermal, Inc. Employees Union (PGIEU) vs. Chevron Geothermal Phils. Holdings, Inc.

G.R. No.: 207252

Date of Decision: January 24, 2018

Citation: 824 Phil. 426

Ponente: Justice Reyes, Jr.

Full text: Read here

Case Summary

This case involves a labor dispute between the Philippine Geothermal, Inc. Employees Union (PGIEU) and Chevron Geothermal Phils. Holdings, Inc. The Union alleged a violation of their Collective Bargaining Agreement (CBA) due to salary increases given to probationary employees, which they claimed caused wage distortion among regular union members.

Nature of the Petition

The PGIEU filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Court of Appeals’ decision that upheld the arbitrator’s ruling in favor of Chevron.

Issue

Was the wage increase granted to Lanao and Cordovales a valid exercise of management prerogative, and did it result in wage distortion?

Ruling: YES, it was valid; NO wage distortion occurred.

Supreme Court Ruling

The Court upheld Chevron’s position, affirming that the wage increases for newly hired probationary employees were part of the company’s management prerogative aimed at attracting high-quality candidates. The Court emphasized that wage distortion applies only when a salary increase mandated by law or wage order disrupts the wage structure within a company.

Doctrine Cited

The Court reiterated the elements of wage distortion as laid out in Prubankers Association v. Prudential Bank and Trust Company:

  1. An existing hierarchy of positions with corresponding salary rates.
  2. A significant change in the salary rate of a lower pay class without a corresponding increase for the higher class.
  3. The elimination of the distinction between the two levels.
  4. The existence of the distortion in the same region.

Management Prerogative Explained

The Court emphasized that management prerogative includes the right to set hiring rates based on market conditions. This discretion must only be exercised in good faith, without malice or intent to circumvent employee rights.

Conclusion

There was no violation of the CBA and no wage distortion. The hiring rates for Lanao and Cordovales were justified by prevailing market conditions and not tied to any legal mandate that could trigger wage distortion claims under Article 124 of the Labor Code.

Legal Takeaway

Wage distortion requires a government-mandated wage increase, not a company-initiated one. Employers may exercise discretion in offering competitive hiring rates, as long as this is done in good faith and does not violate existing contracts or laws.

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