Pal Employees Savings and Loan Association,

Inc. vs. NLRC

August 22, 1996
G.R. No. 105963
Panganiban, J.

Facts: The respondent used to be a security guard under
the employ of the petitioner company. He works for 12
hours a day and is receiving a monthly salary. He was
then dismissed by the petitioner company. Because of
this, the respondent filed a complaint with the Labor
Arbiter for the payment of his overtime pay. The Labor
Arbiter ruled that the respondent is entitled to an
overtime pay. The NLRC affirmed the decision of the
Labor Arbiter. Hence, the current petition.

The petitioner contends that the fact that the monthly
salary of the petitioner is higher than the minimum wage
provided by law is already compensatory of the excess of
4 hours of work rendered by the said employee. It argues
that the salary of the petitioner already includes the
payment for the excess of 4 hours of work rendered by
the respondent. It also contends that since there is a
meeting of the minds between the respondent and the
petitioner, there is already a perfected contract which
means that the parties are bound by their agreements.

Issue: Whether or not the respondent is entitled to an
overtime pay.

Ruling: The Supreme Court ruled that the respondent is
entitled to an overtime pay. The contention of the
petitioner that since the respondents monthly salary is
higher than the minimum wage, it is already
commensurate of the 4 hours excess of work rendered by
the respondent. The Supreme Court held that the fact
that ones salary is higher than the minimum wage does
not in any way offset the other benefits that are due to
the employees, in the absence of an agreement to the
contrary. To consider the overtime pay of the respondent
included in his monthly salary would be in contravention
of the rule against non-diminution of benefits and a
violation of the Labor Code since it prescribes a certain
manner on how overtime pay is included. Moreover, the
Supreme Court found that contrary to what the
petitioner aver, as shown in the computation of the
petitioner itself, the monthly salary of the respondent is
only a basic salary which is exclusive of all the other
benefits that the respondent is to receive.

With regard to the petitioners second contention that
there is already a perfected contract, hence the terms
and conditions imposed therein binds the parties to the
contract, the Supreme Court held that while such
contention has the weight and force of law, it is still
subject to certain exception. The general right to contract
is subject to a limitation that such terms and conditions
must not be contrary to law, public order, public policy,
morals and good customs. Employment contracts are
imbued with public interest and are therefore subject to
the police power of the state. The subject contract in the
case at bar is contrary to labor laws. Therefore, not
binding to the parties of the case.