Upon a review of the wage rate and structure pertaining to its regular rank and file employees, K Corporation found it necessary to increase its hiring rates for employees belonging to the different job classification levels to make their salary rates more competitive in the labor market.
After the implementation of the new hiring salary, Union X, the exclusive bargaining agent of the rank and file employees, demanded a similar salary adjustment for the old employees. It argued that the increase in hiring rates resulted in wage distortion since it erased the wage gap between the new and old employees. In other words, new employees would enjoy almost the same salary rates as K Corporation’s old employees.
(a) What is wage distortion? (2%)
(b) Did a wage distortion arise under the circumstances which legally obligated K Corporation to rectify the wages of its old employees? Explain. (3%)
Suggested Answer:
(a) Wage distortion – refers to a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in 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.
(b) No. Answer
Under the Labor Code, the condition precedent for a wage distortion is the issuance of a wage order. Rule
In the case at bar, there is no such issuance of a wage order. The increase in hiring rates resulted from the review of the wage rate and structure by the employer, K Corporation. Apply
Thus, there was no wage distortion that arose. Conclusion
