This Supreme Court decision clarifies the relationship between Wage Orders (WO) and Collective Bargaining Agreements (CBA) concerning Emergency Cost of Living Allowances (ECOLA). The Court ruled that retroactive salary increases mandated by a CBA should be considered when determining an employee’s entitlement to ECOLA under WO No. 9. The decision underscores the importance of considering the actual wage received by employees when evaluating compliance with minimum wage laws.

ECOLA and CBA: How Retroactive Pay Hikes Affect Worker Entitlement

In this case, the National Union of Workers in Hotel, Restaurant, and Allied Industries-Dusit Hotel Nikko Chapter (Union) claimed that Dusit Hotel Nikko (Dusit Hotel) did not comply with Wage Order (WO) No. NCR-09, which granted a P30.00-per-day Emergency Cost of Living Allowance (ECOLA) to employees earning between P250.00 and P290.00 daily. The core issue was whether salary increases, retroactive to January 1, 2001, granted by the National Labor Relations Commission (NLRC) in a Collective Bargaining Agreement (CBA) dispute, should be considered when determining if Dusit Hotel employees were entitled to ECOLA.

WO No. 9, effective November 5, 2001, aimed to provide immediate relief to workers through ECOLA. It specifically stated that private sector workers in the National Capital Region (NCR) earning daily wage rates between P250.00 and P290.00 were entitled to this allowance. The Regional Tripartite Wages and Productivity Board (RTWPB) approved this order. The controversy arose when the Union argued that Dusit Hotel could not credit salary increases granted in a CBA as compliance with WO No. 9, emphasizing Section 13 of WO No. 9.

Section 13 of WO No. 9 states that wage increases granted within three months before the effectivity of the Order can be credited as compliance, but only if a corresponding CBA provision allows such creditability. The Union pointed out the absence of such a provision in their CBA with Dusit Hotel. However, the Court found the Union’s reliance on Section 13 misplaced. Dusit Hotel wasn’t seeking to substitute the salary increases for the ECOLA. Rather, it argued that the increases should be considered when determining if employees fell within the income bracket eligible for ECOLA.

The Court agreed with Dusit Hotel. The retroactive nature of the salary increases meant employees were entitled to the increased salaries from the specified dates. To disregard these increases when determining ECOLA entitlement would lead to unjust enrichment, as employees would receive salary increases placing them above the WO No. 9 threshold and still claim ECOLA benefits under the same provision. The Court acknowledged the intent of the wage order, which was to provide relief to employees within a particular salary range, which the employees no longer fell under because of the CBA.

Consequently, the Court considered how many employees still qualified for ECOLA after applying the retroactive salary increases. As of November 5, 2001, the effective date of WO No. 9, only 82 employees had daily salary rates within the P250.00 to P290.00 range. By January 1, 2002, after the second round of salary increases, no employee qualified for ECOLA as their salaries exceeded P290.00 daily. However, the court addressed the issue of shares in the service charges. The Court emphasizes the difference between the rights of the employees in service charges and their rights to ECOLA. The law mandates that the employees receive the service charges, thus, cannot be considered as compliance to ECOLA.

Although 82 employees were entitled to the first tranche of ECOLA from November 5, 2001, to December 31, 2001, the Court clarified that Dusit Hotel’s payment of shares in the service charges could not be considered compliance with WO No. 9. The right to service charges is distinct and separate from the right to ECOLA. The Court, however, removed the penalty for double indemnity because the Notice of Inspection Result issued by the DOLE-NCR did not explicitly advise Dusit Hotel of its liability for double indemnity if it failed to correct the violations within five days.

Article 96. Service charges. – All service charges collected by hotels, restaurants and similar establishments shall be distributed at the rate of eighty-five percent (85%) for all covered employees and fifteen percent (15%) for management. The share of employees shall be equally distributed among them. In case the service charge is abolished, the share of the covered employees shall be considered integrated in their wages.

The Court underscored the need to protect both labor and capital, highlighting that while social justice and the protection of the working class are vital, management also has rights that deserve respect and enforcement. The Supreme Court found that while the retroactive salary increases should be taken into account in the computation of wages for ECOLA benefits, employees also have rights to benefits separate from ECOLA, such as shares from service charges.

FAQs

What was the key issue in this case?	The central issue was whether retroactive salary increases granted in a CBA should be considered when determining an employee’s entitlement to ECOLA under WO No. 9. The court had to clarify whether the increase of wages would be ground for non-payment of ECOLA benefits to the employees.
What is ECOLA?	ECOLA stands for Emergency Cost of Living Allowance. It is a benefit granted to employees to help them cope with increases in the cost of living, especially those earning within a specific wage range.
What is Wage Order No. 9?	Wage Order No. 9 (WO No. 9) is a specific wage order that grants a P30.00-per-day ECOLA to private sector workers and employees in the National Capital Region (NCR) earning between P250.00 and P290.00 daily.
What did the NLRC decide?	The NLRC, in resolving a CBA deadlock, ordered Dusit Hotel to grant salary increases to its employees retroactive to January 1, 2001, and January 1, 2002. These increases ultimately raised many employees’ salaries above the threshold for ECOLA eligibility.
How did the Court resolve the issue of double indemnity?	The Court removed the penalty for double indemnity because the DOLE-NCR’s Notice of Inspection Result did not explicitly advise Dusit Hotel of its liability for this penalty if it failed to correct the violations within the specified timeframe. This lack of notice deprived Dusit Hotel of the opportunity to avoid the penalty.
Why couldn’t the service charges be considered as compliance with ECOLA?	The Court emphasized that employees’ right to their shares in the service charges is separate from their right to ECOLA. Therefore, the hotel cannot claim that paying the service charges constitutes compliance with the ECOLA mandate.
What was the effect of the Court’s decision?	The Supreme Court affirmed that only the 82 hotel employees who, after applying the 1 January 2001 salary increases, still had salaries of P250.00 to P290.00 were eligible to receive the ECOLA from 5 November 2001 to 31 December 2001.
What are the implications for employers and employees?	This ruling provides clarity on how retroactive wage increases affect ECOLA entitlement. Employers and employees alike should consider how wage increases may influence employees’ eligibility for benefits under wage orders.

In conclusion, this case provides important guidance on interpreting wage orders in the context of collective bargaining agreements and retroactive salary adjustments. This balance ensures fair treatment for both workers and employers.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Philippine Hoteliers, Inc. vs. National Union of Workers in Hotel, Restaurant, and Allied Industries (NUWHRAIN-APL-IUF)- Dusit Hotel Nikko Chapter, G.R. No. 181972, August 25, 2009