Topic: Quasi-legislative (Rulemaking) Power

METROPOLITAN BANK AND TRUST COMPANY v. NATIONAL WAGES AND PRODUCTIVITY

COMMISSION

Petitioner: Metropolitan Bank and Trust Company, Inc.

Respondent: National Wages and Productivity Commission and Regional Tripartite Wages and
Productivity Board – Region II

FACTS:

 On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II,
Tuguegarao, Cagayan (RTWPB), by virtue of RA No. 6727 (Wage Rationalization Act), issued
Wage Order No. R02-03 as follows:

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

 The said wage order was published in a newspaper of general circulation on December 2, 1995
and took effect on January 1, 1996. Its Implementing Rules were approved on February 14, 1996.

 Per Sec. 13 of the wage order, any party aggrieved by the wage order my file an appeal with the
National Wages and Productivity Commission (NWPC) through the RTWPB within 10 days from
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
with head offices outside Region II to seek exemption from the coverage of the wage order since
its member-banks are already paying more than the prevailing minimum wage rate in the NCR,
which is their principal place of business.
o In its letter-reply dated July 16, 1996, the NWPC stated that the member-banks of BCPM
are covered by the wage order and do not fall under the exemptible categories listed under
the wage order.

 In a letter inquiry to the NWPC dated July 23, 1996, petitioner sought for the interpretation of the
applicability of said wage order. This was then referred by the NWPC to the RTWPB.
o In its letter-reply dated August 12, 1996, the RTWPB clarified that the wage order covers
all private establishments situated in Region II, regardless of the voluntary adoption by said
establishments of the wage orders established in Metro Manila and irrespective of the
amounts already paid by the petitioner.

 On October 15, 1996, petitioner filed a petition for certiorari and prohibition with the CA seeking the
nullification of the wage order on the following grounds:
o That the RTWPB acted without authority when it issued the questioned wage order;
o That even assuming that the RTWPB was vested with the authority to prescribe an
increase, it exceeded its authority when it did so without any ceiling or qualification;
o That the implementation of the wage order will cause the petitioner and other similarly
situated employers, to incur huge financial losses and suffer labor unrest.

OSG’s MANIFESTATION: In its Manifestation and Motion filed in lieu of a Comment, the OSG AFFIRMED
the petitioner’s claim that the RTWPB acted beyond its authority in issuing the wage order prescribing an
across-the-board increase to all workers and employees in Region II, effectively granting additional or other
benefits not contemplated by RA No. 6727.
RESPONDENT’S COMMENT: In its comment, respondents prayed that the petition be dismissed for
procedural lapses since petitioner failed to avail of the remedy of appeal prescribed by the wage order.
Moreover, it maintained that the issuance of the wage order was performed in the exercise of a purely
administrative function.

CA RULING: In its Decision, it DENIED the petition. It ruled that a writ of prohibition can no longer be issued
since implementation of the wage order had long become fait accompli, the Wage Order having taken effect
on January 1, 1996 and its implementing rules approved on February 14, 1996. Similarly, the writ of
certiorari is improper since the wage order was issued in the exercise of a purely administrative function,
not judicial or quasi-judicial. Moreover, it ruled that even if the petitioner’s procedural lapse is disregarded,
a regional wage order prescribing a wage increase across-the-board applies to banks adopting a unified
wage system and a disparity in wages between employees holding similar positions in different regions is
not wage distortion.

ISSUE:
1. W/N the Regional Tripartite Wages and Productivity Board (RTWPB), in issuing the said wage
order, exceeded the authority delegated to it under RA 6727? -YES.
2. W/N Wage Order No. R02-03 is void and of no legal effect? – YES, it is VOID insofar as it
GRANTS A WAGE INCREASE TO EMPLOYEES EARNING MORE THAN THE MINIMUM WAGE
RATE. NO, it is VALID with respect to EMPLOYEES EARNING THE PREVAILING MINIMUM
WAGE RATE.

HELD:
1. W/N the Regional Tripartite Wages and Productivity Board (RTWPB), in issuing the said wage
order, exceeded the authority delegated to it under RA 6727?

 RA No. 6727 declared it a policy of the State to rationalize the fixing of minimum wages
and to promote productivity-improvement and gain-sharing measures to ensure a
decent standard of living for the workers and their families; to guarantee the rights of
labor to its just share in the fruits of production; to enhance employment generation in the
countryside through industrial dispersal; and to allow business and industry reasonable
returns on investment, expansion and growth.

 In line with its declared policy, RA No. 6727:

o Created the NWPC, vested with the power to prescribe rules and guidelines for the
determination of appropriate minimum wage and productivity measures at the
regional, provincial or industry levels; and
o Authorized the RTWPB to determine and fix the minimum wage rates
applicable in their respective regions, provinces, or industries therein and
issue the corresponding wage orders, subject to the guidelines issued by
the NWPC.

 Pursuant to its wage fixing authority, the RTWPB may issue wage orders which set the
daily minimum wage rates based on the standards or criteria set by Art. 124 of the
Labor Code.

 In ECOP, the Court declared that there are two ways of fixing the minimum wage:
o The “floor-wage” method which involves the fixing of a determinate amount to
be added to the prevailing statutory minimum wage rates.
 In the wage order, it would have been sufficient to simply set P15.00 as
the amount to be added to the prevailing statutory minimum wage rates.

o In the “salary-ceiling” method, the wage adjustment is to be applied to

employees receiving a certain denominated salary ceiling.
  In the wage order, it would have been sufficient to state a specific salary,
such as P250.00, and only those earning 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. It
did not set a wage level nor a range to which a wage adjustment or increase shall be
added. Instead, it granted an across-the-board wage increase of P15.00 to all
employees and workers of Region 2. In doing so, the RTWPB exceeded its authority
by extending the coverage of the wage order to wage earners receiving more than
the prevailing minimum wage rate, without a denominated salary ceiling. As correctly
pointed out by the OSG, the wage order granted additional benefits not contemplated by
RA No. 6727.

 The power of administrative agencies is confined to implementing the law or putting

it into effect. Corollary to this guideline is that an administrative regulation cannot
extend the law and amend a legislative action. It is axiomatic that the clear letter of the
law is controlling and cannot be amended by a mere administrative rule issued for its
implementation. Indeed, administrative or executive acts, orders, and regulations shall be
valid only when they are not contrary to the laws or the Constitution.

 Where the legislature has delegated to an executive or administrative officers and

boards authority to promulgate rules to carry out an express legislative purpose, the
rules of administrative officers and boards, which have the effect of extending, or
which conflict with the authority-granting statute, do not represent a valid exercise
of the rule-making power but constitute an attempt by an administrative body to
legislate.

2. W/N Wage Order No. R02-03 is void and of no legal effect? – YES, it is VOID insofar as it
GRANTS A WAGE INCREASE TO EMPLOYEES EARNING MORE THAN THE MINIMUM WAGE
RATE. NO, it is VALID with respect to EMPLOYEES EARNING THE PREVAILING MINIMUM
WAGE RATE.

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

 Thus, the Court finds that:

o Sec. 1, Wage Order No. R02-03 is VOID insofar as it GRANTS A WAGE
INCREASE TO EMPLOYEES EARNING MORE THAN THE MINIMUM WAGE
RATE; and
o Pursuant to the separability clause of the wage order, Sec. 1 is declared VALID
WITH RESPECT TO EMPLOYEES EARNING THE PREVAILING MINIMUM
WAGE RATE.

 Prior to the passage of the wage order, the daily minimum wage rates in Region II
was set as P104.00 for the Province of Isabela, P103.00 for the Province of Cagayan,
P101.00 for the Province of Nueva Vizcaya, and P100.00 for the Provinces of Quirino
and Batanes. Only employees earning the above-stated minimum wage rates are
entitled to the P15.00 mandated increase under the Wage Order.

 However, in line with the Court’s ruling in Blanquera, De Jesus and KMG, employees,
other than minimum wage earners, who received the wage increase mandated by
the Wage Order need not refund the wage increase received by them since they
received the wage increase in good faith, in the honest belief that they are entitled
 to such wage increase and without any knowledge that there was no legal basis for
the same.

DP: WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals dated
July 19, 2000 in CA-G.R. SP No. 42240 is MODIFIED. Section 1 of Wage Order No. R02-03 issued on
October 17, 1995 by the Regional Tripartite Wages and Productivity Board for Region II,
Tuguegarao, Cagayan is declared VALID insofar as the mandated increase applies to employees
earning the prevailing minimum wage rate at the time of the passage of the Wage Order and VOID
with respect to its application to employees receiving more than the prevailing minimum wage rate
at the time of the passage of the Wage Order.