Wage Distortion

It is defined as "asituation 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." (Republic Act No. 6727, also known as the "Wage Rationalization Act," Sec. 124; Manila Mandarin Employees Union vs. NLRC, G.R. No. 108556, 19 November 1996) The general principles on wage distortion are as follows:( Metro Transit Organization, Inc. vs. NLRC, G.R. No. 116008, 11 July 1995)

• (a) The concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees.

• (b) Wage distortions have often been the result of government- decreed increases in minimum wages. There are, however, other causes of wage distortions, like the merger of two (2) companies (with differing classification of employees and different wage rates) where the surviving company absorbs all the employees of the dissolved corporation.

• (c) Should a wage distortion exist, there is no legal requirement that, in the rectification of that distortion by re-adjustment of the wage rates of the differing classes of employees, the gap which had previously or historically existed be restored in precisely the same amount. In other words, correction of a wage distortion may be done by re-establishing a substantial or significant gap (as distinguished from the historical gap) between the wage rates of the differing classes of employees.

• (d) The re-establishment of a significant difference in wage rates may be the result of resort to grievance procedures or collective bargaining negotiations.