Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-16275
February 23, 1961
PAN AMERICAN WORLD AIRWAYS SYSTEM
(PHILIPPINES), petitioner,
vs.
PAN AMERICAN EMPLOYEES ASSOCIATION, respondent.
Ross, Selph and Carrascoso for petitioner.
Jose Espinas for respondent.
REYES, J.B.L., J.:
Appeal by certiorari from the decision of the Court of Industrial
Relations in Case No. 1055-V dated October 10, 1959, and its
resolution en banc denying the motion for reconsideration filed
by the petitioner herein.
The dispositive portion of the appealed decision reads: .
WHEREFORE, the Court orders the Chief of the
Examining Division or his representative to compute the
overtime compensation due the aforesaid fourteen (14)
aircraft mechanic and the two employees from the
Communication Department based on the time sheet of
said employees from February 23 1952 up to and
including July 15, 1958 and to submit his report within 30
days for further disposition by the Court; and the
company shall show to the Court Examiner such time
sheets an other documents that may be necessary in the
aforesaid computation; and two (2) representatives for
the company and two (2) representatives for the union
shall be chosen to help the Court Examiner in said
computation.
The company is also ordered to permanently adopt the
straight 8-hour shift inclusive of meal period which is
mutually beneficial to the parties.
SO ORDERED.
In this appeal, petitioner advances five proposition which,
briefly, are as follows: (1) the Industrial Court has no jurisdiction
to order the payment of overtime compensation, it being a
mere monetary claim cognizable by regular courts; (2) the
finding that the one-hour meal period should be considered
overtime work (deducting 15 minutes as time allotted for

eating) is not supported by substantial evidence; (3) the court

below had no authority to delegate its judicial functions by
ordering the Chief of the Examining Division or his
representative to compute the overtime pay; (4) the finding
that there was no agreement to withdraw Case No. 1055-V in
consideration of the wage increases in the Collective Bargaining
Contract (Exh. "A") is not supported by substantial evidence;
and (5) the court below had no authority to order the company
to adopt a straight 8-hour shift inclusive of meal period.
On the issue of jurisdiction over claims for overtime pay, we
have since definitely ruled in a recent decisions that the
Industrial Court may properly take cognizance of such cases if,
at the time of the petition, the complainants were still in the
service of the employer, or, having been separated from such
service, should ask for reinstatement; otherwise, such claims
should be brought before the regular courts (NASSCO v. CIR, et
al., L-13888, April 29, 1960; FRISCO v. CIR, et al., L-13806, May
23, 1960; Board of Liquidators, et al. vs. CIR, et al., L-15485,
May 23, 1960; Sta. Cecilia, Sawmills Co. vs. CIR, L-14254 & L14255, May 27, 1960; Ajax International Corp. v. Seguritan, L16038, October 25, 1960; Sampaguita Pictures, Inc., et al. vs.
CIR, L-16404, October 25, 1960). Since, in the instant case
there is no question that the employees claiming overtime
compensation were still in the service of the company when the
case was filed, the jurisdiction of the Court of Industrial
Relations cannot be assailed. In fact, since it is not pretended
that, thereafter, the complainants were discharged or otherwise
terminated their relationship with the company for any reason,
all of said complainants could still be with the company up to
the present.
Petitioner herein claims that the one-hour meal period should
not be considered as overtime work (after deducting 15
minutes), because the evidence showed that complainants
could rest completely, and were not in any manner under the
control of the company during that period. The court below
found, on the contrary, that during the so called meal period,
the mechanics were required to stand by for emergency work;
that if they happened not to be available when called, they
were reprimanded by the leadman; that as in fact it happened
on many occasions, the mechanics had been called from their

meals or told to hurry Employees Association up eating to

perform work during this period. Far from being unsupported by
substantial evidence, the record clearly confirms the above
factual findings of the Industrial Court.
Similarly, this Court is satisfied with the finding that there was
no agreement to withdraw Case No. 1055-V in consideration of
the wage increases obtained by the, union and set forth in the
Collective Bargaining Agreement Exhibit "A". As reasoned out
by the court below, such alleged agreement would have been
incorporated in the contract if it existed. The fact that the union
filed a motion to dismiss without prejudice, after the Collective
Bargaining Contract had been signed, did not necessarily mean
that it had agreed to withdraw the case in consideration of the
wage increases. The motion itself (Annex "B", Petition
for Certiorari) was expressly based on an understanding that
the company would "formulate a schedule of work which shall
be in consonance with C. A. 444". All in all, there is substantial
evidence in the record to support the finding of the court below
that no such agreement was made.
It is next contended that in ordering the Chief of the Examining
Division or his representative to compute the compensation
due, the Industrial Court unduly delegated its judicial functions
and thereby rendered an incomplete decision. We do not
believe so. Computation of the overtime pay involves a
mechanical function, at most. And the report would still have to
be submitted to the Industrial Court for its approval, by the very
terms of the order itself. That there was no specification of the
amount of overtime pay in the decision did not make it
incomplete, since this matter would necessarily be made clear
enough in the implementation of the decision (see Malate
Taxicab & Garage, Inc. vs. CIR, et al., L-8718, May 11, 1956).
The Industrial Court's order for permanent adoption of a straight
8-hour shift including the meal period was but a consequence of
its finding that the meal hour was not one of complete rest, but
was actually a work hour, since for its duration, the laborers had
to be on ready call. Of course, if the Company practices in this
regard should be modified to afford the mechanics a real rest
during that hour (f. ex., by installing an entirely different
emergency crew, or any similar arrangement), then the
modification of this part of the decision may be sought from the

Court below. As things now stand, we see no warrant for

altering the decision.
The judgment appealed from is affirmed. Costs against
appellant.
Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion ,
Barrera, Paredes and Dizon, JJ., concur.

FIRST DIVISION
[G.R. No. L-63122. February 20, 1984.]
UNIVERSITY OF PANGASINAN FACULTY UNION, Petitioner,
v. UNIVERSITY OF PANGASINAN And NATIONAL LABOR
RELATIONS COMMISSION, Respondents.
Tanopo, Serafico, Juanitez & Callanta Law Office and
Hermogenes S. Decano for Petitioner.

The Solicitor General for Respondents.

SYLLABUS
1. LABOR AND SOCIAL LEGISLATIONS; LABOR LAWS;
PRESIDENTIAL DECREES ON EMERGENCY COST OF LIVING
ALLOWANCE; REQUISITES FOR ENTITLEMENT TO ALLOWANCES
PROVIDED THEREUNDER. The various Presidential Decrees on
ECOLAs to wit: PDs 1614, 1634, 1678 and 1713, provide on
"Allowances of Fulltime Employees . . ." that "Employees shall
be paid in full the required monthly allowance regardless of the
number of their regular working days if they incur no absences
during the month. If they incur absences without pay, the
amounts corresponding to the absences may be deducted from
the monthly allowance . . ." ; and on "Leave of Absence Without
Pay", that "All covered employees shall be entitled to the
allowance provided herein when they are on leave of absence
with pay."cralaw virtua1aw library
2. ID.; ID.; ID.; "NO WORK, NO PAY" PRINCIPLE NOT APPLICABLE
CASE AT BAR. It is beyond dispute that the petitioners
members are full-time employees receiving their monthly
salaries irrespective of the number of working days or teaching
hours in a month. However, they find themselves in a most
peculiar situation whereby they are forced to go on leave during
semestral breaks. These semestral breaks are in the nature of
work interruptions beyond the employees control. The duration
of the semestral break varies from year to year dependent on a
variety of circumstances affecting at times only the private
respondent but at other times all educational institutions in the
country. As such, these breaks cannot be considered as
absences within the meaning of the law for which deductions
may be made from monthly allowances. The "No work, no pay"
principle does not apply in the instant case. The petitioners
members received their regular salaries during this period. It is
clear from the aforequoted provision of law that it contemplates
a "no work" situation where the employees voluntarily absent
themselves. Petitioners, in the case at bar, certainly do not, ad
voluntatem, absent themselves during semestral breaks.
Rather, they are constrained to take mandatory leave from
work. For this they cannot be faulted nor can they be
begrudged that which is due them under the law.

3. ID.; ID.; ID.; EMPLOYEES WHETHER PAID ON MONTHLY OR

DAILY BASIS ENTITLED TO DAILY LIVING ALLOWANCE WHEN PAID
THEIR BASIC WAGE. Respondents contention that the "factor
receiving a salary alone should not be the basis of receiving
ECOLA", is likewise, without merit. Particular attention is
brought to the Implementing Rules and Regulations of Wage
Order No. 1 to wit: "Sec. 5. Allowance for Unworked Days. a)
All covered employees whether paid on a monthly or daily basis
shall be entitled to their daily living allowance when they are
paid their basic.." . .
4. ID.; ID.; ID.; PURPOSE OF THE LAW. The legal principles of
"No work, no pay; No pay, no ECOLA" must necessarily give way
to the purpose of the law to augment the income of employees
to enable them to cope with the harsh living conditions brought
about by inflation; and to protect employees and their wages
against the ravages brought by these conditions. Significantly, it
is the commitment of the State to protect labor and to provide
means by which the difficulties faced by the working force may
best be alleviated.
5. ID.; ID.; ID.; PRESIDENTIAL DECREE 451; CONSTRUED.
Respondent overlooks the elemental principle of statutory
construction that the general statements in the whereas clauses
cannot prevail over the specific or particular statements in the
law itself which define or limit the purposes of the legislation or
proscribe certain acts. True, the whereas clauses of PD 451
provide for salary and or wage increase and other benefits,
however, the same do not delineate the source of such funds
and it is only in Section 3 which provides for the limitations
wherein the intention of the framers of the law is clearly
outlined. The law is clear. The sixty (60%) percent incremental
proceeds from the tuition increase are to be devoted entirely to
wage or salary increases which means increases in basic salary.
The law cannot be construed to include allowances which are
benefits over and above the basic salaries of the employees.
6. REMEDIAL LAW; APPEALS; FINDINGS OF FACT OF NATIONAL
LABOR RELATIONS COMMISSION ARE BINDING WHEN FULLY
SUBSTANTIATED BY EVIDENCE. As evidenced by the payrolls
submitted by them during the period September 16 to
September 30, 1981, the faculty members have been paid for
the extra loads. We agree with the respondents that this issue
involves a question of fact properly within the competence of
the respondent NLRC to pass upon. The findings of fact of the

respondent Commission are binding on this Court there being

no indication of their being unsubstantiated by evidence.
DECISION
GUTIERREZ, JR., J.:
This is a petition for review on certiorari pursuant to Rule 65 of
the Rules of Court to annul and to set aside the decision of
respondent National Labor Relations Commission (NLRC) dated
October 25, 1982, dismissing the appeal of petitioner in NLRC
Case No. RBI-47-82, entitled "University of Pangasinan Faculty
Union, complainant, versus University of
Pangasinan, Respondent." chanrobles law library : red
Petitioner is a labor union composed of faculty members of the
respondent University of Pangasinan, an educational institution
duly organized and existing by virtue of the laws of the
Philippines.
On December 18, 1981, the petitioner, through its President,
Miss Consuelo Abad, filed a complaint against the private
respondent with the Arbitration Branch of the NLRC, Dagupan
District Office, Dagupan City. The complaint seeks: (a) the
payment of Emergency Cost of Living Allowances (ECOLA) for
November 7 to December 5, 1981, a semestral break; (b) salary
increases from the sixty (60%) percent of the incremental
proceeds of increased tuition fees; and (c) payment of salaries
for suspended extra loads.
The petitioners members are full-time professors, instructors,
and teachers of respondent University. The teachers in the
college level teach for a normal duration of ten (10) months a
school year, divided into two (2) semesters of five (5) months
each, excluding the two (2) months summer vacation. These
teachers are paid their salaries on a regular monthly basis.
In November and December, 1981, the petitioners members
were fully paid their regular monthly salaries. However, from
November 7 to December 5, during the semestral break, they
were not paid their ECOLA. The private respondent claims that
the teachers are not entitled thereto because the semestral
break is not an integral part of the school year and there being

no actual services rendered by the teachers during said period,

the principle of "No work, no pay" applies.
During the same school year (1981-1982), the private
respondent was authorized by the Ministry of Education and
Culture to collect, as it did collect, from its students a fifteen
(15%) percent increase of tuition fees. Petitioners members
demanded a salary increase effective the first semester of said
schoolyear to be taken from the sixty (60%) percent
incremental proceeds of the increased tuition fees. Private
respondent refused, compelling the petitioner to include said
demand in the complaint filed in the case at bar. While the
complaint was pending in the arbitration branch, the private
respondent granted an across-the-board salary increase of
5.86%. Nonetheless, the petitioner is still pursuing full
distribution of the 60% of the incremental proceeds as
mandated by the Presidential Decree No. 451.
Aside from their regular loads, some of petitioners members
were given extra loads to handle during the same 1981-1982
schoolyear. Some of them had extra loads to teach on
September 21, 1981, but they were unable to teach as classes
in all levels throughout the country were suspended, although
said days was proclaimed by the President of the Philippines as
a working holiday. Those with extra loads to teach on said day
claimed they were not paid their salaries for those loads, but
the private respondent claims otherwise.
The issue to be resolved in the case at bar are the
following:chanrob1es virtual 1aw library
I
"WHETHER OR NOT PETITIONERS MEMBERS ARE ENTITLED TO
ECOLA DURING THE SEMESTRAL BREAK FROM NOVEMBER 7 TO
DECEMBER 5, 1981 OF THE 1981-82 SCHOOL YEAR.
II
"WHETHER OR NOT 60% OF THE INCREMENTAL PROCEEDS OF
INCREASED TUITION FEES SHALL BE DEVOTED EXCLUSIVELY TO
SALARY INCREASE,
III
"WHETHER OR NOT ALLEGED PAYMENT OF SALARIES FOR

EXTRA LOADS ON SEPTEMBER 21, 1981 WAS PROVEN BY

SUBSTANTIAL EVIDENCE."cralaw virtua1aw library
Anent the first issue, the various Presidential Decrees on
ECOLAs to wit: PDs 1614, 1634, 1678 and 1713, provide on
"Allowances of Fulltime Employees . . ." that "Employees shall
be paid in full the required monthly allowance regardless of the
number of their regular working days if they incur no absences
during the month. If they incur absences without pay, the
amounts corresponding to the absences may be deducted from
the monthly allowance . . ." ; and on "Leave of Absence Without
Pay", that "All covered employees shall be entitled to the
allowance provided herein when they are on leave of absence
with pay."cralaw virtua1aw library
It is beyond dispute that the petitioners members are full-time
employees receiving their monthly salaries irrespective of the
number of working days or teaching hours in a month. However,
they find themselves in a most peculiar situation whereby they
are forced to go on leave during semestral breaks. These
semestral breaks are in the nature of work interruptions beyond
the employees control. The duration of the semestral break
varies from year to year dependent on a variety of
circumstances affecting at times only the private respondent
but at other times all educational institutions in the country. As
such, these breaks cannot be considered as absences within the
meaning of the law for which deductions may be made from
monthly allowances. The "No work, no pay" principle does not
apply in the instant case. The petitioners members received
their regular salaries during this period. It is clear from the
aforequoted provision of law that it contemplates a "no work"
situation where the employees voluntarily absent themselves.
Petitioners, in the case at bar, certainly do not, ad voluntatem,
absent themselves during semestral breaks. Rather, they are
constrained to take mandatory leave from work. For this they
cannot be faulted nor can they be begrudged that which is due
them under the law. To a certain extent, the private respondent
can specify dates when no classes would be held. Surely, it was
not the intention of the framers of the law to allow employers to
withhold employee benefits by the simple expedient of
unilaterally imposing "no work" days and consequently avoiding
compliance with the mandate of the law for those
days.chanrobles.com.ph : virtual law library
Respondents contention that "the fact of receiving a salary
alone should not be the basis of receiving ECOLA", is, likewise,

without merit. Particular attention is brought to the

Implementing Rules and Regulations of Wage Order No. 1 to wit.
SECTION 5. Allowance for Unworked Days.
"a) All covered employees whether paid on a monthly or daily
basis shall be entitled to their daily living allowance when they
are paid their basic wage."cralaw virtua1aw library
x
x
x
This provision, at once refutes the above contention. It is
evident that the intention of the law is to grant ECOLA upon the
payment of basic wages. Hence, we have the principle of "No
pay, no ECOLA" the converse of which finds application in the
case at bar. Petitioners cannot be considered to be on leave
without pay so as not to be entitled to ECOLA, for, as earlier
stated, the petitioners were paid their wages in full for the
months of November and December of 1981, notwithstanding
the intervening semestral break. This, in itself, is a tacit
recognition of the rather unusual state of affairs in which
teachers find themselves. Although said to be on forced leave,
professors and teachers are, nevertheless, burdened with the
task of working during a period of time supposedly available for
rest and private matters. There are papers to correct, students
to evaluate, deadlines to meet, and periods within which to
submit grading reports. Although they may be considered by
the respondent to be on leave, the semestral break could not be
used effectively for the teachers own purposes for the nature of
a teachers job imposes upon him further duties which must be
done during the said period of time. Learning is a never ending
process. Teachers and professors must keep abreast of
developments all the time. Teachers cannot also wait for the
opening of the next semester to begin their work. Arduous
preparation is necessary for the delicate task of educating our
children. Teaching involves not only an application of skill and
an imparting of knowledge, but a responsibility which entails
self dedication and sacrifice. The task of teaching ends not with
the perceptible efforts of the petitioners members but goes
beyond the classroom: a continuum where only the visible labor
is relieved by academic intermissions. It would be most unfair
for the private respondent to consider these teachers as
employees on leave without pay to suit its purposes and, yet, in
the meantime, continue availing of their services as they
prepare for the next semester or complete all of the last
semesters requirements. Furthermore, we may also by analogy

apply the principle enunciated in the Omnibus Rules

Implementing the Labor Code to wit:chanrob1es virtual 1aw
library
Sec. 4. Principles in Determining Hours Worked. The following
general principles shall govern in determining whether the time
spent by an employee is considered hours worked for purposes
of this Rule:chanrob1es virtual 1aw library
x
x
x
"(d) The time during which an employee is inactive by reason of
interruptions in his work beyond his control shall be considered
time either if the imminence of the resumption of work requires
the employees presence at the place of work or if the interval
is too brief to be utilized effectively and gainfully in the
employees own interest." (Emphasis supplied).
The petitioners members in the case at bar, are exactly in such
a situation. The semestral break scheduled is an interruption
beyond petitioners control and it cannot be used "effectively
nor gainfully in the employees interest. Thus, the semestral
break may also be considered as "hours worked." For this, the
teachers are paid regular salaries and, for this, they should be
entitled to ECOLA. Not only do the teachers continue to work
during this short recess but much less do they cease to live for
which the cost of living allowance is intended. The legal
principles of "No work, no pay; No pay, no ECOLA" must
necessarily give way to the purpose of the law to augment the
income of employees to enable them to cope with the harsh
living conditions brought about by inflation; and to protect
employees and their wages against the ravages brought by
these conditions. Significantly, it is the commitment of the State
to protect labor and to provide means by which the difficulties
faced by the working force may best be alleviated. To submit to
the respondents interpretation of the no work, no pay policy is
to defeat this noble purpose. The Constitution and the law
mandate otherwise.chanrobles.com:cralaw:red
With regard to the second issue, we are called upon to interpret
and apply Section 3 of Presidential Decree 451 to
wit:chanrob1es virtual 1aw library
SEC. 3. Limitations. The increase in tuition or other school
fees or other charges as well as the new fees or charges
authorized under the next preceding section shall be subject to

the following conditions:jgc:chanrobles.com.ph

"(a) That no increase in tuition or other school fees or charges
shall be approved unless sixty (60%) per centum of the
proceeds is allocated for increase in salaries or wages of the
members of the faculty and all other employees of the school
concerned, and the balance for institutional development,
student assistance and extension services, and return to
investments: Provided, That in no case shall the return to
investments exceed twelve (12%) per centum of the
incremental proceeds; . . ."cralaw virtua1aw library
x
x
x
This Court had the occasion to rule squarely on this point in the
very recent case entitled, University of the East v. University of
the East Faculty Association, 117 SCRA 554. We held
that:jgc:chanrobles.com.ph
"In effect, the problem posed before Us is whether or not the
reference in Section 3(a) to increase in salaries or wages of the
faculty and all other employees of the schools concerned as
the first purpose to which the incremental proceeds from
authorized increases to tuition fees may be devoted, may be
construed to include allowances and benefits. In the negative,
which is the position of respondents, it would follow that such
allowances must be taken in resources of the school not derived
from tuition fees.
"Without delving into the factual issue of whether or not there
could be any such other resources, We note that among the
items of second purpose stated in provision in question is return
in investment. And the law provides only for a maximum, not a
minimum. In other words, the schools may get a return to
investment of not more than 12%, but if circumstances warrant,
there is no minimum fixed by law which they should get.
"On this predicate, We are of the considered view that, if the
school happen to have no other resources to grant allowances
and benefits, either mandated by law or secured by collective
bargaining, such allowances and benefits should be charged
against the return to investments referred to in the second
purpose stated in Section 3(a) of P.D. 451."cralaw virtua1aw
library
Private respondent argues that the above interpretation

"disregarded the intention and spirit of the law" which intention

is clear from the "whereas" clauses as
follows:jgc:chanrobles.com.ph
"It is imperative that private educational institutions upgrade
classroom instruction . . . provide salary and or wage increases
and other benefits . . ."cralaw virtua1aw library
Respondent further contends that PD 451 was issued to
alleviate the sad plight of private schools, their personnel and
all those directly or indirectly on school income as the decree
was aimed
". . . to upgrade classroom instruction by improving their
facilities and bring competent teachers in all levels of
education, provide salary and or wage increases and other
benefits to their teaching, administrative, and other personnel
to keep up with the increasing cost of living." (Emphasis
supplied)
Respondent overlooks the elemental principle of statutory
construction that the general statements in the whereas clauses
cannot prevail over the specific or particular statements in the
law itself which define or limit the purposes of the legislation or
proscribe certain acts. True, the whereas clauses of PD 451
provide for salary and or wage increase and other benefits,
however, the same do not delineate the source of such funds
and it is only in Section 3 which provides for the limitations
wherein the intention of the framers of the law is clearly
outlined. The law is clear. The sixty (60%) percent incremental
proceeds from the tuition increase are to be devoted entirely to
wage or salary increases which means increases in basic salary.
The law cannot be construed to include allowances which are
benefits over and above the basic salaries of the employees. To
charge such benefits to the 60% incremental proceeds would be
to reduce the increase in basic salary provided by law, an
increase intended also to help the teachers and other workers
tide themselves and their families over these difficult economic
times.chanrobles virtual lawlibrary
This Court is not guilty of usurpation of legislative functions as
claimed by the respondents. We expressed the opinion in the
University of the East case that benefits mandated by law and
collective bargaining may be charged to the 12% return on
investments within the 40% incremental proceeds of tuition
increase. As admitted by respondent, we merely made this

statement as a suggestion in answer to the respondents query

as to where then, under the law, can such benefits be charged.
We were merely interpreting the meaning of the law within the
confines of its provisions. The law provides that 60% should go
to wage increases and 40% to institutional developments,
student assistance, extension services, and return on
investments (ROI). Under the law, the last item ROI has
flexibility sufficient to accommodate other purposes of the law
and the needs of the university. ROI is not set aside for any one
purpose of the university such as profits or returns on
investments. The amount may be used to comply with other
duties and obligations imposed by law which the university
exercising managerial prerogatives finds cannot under present
circumstances, be funded by other revenue sources. It may be
applied to any other collateral purpose of the university or
invested elsewhere. Hence, the framers of the law intended this
portion of the increases in tuition fees to be a general fund to
cover up for the universitys miscellaneous expenses and,
precisely, for this reason, it was not so delimited. Besides, ROI is
a return or profit over and above the operating expenditures of
the university, and still, over and above the profits it may have
had prior to the tuition increase. The earning capacities of
private educational institutions are not dependent on the
increases in tuition fees allowed by P.D. 451. Accommodation of
the allowances required by law require wise and prudent
management of all the university resources together with the
incremental proceeds of tuition increases. Cognizance should be
taken of the fact that the private respondent had, before PD
451, managed to grant all allowances required by law. It cannot
now claim that it could not afford the same, considering that
additional funds are even granted them by the law in question.
We find no compelling reason, therefore, to deviate from our
previous ruling in the University of the East case even as we
take the second hard look at the decision requested by the
private Respondent. This case was decided in 1982 when PDs
1614, 1634, 1678, and 1713 which are also the various
Presidential Decrees on ECOLA were already in force. PD 451
was interpreted in the light of these subsequent legislations
which bear upon but do not modify nor amend, the same. We
need not go beyond the ruling in the University of the East
case.
Coming now to the third issue, the respondents are of the
considered view that as evidenced by the payrolls submitted by
them during the period September 16 to September 30, 1981,
the faculty members have been paid for the extra loads. We

agree with the respondents that this issue involves a question

of fact properly within the competence of the respondent NLRC
to pass upon. The findings of fact of the respondent Commission
are binding on this Court there being no indication of their being
unsubstantiated by evidence. We find no grave abuse in the
findings of respondent NLRC on this matter to warrant reversal.
Assuming arguendo, however, that the petitioners have not
been paid for these extra loads, they are not entitled to
payment following the principles of "No work, no pay." This
time, the rule applies. Involved herein is a matter different from
the payment of ECOLA under the first issue. We are now
concerned with extra, not regular loads for which the petitioners
are paid regular salaries every month regardless of the number
of working days or hours in such a month. Extra loads should be
paid for only when actually performed by the employee.
Compensation is based, therefore, on actual work done and on
the number of hours and days spent over and beyond their
regular hours of duty. Since there was no work on September
21, 1981, it would now be unfair to grant petitioners demand
for extra wages on that day.chanrobles law library : red
Finally, disposing of the respondents charge of petitioners lack
of legal capacity to sue, suffice it to say that this question can
no longer be raised initially on appeal or certiorari. It is quite
belated for the private respondent to question the personality of
the petitioner after it had dealt with it as a party in the
proceedings below. Furthermore, it was not disputed that the
petitioner is a duly registered labor organization and as such
has the legal capacity to sue and be sued. Registration grants it
the rights of a legitimate labor organization and recognition by
the respondent University is not necessary for it to institute this
action in behalf of its members to protect their interests and
obtain relief from grievances. The issues raised by the
petitioner do not involve pure money claims but are more
intricately intertwined with conditions of employment.
WHEREFORE the petition for certiorari is hereby GRANTED. The
private respondent is ordered to pay its regular fulltime
teachers/employees emergency cost of living allowances for the
semestral break from November 7 to December 5, 1981 and the
undistributed balance of the sixty (60%) percent incremental
proceeds from tuition increases for the same schoolyear as
outlined above. The respondent Commission is sustained insofar
as it DENIED the payment of salaries for the suspended extra
loads on September 21, 1981.

SO ORDERED.
Teehankee, Melencio-Herrera, Plana and Relova, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-9265
April 29, 1957
LUZON STEVEDORING CO., INC., petitioner,
vs.
LUZON MARINE DEPARTMENT UNION and THE HON.
MODESTO CASTILLO, THE HON. JOSE S. BAUTISTA, THE
HON. V. JIMENEZ YANSON and THE HON. JUAN L.
LANTING, Judges of the Court of Industrial
Relations, respondents.
Perkins, Ponce Enrile and Associates for petitioner.
Mariano B. Tuason for respondent Judge of the Court of
Industrial Relations.
Sioson, Roldan and Vidanes for respondent union.
FELIX, J.:
This case involves a petition for certiorari filed by the Luzon
Stevedoring Co., Inc., to review a resolution dated June 5, 1955,
issued by the Court of Industrial Relations. On September 5,
1955, with leave of court, a supplemental petition was filed by
said petitioner, and both petitions were given due course by
resolution of this Court of September 15, 1955. The facts of the
case may be summarized as follows:
On June 21, 1948, herein respondent Luzon Marine Department
Union filed a petition with the Court of Industrial Relations
containing several demands against herein petitioner Luzon
Stevedoring Co., Inc., among which were the petition for full
recognition of the right of COLLECTIVE bargaining, close shop
and check off. However, on July 18, 1948, while the case was
still pending with the CIR, said labor union declared a strike
which was ruled down as illegal by this Court in G.R. No. L-2660
promulgated on May 30, 1950. In view of said ruling, the Union
filed a "Constancia" with the Court of Industrial Relations
praying that the remaining unresolved demands of the Union

presented in their original petition, be granted. Said unresolved

demands are the following:
a. Point No. 2.
That the work performed in excess of eight (8) hours he
paid an overtime pay of 50 per cent the regular rate of
pay, and that work performed on Sundays and legal
holidays be paid double the regular rate of pay.
b. Point No. 7.
That all officers, engineers and crew members of motor
tugboats who have not received their pay corresponding
to the second half of December, 1941, be paid
accordingly.
c. Point No. 11.
That Ciriaco Sarmiento, Chief Mate, M/V Marlin, Rafael
Santos, Port Engineer, and Lorenzo de la Cruz, Chief
Engineer, M/V Shark who have been suspended without
justifiable cause and for union activities, be reinstated
with pay from time of suspension.
d. Point No. 12.
That all officers, engineers and crew members of the
motor tugboats "Shark", "Hearing", "Pike" and "Ray",
who have been discharged without justifiable cause and
for union activities, be reinstate with pay from time of
discharge. (p. 65-66, Record).
On the basis of these demands, the case was set for hearing
and the parties submitted their respective evidence, both oral
and documentary, from June 8,1951, to January 7, 1954. In one
of the hearings of the case, the original intervenor in Union de
Obreros Estibadores de Filipinas (UOEF), through counsel,
moved for the withdraw al of said Union from the case, which
motion was granted by the Court.
After the parties had submitted exhaustive memoranda, the
trial Judge rendered a decision on February 10, 1955, finding
that the company gave said employees 3 free meals every day
and about 20 minutes rest after each mealtime; that they
worked from 6:00 am. to 6:00 p.m. every day including Sundays
and holidays, and for work performed in excess of 8 hours, the
officers, patrons and radio operators were given overtime pay in
the amount of P4 each and P2 each for the rest of the crew up
to March, 1947, and after said date, these payments were
increased to P5 and P2.50, respectively, until the time of their
separation or the strike of July 19, 1948; that when the tugboats
underwent repairs, their personnel worked only 8 hours a day
excluding Sundays and holidays; that although there was an
effort on the part of claimants to show that some had worked
beyond 6:00 p.m., the evidence was uncertain and indefinite

and that demand was, therefore, denied; that respondent

Company, by the nature of its business and as defined by law
(Section 18-b of Commonwealth Act as amended) is considered
a public service operator by the Public Service Commission in
its decision in case No. 3035-C entitled "Philippine Shipowners.
Association vs. Luzon Stevedoring Co., Inc., et al."(Exh. 23),
and, therefore, exempt from paying additional remuneration or
compensation for work performed on Sundays and legal
holidays, pursuant to the provisions of section 4 of
Commonwealth Act No. 444 (Manila Electric Co. vs. Public
Utilities Employees Association, 79 Phil., 408. 44 Off. Gaz.,
1760); and ruled that:
For the above reasons, the aforementioned employees
are only entitled to receive overtime pay for work
rendered in excess of 8 hours on ordinary days including
Sundays and legal holidays.
However, the respondent company has proved to the
satisfaction of the Court that it has paid its employees
for such overtime work as shown above Exhs. 1 to 20-B).
It is, therefore, only a matter of computation whether
such over time pay by the respondent for overtime
services rendered covers the actual overtime work
performed by the employees concerned equivalent to 25
per cent which is the minimum rate fixed by law in the
absence of other proof to justify the granting of more
beyond said minimum rate.
Demands Nos. 11 and 12 regarding the reinstatement to the
service of the employees named therein were denied and
respondent Company was only or to pay the separation pay and
overtime work rendered by Ciriaco Sarmiento, Rafael Santos
and Lorenzo de la Cruz, after making the pronouncement that
their separation or dismissal was not due to union activities but
for valid and legal grounds.
The Luzon Marine Department Union, through counsel,
therefore, filed a motion for reconsideration praying that the
decision of February 10, 1955, be modified so as to declare and
rule that the members of the Union who had rendered services
from 6:00 a.m. to 6:00 p.m. were entitled to 4 hours' overtime
pay; that allotted to the taking of their meals should not be
deducted from the 4 hours of overtime rendered by said
employees, that the amounts of P3 and P2 set aside for the
daily meals of the employees be considered as part of their
actual compensation in determining the amount due to said
employees separated from the service without just cause be
paid their unearned wages and salaries from the date of their
separation up to the time the decision in case L-2660 became

final; and for such other relief as may be just and equitable in
the premises.
Luzon Stevedoring Co., Inc. also sought for the reconsideration
of the decision only in so far as it interpreted that the period
during which a seaman is aboard a tugboat shall be considered
as "working time" for the purpose of the Eight-Hour-Labor Law.
In pursuance of Section 1 of Commonwealth Act No. 103, as
amended by Commonwealth Act No. 254 and further amended
by Commonwealth Act No. 559, the motions for reconsideration
were passed upon by the Court en banc, and on June 6, 1955, a
resolution modifying the decision of February 10, 1955, was
issued, in the sense that the 4 hours of overtime work included
in the regular daily schedule of work from 6:00 a.m. to 6:00
p.m. should be paid independently of the so-called "coffeemoney", after making a finding that said extra amounts were
given to crew members of some tugboats for work performed
beyond 6:00 p.m. over a period of some 16 weeks. The
Company's motion for reconsideration was denied.
From this resolution, the Luzon Stevedoring Co., Inc. filed the
present petition for certiorari and when the Court of Industrial
Relations, acting upon said Company's motion for clarification,
ruled that the 20 minutes' rest given the claimants after
mealtime should not be deducted from the 4 hours of overtime
worked performed by said claimants, petitioner filed a
supplemental petition for certiorari dated September 5, 1955,
and both petitions were given due course by this Court.
Respondent Luzon Marine Labor Union filed within the
reglementary period a motion to dismiss, which this Court
considered as an answer by resolution of October 14, 1955,
alleging that the decision, resolution and order of the Court of
Industrial Relations sought to be reviewed by petitioner do not
present any question of law, the issues in said CIR case No. 147V being purely factual. The respondent Judges of the Court of
Industrial Relations, represented by counsel, timely filed an
answer likewise asserting that there could have been no
question of law involved or error of law committed by the said
Judges in the resolutions appealed from, same having been
based on purely findings of fact.
In this instance, petitioner does not seek to alter the lower
court's finding that the regular daily schedule of work of the
members of the herein respondent Union was from 6:00 a.m. to
6:00 p.m. Petitioner, however, submits several "issues" which
We will proceed to discuss one after the other. They are the
following:
I. Is the definition for "hours of work" as presently applied to
dryland laborers equally applicable to seamen? Or should a

different criterion be applied by virtue of the fact that the

seamen's employment is completely different in nature as well
as in condition of work from that of a dryland laborer?
Petitioner questions the applicability to seamen of the
interpretation given to the phrase "hours of work" for the
purpose of the Eight-Hour Labor Law, insinuating that although
the seamen concerned stayed in petitioner's tugboats, or
merely within its compound, for 12 hours, yet their work was
not continuous but interrupted or broken. It has been the
consistent stand of petitioner that while it is true that the
workers herein were required to report for work at 6:00 a.m.
and were made to stay up to 6:00 p.m., their work was not
continuous and they could have left the premises of their
working place were it not for the inherent physical impossibility
peculiar to the nature of their duty which prevented them from
leaving the tugboats. It is the Company's defense that a literal
interpretation of what constitutes non-working hours would
result in absurdity if made to apply to seamen aboard vessels in
bays and rivers, and We are called upon to make an
interpretation of the law on "non-working hours" that may
comprehend within its embrace not only the non-working hours
of laborers employed in land jobs, but also of that particular
group of seamen, i.e., those employed in vessels plying in rivers
and bays, since admittedly there is no need for such ruling with
respect to officers and crew of interisland vessels which have
aboard 2 shifts of said men and strictly follow the 8-hour
working period.
Section 1 of Commonwealth Act No. 444, known as the EightHour Labor Law, provides:
SEC. 1. The legal working day for any person employed
by another shall be of not more than eight hours daily.
When the work is not continuous, the time during which
the laborer is not working AND CAN LEAVE HIS WORKING
PLACE and can rest completely, shall not be counted.
The requisites contained in this section are further implemented
by contemporary regulations issued by administrative
authorities (Sections 4 and 5 of Chapter III, Article 1, Code of
Rules and Regulations to Implement the Minimum Wage Law).
For the purposes of this case, We do not need to set for seamen
a criterion different from that applied to laborers on land, for
under the provisions of the above quoted section, the only thing
to be done is to determine the meaning and scope of the term
"working place" used therein. As We understand this term, a
laborer need not leave the premises of the factory, shop or boat
in order that his period of rest shall not be counted, it being
enough that he "cease to work", may rest completely and leave

or may leave at his will the spot where he actually stays while
working, to go somewhere else, whether within or outside the
premises of said factory, shop or boat. If these requisites are
complied with, the period of such rest shall not be counted.
In the case at bar We do not need to look into the nature of the
work of claimant mariners to ascertain the truth of petitioners
allegation that this kind of seamen have had enough "free
time", a task of which We are relieved, for although after an
ocular inspection of the working premises of the seamen
affected in this case the trial Judge declared in his decision that
the Company gave the complaining laborers 3 free meals a day
with a recess of 20 minutes after each meal, this decision was
specifically amended by the Court en banc in its Resolution of
June 6, 1955, wherein it held that the claimants herein rendered
services to the Company from 6:00 a.m. to 6:00 p.m. including
Sundays and holidays, which implies either that said laborers
were not given any recess at all, or that they were not allowed
to leave the spot of their working place, or that they could not
rest completely. And such resolution being on a question
essentially of fact, this Court is now precluded to review the
same (Com. Act No. 103, Sec. 15, as amended by Sec. 2 of
Com. Act No. 559; Rule 44 of the Rules of Court; Kaisahan Ng
Mga Manggagawa sa Kahoy sa Filipinas vs. Gotamco Sawmill,
80 Phil., 521; Operators, Inc. vs. Pelagio, 99 Phil, 893, and
others).
II. Should a person be penalized for following an opinion issued
by the Secretary of Justice in the absence of any judicial
pronouncement whatsoever?
Petitioner cites Opinion No. 247, Series of 1941 of the Secretary
of Justice to a query made by the Secretary of Labor in
connection with a similar subject matter as the one involved, in
this issue, but that opinion has no bearing on the case at bar
because it refers to officers and crew on board interisland
boats whose situation is different from that of mariners or
sailors working in small tugboats that ply along bays and rivers
and have no cabins or places for persons that man the same.
Moreover, We can not pass upon this second issue because,
aside from the fact that there appears nothing on record that
would support petitioner's assertion that in its dealing with its
employees, it was guided by an opinion of the Secretary of
Justice, the issue involves a mere theoretical question.
III. When employees with full knowledge of the law, voluntarily
agreed to work for so many hours in consideration of a certain
definite wage, and continue working without any protest for a
period of almost two years, is said compensation as agreed
upon legally deemed and retroactively presumed to constitute

full payment for all services rendered, including whatever

overtime wages might be due? Especially so if such wages,
though received years before the enactment of the Minimum
Wage Law, were already set mostly above said minimum wage?
IV. The members set of respondent Union having expressly
manifested acquiescence over a period of almost two years with
reference to the sufficiency of their wages and having made no
protest whatsoever with reference to said compensation does
the legal and equitable principle of estoppel operate to bar
them from making a claim for, or making any recovery of, back
overtime compensation?
We are going to discuss these two issues jointly. Section 6 of
Commonwealth Act No. 444 provides:
Sec. 6. Any agreement or contract between the employer and
the laborer or employee contrary to the provisions of this Act
shall be null and void ab initio.
In the case of the Manila Terminal Co. vs. Court of Industrial
Relations et al., 91 Phil., 625, 48 Off. Gaz., 2725, this Court
held:
The principles of estoppel and laches cannot be, invoked
against employees or laborers in an action for the
recovery of compensation for past overtime work. In the
first place, it would be contrary to the spirit of the EightHour Labor Law, under which. as already seen, the
laborers cannot waive their right to extra compensation.
In the second place, the law principally obligates the
employer to observe it, so much so that it punishes the
employer for its violation and leaves the employee free
and blameless. In the third place, the employee or
laborer is in such a disadvantageous position as to be
naturally reluctant or even apprehensive in asserting a
claim which may cause the employer to devise a way for
exercising his right to terminate the employment.
Moreover, if the principle of estoppel and laches is to be
applied, it would bring about a situation whereby the
employee or laborer, can not expressly renounce the
right to extra compensation under the Eight-Hour Labor
Law, may be compelled to accomplish the same thing by
mere silence or lapse of time, thereby frustrating the
purpose of the law by indirection.
This is the law on the matter and We certainly adhere, to it in
the present case. We deem it, however, convenient to say a few
words of explanation so that the principle enunciated herein
may not lead to any misconstruction of the law in future cases.
There is no question that the right of the laborers to overtime
pay cannot be waived. But there may be cases in which the

silence of the employee or laborer who lets the time go by for

quite a long period without claiming or asserting his right to
overtime compensation may favor the inference that he has not
worked any such overtime or that his extra work has been duly
compensated. But this is not so in the case at bar. The
complaining laborers have declared that long before the filing of
this case, they had informed Mr. Martinez, a sort of overseer of
the petitioner, that they had been working overtime and
claiming the corresponding compensation therefor, and there is
nothing on record to show that the claimants, at least the
majority of them, had received wages in excess of the minimum
wage later provided by Republic Act No. 602, approved April 6,
1951. On the contrary, in the decision of the trial Judge, it
appears that 34 out of the 58 claimants received salaries less
than the minimum wage authorized by said Minimum Wage
Law, to wit:

Per
month

1. Ambrosio Taada .. oiler

but after passing the
examinations his wages were
increased to P225 per month;

P82.50

2. Patricio Santiago .. quartermaste

but after passing the
r
examinations his wages were
increased to P225 per month;

82.50

3. Fidelino Villanueva oiler

82.50

4. Pedro Filamor quartermaste

then his wage was reduced r
to P67.50 per month as cook;

82.50

5. Emiliano Irabon . seaman

then his wage was reduced
to P60 and he stayed for 1
month only; it was increased
again to P67.50;

82.50

6. Juanito de Luna

oiler

82.50

7. Benigno Curambao

oiler

82.50

8. Salvador Mercadillo

oiler

82.50

9. Nicasio Sta. Lucia

cook

82.50

10. Damaso Arciaga

seaman

82.50

11. Leonardo Patnugot

oiler

82.50

12. Bienvenido Crisostomo

oiler

82.50

13. Isidro Malabanan

cook

82.50

14. Saturnino Tumbokon

seaman

67.50

15. Bonifacio Cortez

quartermaste
r

82.50

16. Victorio Carillo

cook

67.50

17. Francisco Atilano

cook

67.50

18. Gualberto Legaspi

seaman

67.50

19. Numeriano Juanillo

quartermaste
r

82.50

20. Moises Nicodemus

quartermaste
r

82.50

21. Arsenio Indiano

seaman

82.50

22. Ricardo Autencio

oiler

82.50

23. Mateo Arciaga

seaman

67.50

24. Romulo Magallanes

quartermaste
r

82.50

25. Antonio Belbes

seaman

67.50

26. Benjamin Aguirre

quartermaste
r

82.50

27. Emilio Anastasio

quartermaste
r

82.50

28. Baltazar Labrada

oiler

82.50

29. Emeterio Magallanes

seaman

67.50

30. Agripino Laurente

quartermaste
r

82.50

31. Roberto Francisco

oiler

82.50

32. Elias Matrocinio

seaman

82.50

33. Baltazar Vega

seaman

67.50

34. Jose Sanchez

oiler

82.50

Consequently, for lack of the necessary supporting evidence for

the petitioner, the inference referred to above cannot be drawn
in this case.
V. Granting, without conceding, that any overtime pay in arrears
is due, what is the extent and rule of retro-activity with
reference to overtime pay in arrears as set forth and
established by the precedents and policies of the Court of
Industrial Relations in past decisions duly affirmed by the
Honorable Supreme Court?
VI. Is the grant of a sizeable amount as back overtime wages by
the Court of Industrial Relations in consonance with the dictates
of public policy and the avowed national and government policy
on economic recovery and financial stability?

In connection with issue No. 5, petitioner advances the theory

that the computation of the overtime payment in arrears should
be based from the filing of the petition. In support of this
contention, petitioner cites the case of Gotamco Lumber Co. vsCourt of Industrial Relations, 85 Phil., 242; 47 Off. Gaz., 3421.
This case is not in point; it merely declares that Commonwealth
Act No. 444 imposes upon the employer the duty to secure the
permit for overtime work, and the latter may not therefore be
heard to plead his own negligence as exemption or defense.
The employee in rendering extra services at the request of his
employer has a right to assume that the latter has complied
with the requirements of the law and therefore has obtained the
required permission from the Department of Labor (47 Off, Gaz.,
3421). The other decisions of the Court of Industrial Relations
cited by petitioner, to wit: Cases 6-V, 7-V and 8-V, Gotamco &
Co., Dy Pac & Co., Inc. and D. C. Chuan; Case 110-V,National
Labor Union vs. Standard Vacuum Oil Co.; Case No. 76-v, Dee
Cho Workers, CLO vs. Dee Cho Lumber Co., and Case No. 70V, National Labor Union vs. Benguet Consolidated Mining Co.,
do not seem to have reached this Court and to have been
affirmed by Us.
It is of common occurrence that a workingman has already
rendered services in excess of the statutory period of 8 hours
for some time before he can be led or he can muster enough
courage to confront his employer with a demand for payment
thereof. Fear of possible unemployment sometimes is a very
strong factor that gags the man from asserting his right under
the law and it may take him months or years before he could be
made to present a claim against his employer. To allow the
workingman to be compensated only from the date of the filing
of the petition with the court would be to penalize him for his
acquiescence or silence which We have declared in the case of
the Manila Terminal Co. vs. CIR, supra, to be beyond the intent
of the law. It is not just and humane that he should be deprived
of what is lawfully his under the law, for the true intendent of
Commonwealth Act No. 444 is to compensate the worker for
services rendered beyond the statutory period and this should
be made to retroact to the date when such services were
actually performed.
Anent issue No. VI, petitioner questions the reasonableness of
the law providing for the grant of overtime wages. It is sufficient
for Us to state here that courts cannot go outside of the field of
interpretation so as to inquire into the motive or motives of
Congress in enacting a particular piece of legislation. This
question, certainly, is not within Our province to entertain.

It may be alleged, however, that the delay in asserting the right

to back overtime compensation may cause an unreasonable or
irreparable injury to the employer, because the accumulation of
such back overtime wages may become so great that their
payment might cause the bankruptcy or the closing of the
business of the employer who might not be in a position to
defray the same. Perhaps this situation may occur, but We shall
not delve on it this time because petitioner does not claim that
the payment of the back overtime wages it is ordered to pay to
its claimant laborers will cause the injury it foresees or force it
to close its business, a situation which it speaks of theoretically
and in general.
VII. Should not a Court of Industrial Relations' resolution, en
banc, which is clearly unsupported in fact and in law, patently
arbitrary and capricious and absolutely devoid of sustaining
reason, be declared illegal? Especially so, if the trial court's
decision which the resolution en banc reversed, is most
detailed, exhaustive and comprehensive in its findings as well
as most reasonable and legal in its conclusions? This issue was
raised by petitioner in its supplemental petition and We have
this much to say. The Court of Industrial Relations has been
considered "a court of justice" (Metropolitan Transportation
Service vs. Paredes,* G.R. No. L-1232, prom. January 12, 1948),
although in another case. We said that it is "more an
administrative board than a part of the integrated judicial
system of the nation" (Ang Tibay vs. Court of Industrial
Relations, 69 Phil., 635). But for procedural purposes, the Court
of Industrial Relations is a court with well-defined powers vested
by the law creating it and with such other powers as generally
pertain to a court of justice (Sec. 20, Com. Act No. 103). As
such, the general rule that before a judgment becomes final,
the Court that rendered the same may alter or modify it so as to
conform with the law and the evidence, is applicable to
the Court of Industrial Relations (Connel Bros. Co.(Phil.) vs.
National Labor Union, G.R. No. L-3631, prom. January 30, 1956).
The law also provides that after a judge of the Court of
Industrial Relations, duly designated by the Presiding Judge
therein to hear a particular case, had rendered a decision, any
agrieved party may request for reconsideration thereof and the
judges of said Court shall sit together, the concurrence of the 3
of them being necessary for the pronouncement of a decision,
order or award (See. 1, Com. Act No. 103). It was in virtue of
these rules and upon motions for reconsideration presented by
both parties that resolution subject of the present petition was
issued, the Court en banc finding it necessary to modify a part

of the decision of February 10, 1955, which is clearly within its

power to do.
On the other hand, the issue under consideration is predicated
on a situation which is not obtaining in the case at bar, for, it
presupposes that the resolutions en banc of the respondent
Court "are clearly unsupported in fact and in law, patently
arbitrary and capricious and absolutely devoid of any sustaining
reason", which does not seem to be the case as a matter of
fact.
Wherefore, and on the strength of the foregoing consideration,
the resolutions of the Court of Industrial Relations appealed
from are hereby affirmed, with costs against petitioner. It is so
ordered.
Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador.
Concepcion, Reyes, J.B.L. and Endencia, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. Nos. 85122-24
March 22, 1991
JULIO N. CAGAMPAN, SILVINO C. VICERA, JORGE C. DE
CASTRO, JUANITO R. DE JESUS, ARNOLD J. MIRANDA, ,
MAXIMO O. ROSELLO & ANICETO L. BETANA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, & ACE
MARITIME AGENCIES, INC., respondents.
Benjamin S. David for petitioners.
De Luna, Sumnoad and Gaerlan for private respondent.
PARAS, J.:
Presented before Us for review is the decision of public
respondent National Labor Relations Commission handed down
on March 16, 1988 reversing the decision of the Philippine
Oversees Employment Administration and correspondingly
dismissing the cases for lack of merit. The POEA decision
granted overtime pay to petitioners equivalent to 30% of their
basic pay.
We do not dispute the facts as found by the Solicitor General.
Thus:
On April 17 and 18,1985, petitioners, all seamen,
entered into separate contracts of employment with the
Golden Light Ocean Transport, Ltd., through its local

agency, private respondent ACE MARITIME AGENCIES,

INC. Petitioners, with their respective ratings and
monthly salary rates, are as follows:
Petitioners

Rating

Salary per mo

Julio Cagampan

2nd Engineer

US$500.00

Silvino Vicera

2nd Engineer

US$800.00

Juanito de Jesus

Ordinary Seaman

US$120.00

Jorge C. de Castro

Ordinary Seaman

US$160.00

Arnold Miranda

3rd Officer

US$310.00

Maximo Rosello

Cook

US$230.00

Aniceto Betana

3rd Engineer

US$400.00

Petitioners were deployed on May 7, 1985, and

discharged on July 12, 1986.
Thereafter, petitioners collectively and/or individually filed
complaints for non-payment of overtime pay, vacation pay and
terminal pay against private respondent. In addition, they
claimed that they were made to sign their contracts in blank.
Likewise, petitioners averred that although they agreed to
render services on board the vessel Rio Colorado managed by
Golden Light Ocean Transport, Ltd., the vessel they actually
boarded was MV "SOIC I" managed by Columbus Navigation.
Two (2) petitioners, Jorge de Castro and Juanito de Jesus,
charged that although they were employed as ordinary seamen
(OS), they actually performed the work and duties of Able
Seamen (AB).
Private respondent was furnished with copies of petitioners'
complaints and summons, but it failed to file its answer within
the reglementary period. Thus, on January 12, 1987, an Order
was issued declaring that private respondent has waived its
right to present evidence in its behalf and that the cases are
submitted for decision (Page 68, Records).
On August 5, 1987, the Philippine Overseas Employment
Administration (POEA) rendered a Decision dismissing
petitioners' claim for terminal pay but granted their prayer for
leave pay and overtime pay. The dispositive portion of the
Decision reads:
IN VIEW OF THE FOREGOING, judgment is hereby
rendered ordering respondent (private respondent) Ace

Maritime Agencies, Inc. to pay the following

complainants (petitioners) in the amounts opposite their
names:
1. Julio CagampanUS$583.33 plus US$2,125.00
representing the 30% guaranteed overtime pay;
2. Silvino ViceraUS$933.33 plus US$3,400.00
representing the 30% guaranteed overtime pay;
3. Jorge de CastroUS$233.33 plus US$850.00
representing the 30% guaranteed overtime pay;
4. Juanito de JesusUS$233.33 plus US$850.00
representing the 30% guaranteed overtime pay;
5. Lauro DiongzonUS$233.33 plus US$850.00
representing the 30% guaranteed overtime pay;
6. Arnold MirandaUS$455.00 plus US$1,659.50
representing the 30% guaranteed overtime pay;
7. Maximo RoselloUS$303.33 plus US$1,105.00
representing the 30% guaranteed overtime pay; and
8. Aniceto BetanaUS$583.33 plus US$2,125.00
representing the 30% guaranteed overtime pay.
The payments represent their leave pay equivalent to
their respective salary (sic) of 35 days and should be
paid in Philippine currency at the current rate of
exchange at the time of actual payment. (pp. 81-82,
Records)
Private respondent appealed from the POEA's Decision to the
NLRC on August 24, 1987. On March 16, 1988, the NLRC
promulgated a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed
decision is hereby REVERSED and SET ASIDE and
another one entered dismissing these cases for lack of
merit. (p. 144, Records)
On May 8, 1988, petitioners filed an Urgent Motion for
Reconsideration of the NLRC's Decision (p. 210, Records), but
the same was denied by the NLRC for lack of merit in its
Resolution dated September 12, 1988 (p. 212, Records).
Hence, this appeal from the decision and resolution of the
respondent NLRC.
Petitioners allege that respondent Commission gravely abused
its discretion or erred in deciding in favor of private respondent
company by reason of the following:
1. Respondent NLRC overlooked the fact that private
respondent company had repeatedly failed and refused
to file its answer to petitioners' complaints with their
supporting documents.
2. Respondent Commission erred in reversing and
setting aside the POEA decision and correspondingly

dismissing the appeal of petitioners, allegedly in

contravention of law and jurisprudence.
Private respondent maritime company disclaims the aforesaid
allegations of petitioners through these arguments:
1. As borne out by the records, its former counsel
attended all the hearings before the POEA wherein he
raised the basis objection that the complaint of
petitioners was so generally couched that a more
detailed pleading with supporting documents was
repeatedly requested for the latter to submit.
2. The NLRC never abused its discretion in arriving at
assailed decision considering that the same was based
on the Memorandum on Appeal dated August 14, 1987
filed by private respondent.
3. In the hearings conducted by respondent Commission,
all the arguments of both parties were properly
ventilated and considered by said Commission in
rendering its decision.
4. The Labor Code basically provides that the rules of
evidence prevailing in courts of law or equity shall not be
controlling and it is the spirit and intention of the Code
that the Commission and its members and Labor Arbiters
should use every and an reasonable means to ascertain
the facts in each case speedily and objectively and
without regard to technicalities of law and procedure, all
in the interest of due process.
5. Petitioners' motion for reconsideration of the NLRC
decision did not invoke the merits of the case but merely
raised purely technical and procedural matters. Even
assuming that private respondent, technically speaking,
waived the presentation of evidence, its appeal to the
NLRC was valid since it involved merely a correct
interpretation and clarification of certain provisions of
the contract the validity of which has never been
questioned.
The Solicitor General, arguing for public respondent NLRC,
contends:
1. Petitioners' assumption that a party who is declared to
have waived his right to present evidence also loses his
right to appeal from an adverse judgment made against
him is a falsity for, although the technical rules of
evidence prevailing in the courts of law or equity do not
bind labor tribunals, even the Rules of Court allows a
party declared in default to appeal from said judgment
by attaching the propriety of the relief awarded therein.

2. The NLRC did not abuse its discretion in the rendition

of subject decision because the evidence presented by
petitioners in support of their complaint is by itself
sufficient to back up the decision. The issue of the
disallowance of overtime pay stems from an
interpretation of particular provisions of the employment
contract.
We cannot sustain petitioners' position.
The failure of respondent to submit its responsive pleading was
not fatal as to invalidate its case before the Phil. Overseas
Employment Authority. Evidently, such formal or technical
defect was rectified by the fact that the POEA proceeded with
the hearings on the case where both parties were given
sufficient leeway to ventilate their cases.
Petitioners' manifest pursuit of their claims before the POEA in
the absence of the answer produced the effect of condoning the
failure of private respondent to submit the said answer. Their
submission to the POEA's authority without questioning its
jurisdiction to continue the hearings further strengthens the fact
that the alleged technical defect had already been cured. After
all, what is there to complain of when the POEA handed down a
decision favorable to petitioners with the allowance of the
latter's leave pay and overtime pay.
Notably, it was only when private respondent appealed the
NLRC decision to this Court that petitioners suddenly unearth
the issue of private respondent's default in the POEA case. Had
the decision favoring them not been reversed by the NLRC,
petitioners could have just clammed up. They resorted to
bringing up a technical, not a substantial, defect in their
desperate attempt to sway the Court's decision in their favor.
Private respondent has pointedly argued that the NLRC
anchored its decision primarily upon the Memorandum on
Appeal.1wphi1 In the case of Manila Doctors Hospital v. NLRC
(153 SCRA 262) this Court ruled that the National Labor
Relations Commission and the Labor Arbiter have authority
under the Labor Code to decide a case based on the position
papers and documents submitted without resorting to the
technical rules of evidence.
On the issue of whether or not petitioners should be entitled to
terminal pay, We sustain the finding of respondent NLRC that
petitioners were actually paid more than the amounts fixed in
their employment contracts. The pertinent portion of the NLRC
decision reads as follows.
On this award for leave pay to the complainants
(petitioners), the (private) respondent maintains that the
actually they were paid much more than what they were

legally entitled to under their contract. This fact has not

been disputed by the complainants (petitioners.) Thus,
as mentioned in (private) respondent's Memorandum on
Appeal dated 14 August 1987, their overpayment is
more than enough and sufficient to offset whatever
claims for leave pay they filed in this case and for which
the POEA favorably considered in their favor. For
complainant (petitioner) Aniceto Betana, it appears that
under the crew contract his monthly salary was US$400
while he was overpaid by US$100 as he actually
received US$500. In fine, Betana had received at least
US1,400 excess salary for a period of fourteen (14)
months which was the period of his employment. In the
case of complainant (petitioner) Jorge C. de Castro his
stipulated monthly pay was US$160 but he actually
received a monthly pay of US$200 or an overpayment of
US$560 for the same period of service. For complainant
(petitioner) Juanito R. de Jesus, his overpayment is
US$1120. Complainant (petitioner) Arnold J. Miranda has
also the same amount of excess payment as de Jesus.
Indeed, We cannot simply ignore this material fact. It is
our duty to prevent a miscarriage of justice for if We
sustain the award for leave pay in the face of undisputed
facts that the complainants (petitioners) were even paid
much more than what they should receive by way of
leave pay, then they would be enriching themselves at
the expense of others. Accordingly, justice and equity
compel Us to deny this award.
Even as the denial of petitioners' terminal pay by the NLRC has
been justified, such denial should not have been applied to
petitioners Julio Cagampan and Silvino Vicera. For, a deeper
scrutiny of the records by the Solicitor General has revealed
that the fact of overpayment does not cover the aforenamed
petitioners since the amounts awarded them were equal only to
the amounts stipulated in the crew contracts. Since petitioners
Cagampan and Vicera were not overpaid by the company, they
should be paid the amounts of US$583.33 and US$933.33,
respectively. Further examination by the Solicitor General shows
that petitioner Maximo Rosello was also overpaid in the amount
of US$420.00.
Hence, with respect to petitioners Cagampan and Vicera, the
NLRC decision must be modified correspondingly.
As regards the question of overtime pay, the NLRC cannot be
faulted for disallowing the payment of said pay because it
merely straightened out the distorted interpretation asserted by
petitioners and defined the correct interpretation of the

provision on overtime pay embodied in the contract

conformably with settled doctrines on the matter. Notably, the
NLRC ruling on the disallowance of overtime pay is ably
supported by the fact that petitioners never produced any proof
of actual performance of overtime work.
Petitioners have conveniently adopted the view that the
"guaranteed or fixed overtime pay of 30% of the basic salary
per month" embodied in their employment contract should be
awarded to them as part of a "package benefit." They have
theorized that even without sufficient evidence of actual
rendition of overtime work, they would automatically be entitled
to overtime pay. Their theory is erroneous for being illogical and
unrealistic. Their thinking even runs counter to the intention
behind the provision. The contract provision means that the
fixed overtime pay of 30% would be the basis for computing the
overtime pay if and when overtime work would be rendered.
Simply, stated, the rendition of overtime work and the
submission of sufficient proof that said work was actually
performed are conditions to be satisfied before a seaman could
be entitled to overtime pay which should be computed on the
basis of 30% of the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the
entitlement to such benefit must first be established.
Realistically speaking, a seaman, by the very nature of his job,
stays on board a ship or vessel beyond the regular eight-hour
work schedule. For the employer to give him overtime pay for
the extra hours when he might be sleeping or attending to his
personal chores or even just lulling away his time would be
extremely unfair and unreasonable.
We already resolved the question of overtime pay of a worker
aboard a vessel in the case of National Shipyards and Steel
Corporation v. CIR (3 SCRA 890). We ruled:
We can not agree with the Court below that respondent
Malondras should be paid overtime compensation for
every hour in excess of the regular working hours that
he was on board his vessel or barge each day,
irrespective of whether or not he actually put in work
during those hours. Seamen are required to stay on
board their vessels by the very nature of their duties,
and it is for this reason that, in addition to their regular
compensation, they are given free living quarters and
subsistence allowances when required to be on board. It
could not have been the purpose of our law to require
their employers to pay them overtime even when they
are not actually working; otherwise, every sailor on
board a vessel would be entitled to overtime for sixteen

hours each day, even if he spent all those hours resting

or sleeping in his bunk, after his regular tour of duty. The
correct criterion in determining whether or not sailors
are entitled to overtime pay is not, therefore, whether
they were on board and can not leave ship beyond the
regular eight working hours a day, but whether they
actually rendered service in excess of said number of
hours. (Emphasis supplied)
The aforequoted ruling is a reiteration of Our resolution in Luzon
Stevedoring Co., Inc. vs. Luzon Marine Department Union, et al.
(G.R. No. 9265, April 29, 1957).
WHEREFORE, the decision of the NLRC is hereby AFFIRMED with
the modification that petitioners Cagampan and Vicera are
awarded their leave pay according to the terms of the contract.
SO ORDERED.
Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-15422
November 30, 1962
NATIONAL DEVELOPMENT COMPANY, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and NATIONAL
TEXTILE WORKERS UNION, respondents.
Government Corporate Counsel Simeon M. Gopengco and
Lorenzo R. Mosqueda for petitioner.
Eulogio R. Lerum for respondent National Textile Workers Union.
Mariano B. Tuason for respondent Court of Industrial Relations.
REGALA, J.:
This is a case for review from the Court of Industrial Relations.
The pertinent facts are the following:
At the National Development Co., a government-owned and
controlled corporation, there were four shifts of work. One shift
was from 8 a.m. to 4 p.m., while the three other shifts were
from 6 a.m. to 2 p.m; then from 2 p.m. to 10 p.m. and, finally,
from 10 p.m. to 6 a.m. In each shift, there was a one-hour
mealtime period, to wit: From (1) 11 a.m. to 12 noon for those

working between 6 a.m. and 2 p.m. and from (2) 7 p.m. to 8

p.m. for those working between 2 p.m. and 10 p.m.
The records disclose that although there was a one-hour
mealtime, petitioner nevertheless credited the workers with
eight hours of work for each shift and paid them for the same
number of hours. However, since 1953, whenever workers in
one shift were required to continue working until the next shift,
petitioner instead of crediting them with eight hours of overtime
work, has been paying them for six hours only, petitioner that
the two hours corresponding to the mealtime periods should not
be included in computing compensation. On the other hand,
respondent National Textile Workers Union whose members are
employed at the NDC, maintained the opposite view and asked
the Court of Industrial Relations to order the payment of
additional overtime pay corresponding to the mealtime periods.
After hearing, Judge Arsenio I. Martinez of the CIR issued an
order dated March 19, 1959, holding that mealtime should be
counted in the determination of overtime work and accordingly
ordered petitioner to pay P101,407.96 by way of overtime
compensation. Petitioner filed a motion for reconsideration but
the same was dismissed by the CIR en banc on the ground that
petitioner failed to furnish the union a copy of its motion.
Thereafter, petitioner appealed to this Court, contending, first,
that the CIR has no jurisdiction over claims for overtime
compensation and, secondary that the CIR did not make "a
correct appraisal of the facts, in the light of the evidence" in
holding that mealtime periods should be included in overtime
work because workers could not leave their places of work and
rest completely during those hours.
In support of its contention that the CIR lost its jurisdiction over
claims for overtime pay upon the enactment of the Industrial
Peace Act (Republic Act No. 875), petitioner cites a number of
decisions of this Court. On May 23, 1960, however, We ruled
in Price Stabilization Corp. v. Court of Industrial Relations, et al.,
G.R. No. L-13206, that
Analyzing these cases, the underlying principle, it will be
noted in all of them, though not stated in express terms,
is that where the employer-employee relationship is still
existing or is sought to be reestablished because of its
wrongful severance, (as where the employee seeks
reinstatement) the Court of Industrial Relations has

jurisdiction over all claims arising out of, or in connection

with the employment, such as those related to the
Minimum Wage Law and the Eight-Hour Labor Law. After
the termination of their relationship and no
reinstatement is sought, such claims become mere
money claims, and come within the jurisdiction of the
regular courts,
We are aware that in 2 cases, some statements implying
a different view have been made, but we now hold and
declare the principle set forth in the next preceding
paragraph as the one governing all cases of this nature.
This has been the constant doctrine of this Court since May 23,
1960.1
A more recent definition of the jurisdiction of the CIR is found
in Campos, et al. v. Manila Railroad Co., et al., G.R. No. L-17905,
May 25, 1962, in which We held that, for such jurisdiction to
come into play, the following requisites must be complied with:
(a) there must exist between the parties an employer-employee
relationship or the claimant must seek his reinstatement; and
(b) the controversy must relate to a case certified by the
President to the CIR as one involving national interest, or must
arise either under the Eight-Hour Labor Law, or under the
Minimum Wage Law. In default of any of these circumstances,
the claim becomes a mere money claim that comes under the
jurisdiction of the regular courts. Here, petitioner does not deny
the existence of an employer-employee relationship between it
and the members of the union. Neither is there any question
that the claim is based on the Eight-Hour Labor Law (Com. Act
No. 444, as amended). We therefore rule in favor of the
jurisdiction of the CIR over the present claim.
The other issue raised in the appeal is whether or not, on the
basis of the evidence, the mealtime breaks should be
considered working time under the following provision of the
law;
The legal working day for any person employed by
another shall be of not more than eight hours daily.When
the work is not continuous, the time during which the
laborer is not working and can leave his working place
and can rest completely shall not be counted. (Sec. 1,
Com. Act No. 444, as amended. Emphasis ours.)

It will be noted that, under the law, the idle time that an
employee may spend for resting and during which he may leave
the spot or place of work though not the premises 2 of his
employer, is not counted as working time only where the work
is broken or is not continuous.
The determination as to whether work is continuous or not is
mainly one of fact which We shall not review as long as the
same is supported by evidence. (Sec. 15, Com. Act No. 103, as
amended, Philippine Newspaper Guild v. Evening News, Inc., 86
Phil. 303).
That is why We brushed aside petitioner's contention in one
case that workers who worked under a 6 a.m. to 6 p.m.
schedule had enough "free time" and therefore should not be
credited with four hours of overtime and held that the finding of
the CIR "that claimants herein rendered services to the
Company from 6:00 a.m. to 6:00 p.m. including Sundays and
holidays, . . . implies either that they were not allowed to leave
the spot of their working place, or that they could not rest
completely" (Luzon Stevedoring Co., Inc. v. Luzon Marine
Department Union, et al., G.R. No. L-9265, April 29, 1957).
Indeed, it has been said that no general rule can be laid down is
to what constitutes compensable work, rather the question is
one of fact depending upon particular circumstances, to be
determined by the controverted in cases. (31 Am. Jurisdiction
Sec. 626 pp. 878.)
In this case, the CIR's finding that work in the petitioner
company was continuous and did not permit employees and
laborers to rest completely is not without basis in evidence and
following our earlier rulings, shall not disturb the same. Thus,
the CIR found:
While it may be correct to say that it is well-high
impossible for an employee to work while he is eating,
yet under Section 1 of Com. Act No. 444 such a time for
eating can be segregated or deducted from his work, if
the same is continuous and the employee can leave his
working place rest completely. The time cards show that
the work was continuous and without interruption. There
is also the evidence adduced by the petitioner that the
pertinent employees can freely leave their working place
nor rest completely. There is furthermore the aspect that
during the period covered the computation the work was

on a 24-hour basis and previously stated divided into

shifts.
From these facts, the CIR correctly concluded that work in
petitioner company was continuous and therefore the mealtime
breaks should be counted as working time for purposes of
overtime compensation.
Petitioner gives an eight-hour credit to its employees who work
a single shift say from 6 a.m. to 2 p.m. Why cannot it credit
them sixteen hours should they work in two shifts?
There is another reason why this appeal should dismissed and
that is that there is no decision by the CIR en bancfrom which
petitioner can appeal to this Court. As already indicated above,
the records show that petitioner's motion for reconsideration of
the order of March 19, 1959 was dismissed by the CIR en
banc because of petitioner's failure to serve a copy of the same
on the union.
Section 15 of the rules of the CIR, in relation to Section 1 of
Commonwealth Act No. 103, states:
The movant shall file the motion (for reconsideration), in
six copies within five (5) days from the date on which he
receives notice of the order or decision, object of the
motion for reconsideration, the same to be verified
under oath with respect to the correctness of the
allegations of fact, and serving a copy thereof personally
or by registered mail, on the adverse party. The latter
may file an answer, in six (6) copies, duly verified under
oath. (Emphasis ours.)
In one case (Bien, et al. v. Castillo, etc., et al., G.R. No. L-7428,
May 24, 1955), We sustained the dismissal of a motion for
reconsideration filed outside of the period provided in the rules
of the CIR. A motion for reconsideration, a copy of which has not
been served on the adverse party as required by the rules,
stands on the same footing. For "in the very nature of things, a
motion for reconsideration against a ruling or decision by one
Judge is in effect an appeal to the Court of Industrial
Relations, en banc," the purpose being "to substitute the
decision or order of a collegiate court for the ruling or decision
of any judge." The provision in Commonwealth Act No. 103
authorizing the presentation of a motion for reconsideration of a
decision or order of the judge to the CIR,en banc and not direct
appeal therefore to this Court, is also in accord with the

principal of exhaustion of administrative remedies before resort

can be made to this Court. (Broce, et al., v. The Court of
Industrial Relations, et al., G.R. No. L-12367, October 29, 1959).
Petitioner's motion for reconsideration having been dismissed
for its failure to serve a copy of the same on the union, there is
no decision of the CIR en banc that petitioner can bring to this
Court for review.
WHEREFORE, the order of March 19, 1959 and the resolution of
April 27, 1959 are hereby affirmed and the appeal is dismissed,
without pronouncement as to costs.
Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,
Barrera, Paredes, Dizon and Makalintal concur.
Bengzon, C.J., took no part.

FIRST DIVISION
[G.R. No. 119205. April 15, 1998]
SIME DARBY PILIPINAS, INC., petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION (2ND DIVISION)
and
SIME
DARBY
SALARIED
EMPLOYEES
ASSOCIATION (ALU-TUCP), respondents.
DECISION
BELLOSILLO, J.:
Is the act of management in revising the work schedule of
its employees and discarding their paid lunch break constitutive
of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the
manufacture of automotive tires, tubes and other rubber
products. Sime Darby Salaried Employees Association (ALUTUCP), private respondent, is an association of monthly salaried
employees of petitioner at its Marikina factory. Prior to the

present controversy, all company factory workers in Marikina

including members of private respondent union worked
from 7:45 a.m. to 3:45 p.m. with a 30 minute paid on call lunch
break.
On 14 August 1992 petitioner issued a memorandum to all
factory-based employees advising all its monthly salaried
employees in its Marikina Tire Plant, except those in the
Warehouse and Quality Assurance Department working on
shifts, a change in work schedule effective 14 September 1992
thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work
schedule factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 P.M. (Saturday).
Coffee break time will be ten minutes only anytime
between:
9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
Lunch break will be between:
12:00 NN 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse
and QA employees who are on shifting. Their work and
break time schedules will be maintained as it is now. [1]
Since private respondent felt affected adversely by the
change in the work schedule and discontinuance of the 30minute paid on call lunch break, it filed on behalf of its
members a complaint with the Labor Arbiter for unfair labor
practice, discrimination and evasion of liability pursuant to the
resolution of this Court in Sime Darby International Tire Co., Inc.
v. NLRC.[2] However, the Labor Arbiter dismissed the complaint

on the ground that the change in the work schedule and the
elimination of the 30-minute paid lunch break of the factory
workers constituted a valid exercise of management prerogative
and that the new work schedule, break time and one-hour lunch
break did not have the effect of diminishing the benefits
granted to factory workers as the working time did not exceed
eight (8) hours.
The Labor Arbiter further held that the factory workers
would be justly enriched if they continued to be paid during
their lunch break even if they were no longer on call or required
to work during the break. He also ruled that the decision in the
earlier Sime Darby case[3] was not applicable to the instant case
because the former involved discrimination of certain
employees who were not paid for their 30-minute lunch break
while the rest of the factory workers were paid; hence, this
Court ordered that the discriminated employees be similarly
paid the additional compensation for their lunch break.
Private respondent appealed to respondent National Labor
Relations Commission (NLRC) which sustained the Labor Arbiter
and dismissed the appeal.[4] However, upon motion for
reconsideration by private respondent, the NLRC, this time with
two (2) new commissioners replacing those who earlier retired,
reversed its arlier decision of 20 April 1994 as well as the
decision of the Labor Arbiter.[5]The NLRC considered the decision
of this Court in the Sime Darby case of 1990 as the law of the
case wherein petitioner was ordered to pay the money value of
these covered employees deprived of lunch and/or working time
breaks. The public respondent declared that the new work
schedule deprived the employees of the benefits of timehonored company practice of providing its employees a 30minute paid lunch break resulting in an unjust diminution of
company privileges prohibited by Art. 100 of the Labor Code, as
amended. Hence, this petition alleging that public respondent
committed grave abuse of discretion amounting to lack or
excess of jurisdiction: (a) in ruling that petitioner committed
unfair labor practice in the implementation of the change in the
work schedule of its employees from 7:45 a.m. 3:45 p.m. to
7:45 a.m. 4:45 p.m. with one-hour lunch break from 12:00 nn to
1:00 p.m.; (b) in holding that there was diminution of benefits
when the 30-minute paid lunch break was eliminated; (c) in

failing to consider that in the earlier Sime Darby case affirming

the decision of the NLRC, petitioner was authorized to
discontinue the practice of having a 30-minute paid lunch break
should it decide to do so; and (d) in ignoring petitioners
inherent management prerogative of determining and fixing the
work schedule of its employees which is expressly recognized in
the collective bargaining agreement between petitioner and
private respondent.
The Office of the Solicitor General filed in lieu of comment a
manifestation and motion recommending that the petition be
granted, alleging that the 14 August 1992 memorandum which
contained the new work schedule was not discriminatory of the
union members nor did it constitute unfair labor practice on the
part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the
work schedules of the employees rests principally on their
employer. In the instant case petitioner, as the employer, cites
as reason for the adjustment the efficient conduct of its
business operations and its improved production. [6] It
rationalizes that while the old work schedule included a 30minute paid lunch break, the employees could be called upon to
do jobs during that period as they were on call. Even if
denominated as lunch break, this period could very well be
considered as working time because the factory employees
were required to work if necessary and were paid accordingly
for working. With the new work schedule, the employees are
now given a one-hour lunch break without any interruption from
their employer. For a full one-hour undisturbed lunch break, the
employees can freely and effectively use this hour not only for
eating but also for their rest and comfort which are conducive to
more efficiency and better performance in their work. Since the
employees are no longer required to work during this one-hour
lunch break, there is no more need for them to be compensated
for this period. We agree with the Labor Arbiter that the new
work schedule fully complies with the daily work period of eight
(8) hours without violating the Labor Code. [7] Besides, the new
schedule applies to all employees in the factory similarly
situated whether they are union members or not.[8]
Consequently, it was grave abuse of discretion for public
respondent to equate the earlier Sime Darby case[9] with the

facts obtaining in this case. That ruling in the former case is not
applicable here. The issue in that case involved the matter of
granting lunch breaks to certain employees while depriving the
other employees of such breaks. This Court affirmed in that
case the NLRCs finding that such act of management was
discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy
involving discrimination of employees but only the issue of
whether the change of work schedule, which management
deems necessary to increase production, constitutes unfair
labor practice. As shown by the records, the change effected by
management with regard to working time is made to apply to all
factory employees engaged in the same line of work whether or
not they are members of private respondent union. Hence, it
cannot be said that the new scheme adopted by management
prejudices the right of private respondent to self-organization.
Every business enterprise endeavors to increase its
profits. In the process, it may devise means to attain that
goal. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. [10] Thus,
management is free to regulate, according to its own discretion
and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of
work, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay off of
workers and discipline, dismissal and recall of workers.
[11]
Further, management retains the prerogative, whenever
exigencies of the service so require, to change the working
hours of its employees. So long as such prerogative is exercised
in good faith for the advancement of the employers interest and
not for the purpose of defeating or circumventing the rights of
the employees under special laws or under valid agreements,
this Court will uphold such exercise.[12]
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every dispute will be automatically decided in
favor of labor. Management also has right which, as such, are
entitled to respect and enforcement in the interest of simple fair
play. Although this Court has inclined more often than not

toward the worker and has upheld his cause in his conflicts with
the employer, such as favoritism has not blinded the Court to
the rule that justice is in every case for the deserving, to be
dispensed in the light of the established facts and the
applicable law and doctrine.[13]
WHEREFORE, the Petition is GRANTED. The Resolution of
the National Labor Relations Commission dated 29 November
1994 is SET ASIDE and the decision of the Labor Arbiter dated
26 November 1993 dismissing the complaint against petitioner
for unfair labor practice is AFFIRMED.
SO ORDERED.
Davide,
Jr.,
(Chairman),
Panganiban, and Quisumbing, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-30452 September 30, 1982

Vitug,

MERCURY DRUG CO., INC., petitioner,

vs.
NARDO DAYAO, ET AL., respondents,
Caparas & Ilagan for petitioner.
Gerardo P. Cabo Chan and Elias Banzali for respondents.
GUTIERREZ, JR., J.:
This is a petition for review on certiorari of the decision of the
Court of Industrial Relations dated March 30, 1968 in Case No.
1926-V and the Resolution of the Court en banc dated July 6,
1968 denying two separate motions for reconsideration filed by
petitioners and respondents.
The factual background of Case No. 1926-V is summarized by
the respondent Court of Industrial Relations as follows:
This is a verified petition dated March 17, 1964
which was subsequently amended on July 31,
1964 filed by Nardo Dayao and 70 others against
Mercury Drug Co., Inc., and/or Mariano Que,
President & General Manager, and Mercury Drug
Co., Inc., Employees Association praying, with
respect to respondent corporation and its
president and general manager: 1) payment of
their unpaid back wages for work done on
Sundays and legal holidays plus 25c/c additional
compensation from date of their employment up
to June 30, 1962; 2) payment of extra
compensation on work done at night; 3)
reinstatement of Januario Referente and Oscar
Echalar to their former positions with back
salaries; and, as against the respondent union,
for its disestablishment and the refund of all
monies it had collected from petitioners.
In separate motions, respondent management
and respondent union move to dismiss, the first
on the ground that:
I. The petition states no cause of action.
II. This Court has no jurisdiction over the subject
of the claims of petitioners Januario Referente
and Oscar Echalar.

III. There is another action pending between the

same parties, namely, Mercury Drug Co., Inc.,
and/or Mariano Que and Nardo Dayao.
while on the other hand, the second alleges that this Court has
no jurisdiction over the acts complained of against the
respondent union.
For reasons stated in the Order dated March 24,
1965, two Court resolved the motions to dismiss,
as follows:
1. Ground No. 1 of management's motion to
dismiss was denied for lack of merit.
2. Its second ground was found meritorious and,
accordingly Januario Referente and Oscar Echalar
were dropped as party petitioners in this case.
3. The third ground was denied, holding that
there still exists the employer- employee
relationship between Nardo Dayao and the
management.
4. With respect to the fourth ground, the Court
held that on the basis of section 7-A of C.A. No.
444, as amended by R.A. No. 1993, 'it can be
safely said that,
counting backward the three (3) year prescriptive
period from the date of the filing of the instant
petition - March 20, 1964 - all-of petitioners'
claims have not yet prescribed.'
5. In so far as respondent union's motion is
concerned, the Court held that 'petitioners' cause
of action against the respondent Association
should be dismissed without prejudice to the
refiling of the same as an unfair labor practice
case.'
Only the respondent management moved to
reconsider the Order of March 24, 1965 but the
same was denied by the Court en banc in a
resolution dated August 26, 1965. Respondent
submitted an answer to the amended petition
which was subsequently amended on January 6,
1966, containing some admissions and some
denials of the material averments of the
amended petition. By way of affirmative and

special defenses,, respondents alleged that

petitioners have no cause of action against
Mariano Que because their employer respondent
Mercury Drug Company, Inc., an existing
corporation which has a separate and distinct
personality from its incorporators stockholders
and/or officer, that the company being a service
enterprise is excluded from the coverage of the
Eight Hour Labor Law, as amended; that no court
has the power to set wages, rates of pay, hours of
employment, or other conditions of employment
to the extent of disregarding an agreement
thereon between the respondent company and
the petitioners, and of fixing night differential
wages; that the petitioners were fully paid for
services rendered under the terms and conditions
of the individual contracts of employment; that
the petition having been verified by only three of
the petitioners without showing that the others
authorized the inclusion of their names as
petitioners does not confer jurisdiction to this
Court; that there is no employer-employee
relationship between management and petitioner
Nardo Dayao and that his claim has been
released and/or barred by another action and that
petitioners' claims accuring before March 20,
1961 have prescribed." (Annex "P", pp. 110-112,
rollo).
After hearing on the merits, the respondent court rendered its
decision. The dispositive portion of the March 30, 1968 decision
reads:
IN VIEW OF THE FOREGOING, the Court hereby
resolves that:
1. The claim of the petitioners for payment of
back wages correspoding to the first four hours
work rendered on every other Sunday and first
four hours on legal holidays should be denied for
lack of merit.
2. Respondent Mercury Drug Company, Inc.. is
hereby ordered to pay the sixty- nine (69)
petitioners:

(a) An additional sum equivalent to

25% of their respective basic or
regular salaries for services
rendered on Sundays and legal
holidays during the period from
March 20. 1961 up to June 30,
1962; and
(b) Another additional sum or
premium equivalent to 25% of their
respective basic or regular salaries
for nighttime services rendered
from March 20, 1961 up to June 30,
1962.
3. Petitioners' petition to convert them to monthly
employees should be, as it is hereby, denied for
lack of merit.
4. Respondent Mariano Que, being an officer and
acted only as an agent in behalf of the
respondent corporation, should be absolved from
the money claims of herein petitioners whose
employer, according to the pleadings and
evidence, is the Mercury Drug Company,, Inc.
To expedite the computation of the money award,
the Chief Court Examiner or his authorized
representative is hereby directed to proceed to
the office of the respondent corporation at
Bambang Street, Sta. Cruz, Manila, the latter to
make available to said employee its records, like
time records, payrolls and other pertinent papers,
and compute the money claims awarded in this
decision and, upon the completion thereof, to
submit his report as soon as possible for further
disposition of the Court.
Not satisfied with the decision, the respondents filed a motion
for its reconsideration. The motion for reconsideration, was
however, denied by the Court en banc in its Resolution dated
July 6, 1968.
Petitioner Mercury Drug Company, Inc., assigned the following
errors in this petition:
I

RESPONDENT CIR ERRED IN DECLARING THE

CONTRACTS OF EMPLOYMENT, EXHIBITS "A" AND
"B", NULL AND VOID AS BEING CONTRARY TO
PUBLIC POLICY AND IN SUSTAINING,
ACCORDINGLY, PRIVATE RESPONDENTS' CLAIMS
FOR 25% SUNDAY AND LEGAL HOLIDAY
PREMIUMS BECAUSE SUCH DECLARATION AND
AWARD ARE NOT SUPPORTED BY SUBSTANTIAL
EVIDENCE, THUS INFRINGING UPON THE
CARDINAL RIGHTS OF THE PETITIONER; AND
ALSO BECAUSE THE VALIDITY OF SAID t
CONTRACTS OF EMPLOYMENT HAS NOT BEEN
RAISED.
II
RESPONDENT CIR ERRED IN SUSTAINING PRIVATE
RESPONDENTS' CLAIMS FOR NIGHTTIME WORK
PREMIUMS NOT ONLY BECAUSE OF THE
DECLARED POLICY ON COLLECTIVE BARGAINING
FREEDOM EX. PRESSED IN REPUBLIC ACT 875
AND THE EXPRESS PROHIBITION IN SECTION 7 OF
SAID STATUTE, BUT ALSO BECAUSE OF THE
WAIVER OF SAID CLAIMS AND THE TOTAL
ABSENCE OF EVIDENCE THEREON.
III
RESPONDENT CIR ERRED IN MAKING AWARDS IN
FAVOR OF THE PRIVATE RESPONDENTS WHO
NEITHER GAVE EVIDENCE NOR EVEN APPEARED
TO SHOW THEIR INTEREST.
Three issues are discussed by the petitioner in its first
assignment of error. The first issue refers to its allegation that
the respondent Court erred in declaring the contracts of
employment null and void and contrary to law. This allegation is
premised upon the following finding of the respondent court:
But the Court finds merit in the claim for the
payment of additional compensation for work
done on Sundays and holidays. While an
employer may compel his employees to perform
service on such days, the law nevertheless
imposes upon him the obligation to pay his
employees at least 25% additional of their basic
or regular salaries.

No person, firm or corporation,

business establishment or place of
center of labor shall compel an
employee or laborer to work during
Sundays and legal holidays unless
he is paid an additional sum of at
least twenty-five per centum of his
regular remuneration: PROVIDED,
HOWEVER, That this prohibition
shall not apply to public utilities
performing some public service
such as supplying gas, electricity,
power, water, or providing means
of transportation or
communication. (Section 4, C. A.
No. 444) (Emphasis supplied)
Although a service enterprise, respondent
company's employees are within the coverage of
C. A. No. 444, as amended known as the Eight
Hour Labor Law, for they do not fall within the
category or class of employees or laborers
excluded from its provisions. (Section 2, Ibid.)
The Court is not impressed by the argument that
under the contracts of employment the
petitioners are not entitled to such claim for the
reason that the same are contrary to law.
Payment of extra or additional pay for services
rendered during Sundays and legal holidays is
mandated by law. Even assuming that the
petitioners had agreed to work on Sundays and
legal holidays without any further consideration
than their monthly salaries, they are not barred
nevertheless from claiming what is due them,
because such agreement is contrary to public
policy and is declared nun and void by law.
Any agreement or contract between employer
and the laborer or employee contrary to the
provisions of this Act shall be null and void ab
initio.
Under the cited statutory provision, the
petitioners are justified to receive additional

amount equivalent to 25% of their respective

basic or regular salaries for work done on
Sundays and legal holidays for the period from
March 20, 1961 to June 30, 1962. (Decision, pp.
119-120, rollo)
From a perusal of the foregoing statements of the respondent
court, it can be seen readily that the petitioner-company based
its arguments in its first assignment of error on the wrong
premise. The contracts of employment signed by the private
respondents are on a standard form, an example of which is
that of private respondent Nardo Dayao quoted hereunder:
Mercury Drug Co., Inc. 1580 Bambang, Manila
October 30, 1959
Mr. Nardo Dayao
1015 Sta. Catalina
Rizal Ave., Exten.
Dear Mr. Dayao:
You are hereby appointed as Checker, in the
Checking Department of MERCURY DRUG CO.,
INC., effective July 1, 1959 and you shall receive
an annual compensation the amount of Two
Thousand four hundred pesos only (P2,400.00),
that includes the additional compensation for
work on Sundays and legal holidays.
Your firm being a Service Enterprise, you will be
required to perform work every day in a year as
follows:
8 Hours work on regular days and-all special
Holidays that may be declared but with the 25%
additional compensation;
4 Hours work on every other Sundays of the
month;
For any work performed in excess of the hours as above
mentioned, you shall be paid 25 % additional compensation per
hour.
This appointment may be terminated without notice for cause
and without cause upon thirty days written notice.
This supersedes your appointment of July 1, 1959.
Very truly yours,
MERCURY DRUG CO., INC.
(Sgd.) MARIANO QUE General Manager
ACCEPTED WITH FULL CONFORMITY:

(Sgd.) NARDO DAYAO

(EXH. "A" and "l ")
(Decision, pp. 114-115, rollo)
These contracts were not declared by the respondent court null
and void in their entirety. The respondent court, on the basis of
the conflicting evidence presented by the parties, in effect: 1)
rejected the theory of the petitioner company that the 25%
additional compensation claimed by the private respondents for
the four-hour work they rendered during Sundays and legal
holidays provided in their contracts of employment were
covered by the private respondents' respective monthly
salaries; 2) gave credence to private respondents', (Nardo
Dayao, Ernesto Talampas and Josias Federico) testimonies that
the 25% additional compensation was not included in the
private respondents' respective monthly salaries and 3) ruled
that any agreement in a contract of employment which would
exclude the 25% additional compensation for work done during
Sundays and holidays is null and void as mandated by law.
On the second issue, the petitioner-company reiterated its
stand that under the,- respective contracts of employment of
the private respondents, the subject 25 % additional
compensation had already been included in the latter's
respective monthly salaries. This contention is based on the
testimony of its lone witness, Mr. Jacinto Concepcion and
pertinent exhibits. Thus:
Exhibit A shows that for the period of October 30,
1960, the annual compensation of private
respondent Nardo Dayao, including the additional
compensation for the work he renders during the
first four (4) hours on every other Sunday and on
the eight (8) Legal Holidays at the time was
P2,400.00 or P200.00 per month. These amounts
did not represent basic salary only, but they
represented the basic daily wage of Nardo Dayao
considered to be in the amount of P7.36 x 305
ordinary working days at the time or in the total
amount of P2,144.80. So plus the amount of
P156.40 which is the equivalent of the Sunday
and Legal Holiday rate at P9.20 basic rate of
P7.36 plus 25% thereof or P1.84) x 17, the latter

figure representing 13 Sundays and 4 Legal

Holidays of 8 hours each. ...
xxx xxx xxx
That the required minimum 25% Sunday and
Legal Holiday additional compensation was paid
to and received by the employees for the work
they rendered on every other Sunday and on the
eight Legal Holidays for the period October, 1959
to June 30, 1962 is further corroborated by
Exhibits 5, 6, 8, 9 and 9-A and the testimony of
Mr. Jacinto Concepcion thereon. (Brief for the
Petitioner, pp. 24, 27).
The aforesaid computations were not given credence by the
respondent court. In fact the same computations were not even
mentioned in the court's decision which shows that the court
found such computations incredible. The computations,
supposedly patterned after the WAS Interpretative Bulletin No. 2
of the Department Labor demonstrated in Exhibits "6", "7", "8",
"9", and "9-A", miserably failed to show the exact and correct
annual salary as stated in the respective contracts of
employment of the respondent employees. The figures arrived
at in each case did not tally with the annual salaries on to the
employees' contracts of employment, the difference varying
from P1.20 to as much as P14.40 always against the interest of
the employees. The petitioner's defense consists of
mathematical computations made after the filing of the case in
order to explain a clear attempt to make its employees work
without the extra compensation provided by law on Sundays
and legal holidays.
In not giving weight to the evidence of the petitioner company,
the respondent court sustained the private respondents'
evidence to the effect that their 25% additional compensation
for work done on Sundays and Legal Holidays were not included
in their respective monthly salaries. The private respondents
presented evidence through the testimonies of Nardo Dayao,
Ernesto Talampas, and Josias Federico who are themselves
among the employees who filed the case for unfair labor
practice in the respondent court and are private respondents
herein. The petitioner- company's contention that the
respondent court's conclusion on the issue of the 25%
additional compensation for work done on Sundays and legal

holidays during the first four hours that the private respondents
had to work under their respective contracts of employment
was not supported by substantial evidence is, therefore,
unfounded. Much less do We find any grave abuse of discretion
on the part of the respondent court in its interpretation of the
employment contract's provision on salaries. In view of the
controlling doctrine that a grave abuse of discretion must be
shown in order to warrant our disturbing the findings of the
respondent court, the reversal of the court's endings on this
matter is unwarranted. (Sanchez vs. Court of Industrial
Relations, 27 SCRA 490).
The last issue raised in the first assignment of error refers to a
procedural matter. The petitioner-company contends that ,-the
question as to whether or not the contracts of employment
were null and void was not put in issue, hence, the respondent
court pursuant to the Rules of Court should have refrained from
ruling that such contracts of employment were null and void. In
this connection We restate our finding that the respondent court
did not declare the contracts of employment null and void in
their entirety. Only the objectionable features violative of law
were nullified. But even granting that the Court of Industrial
Relations declared the contracts of employment wholly void, it
could do so notwithstanding the procedural objection. In
Sanchez u. Court of Industrial Relations, supra, this Court
speaking through then Justice, now Chief Justice Enrique M.
Fernando, stated:
xxx xxx xxx
Moreover, petitioners appear to be oblivious of
the statutory mandate that respondent Court in
the hearing, investigation and determination of
any question or controversy and in the exercise of
any of its duties or power is to act 'according to
justice and equity and substantial merits of the
case, without regard to technicalities or legal
forms and shall not be bound by any technical
rules of legal evidence' informing its mind 'in
such manner as it may deem just and equitable.'
Again, this Court has invariably accorded the
most hospitable scope to the breadth and
amplitude with which such provision is couched.

So it has been from the earliest case decided in

1939 to a 1967 decision.
Two issues are raised in the second assignment of
error by the petitioner-company. The first hinges
on the jurisdiction of the respondent court to
award additional compensation for nighttime
work. Petitioner wants Us to re- examine Our
rulings on the question of nighttime work. It
contends that the respondent court has no
jurisdiction to award additional compensation for
nighttime work because of the declared policy on
freedom of collective bargaining expressed in
Republic Act 875 and the express prohibition in
Section 7 of the said statute. A re- examination of
the decisions on nighttime pay differential was
the focus of attention in Rheem of the
Philippines, Inc. et al., v. Ferrer, et al (19 SCRA
130). The earliest cases cited by the petitionercompany, Naric v. Naric Workers Union L-12075, May 29, 1959 and Philippine Engineers' Syndicate
u. Bautista, L-16440, February 29, 196.4, were
discussed lengthily. Thus xxx xxx xxx
2. On the claim for night differentials, no
extended discussion is necessary. To be read as
controlling here is Philippine Engineers'
Syndicate, Inc. vs. Hon. Jose S. Bautista, et al., L16440, February 29, 1964, where this Court,
speaking thru Mr. Chief Justice Cesar Bengzon,
declared
Only one issue is raised: whether or
not upon the enactment of
Republic Act 875, the CIR lost its
jurisdiction over claims for
additional compensation for regular
night work. Petitioner says that this
Act reduced the jurisdiction of
respondent court and limited it to
specific cases which this Court has
defined as: ... (1) when the labor
dispute affects an industry which is

indispensable to the national

interest and is so certified by the
President to the industrial court
(Sec. 10, Republic Act 875); (2)
when the controversy refers to
minimum wage under the Minimum
Wage Law (Republic Act 602); (3)
when it involves hours of
employment under the Eight-Hour
Labor Law (Commonwealth Act
444) and (4) when it involves an
unfair labor practice [Sec. 5(a),
Republic Act 8751', [Paflu, et al. vs.
Tan, et al., 52 Off. Gaz, No. 13,
5836].
Petitioner insists that respondents'
case falls in none of these
categories because as held in two
previous cases, night work is not
overtime but regular work; and that
respondent court's authority to try
the case cannot be implied from its
general jurisdiction and broad
powers' under Commonwealth Act
103 because Republic Act 875
precisely curbed such powers
limiting them to certain specific
litigations, beyond which it is not
permitted to act.
We believe petitioner to be in error. Its position
collides with our ruling in the Naric case [National
Rice & Corn Corp. (NARIC) vs. NARIC Workers'
Union, et al., G.R. No. L-12075, May 29, 1959]
where we held;
While it is true that this Court made
the above comment in the
aforementioned case, it does not
intend to convey the Idea that work
done at night cannot also be an
overtime work. The comment only

served to emphasize that the

demand which the Shell Company
made upon its laborers is not
merely overtime work but night
work and so there was need to
differentiate night work from
daytime work. In fact, the company
contended that there was no law
that required the payment of
additional compensation for night
work unlike an overtime work
which is covered by
Commonwealth Act No. 444 (Eight
Hour Labor Law). And this Court in
that case said that while there was
no law actually requiring payment
of additional compensation for
night work, the industrial court has
the power to determine the wages
that night workers should receive
under Commonwealth Act No. 103,
and so it justified the additional
compensation in the Shell case for
'hygienic, medical, moral, cultural
and sociological reasons.
xxx xxx xxx
True, in Paflu, et al. vs. Tan, et al., supra, and in a series of cases
thereafter, We held that the broad powers conferred by
Commonwealth Act 103 on the CIR may have been curtailed by
Republic Act 875 which limited them to the four categories
therein expressed in line with the public policy of allowing
settlement of industrial disputes via the collective bargaining
process; but We find no cogent reason for concluding that a suit
of this nature for extra compensation for night work falls outside
the domain of the industrial court. Withal, the record does not
show that the employer-employee relation between the 64
respondents and the petitioner had ceased.
After the passage of Republic Act 875, this Court has not only
upheld the industrial court's assumption of jurisdiction over
cases for salary differentials and overtime pay [Chua Workers

Union (NLU) vs. City Automotive Co., et al., G.R. No. L- 11655,
April 29, 1959; Prisco vs. CIR, et al., G.R. No. L-13806, May 23,
1960] or for payment of additional compensation for work
rendered on Sundays and holidays and for night work [Nassco
vs. Almin, et al., G.R. No. L9055, November 28, 1958; Detective
& Protective Bureau, Inc. vs. Felipe Guevara, et al., G.R. No. L8738, May 31, 1957] but has also supported such court's ruling
that work performed at night should be paid more than work
done at daytime, and that if that work is done beyond the
worker's regular hours of duty, he should also be paid additional
compensation for overtime work. [Naric vs. Naric Workers'
Union. et al., G. R No. L-12075, May 29, 1959, citing Shell Co.
vs. National Labor Union, 81 Phil. 315]. Besides, to hold that this
case for extra compensation now falls beyond the powers of the
industrial court to decide, would amount to a further
curtailment of the jurisdiction of said court to an extent which
may defeat the purpose of the Magna Carta to the prejudice of
labor.' [Luis Recato Dy, et al v-9. CIR, G.R. No. L-17788, May
25,1962]"
The petitioner-company's arguments on the respondent court's
alleged lack of jurisdiction over additional compensation for
work done at night by the respondents is without merit.
The other issue raised in the second assignment of error is
premised on the petitioner-company's contention that the
respondent court's ruling on the additional compensation for
nighttime work is not supported by substantial evidence.
This contention is untenable. Pertinent portions of the
respondent court's decision read:
xxx xxx xxx
There is no serious disagreement between the
petitioners and respondent management on the
facts recited above. The variance in the evidence
is only with respect to the money claims.
Witnesses for petitioners declared they worked on
regular days and on every other Sunday and also
during all holidays; that for services rendered on
Sundays and holidays they were not paid for the
first four (4) hours and what they only received
was the overtime compensation corresponding to
the number of hours after or in excess of the first
four hours; and that such payment is being

indicated in the overtime pay for work done in

excess of eight hours on regular working days. It
is also claimed that their nighttime services could
well be seen on their respective daily time
records. .. (Emphasis supplied) (p.116, rollo)
The respondent court's ruling on additional compensation for
work done at night is, therefore, not without evidence.
Moreover, the petitioner-company did not deny that the private
respondents rendered nighttime work. In fact, no additional
evidence was necessary to prove that the private respondents
were entitled to additional compensation for whether or not
they were entitled to the same is a question of law which the
respondent court answered correctly. The "waiver rule" is not
applicable in the case at bar. Additional compensation for
nighttime work is founded on public policy, hence the same
cannot be waived. (Article 6, Civil Code). On this matter, We
believe that the respondent court acted according to justice and
equity and the substantial merits of the case, without regard to
technicalities or legal forms and should be sustained.
The third assignment of error is likewise without merit. The fact
that only three of the private respondents testified in court does
not adversely affect the interests of the other respondents in
the case. The ruling in Dimayuga V. Court of Industrial
Relations (G.R. No. L-0213, May 27, 1957) has been abandoned
in later rulings of this Court.In Philippine Land Air-Sea Labor
Union (PLASLU) vs. Sy Indong Company Rice And Corn Mill (11
SCRA 277) We had occasion to re-examine the ruling
in Dimayuga We stated:
The latter reversed the decision of the trial Judge
as regards the reinstatement with backwages
of ... upon the theory that this is not a class suit;
that, consequently, it is necessary and imperative
that they should personally testify and prove the
charges in the complaint', and that, having failed
to do so, the decision of the trial Judge in their
favor is untenable under the rule laid down in
Dimayuga vs. Court of Industrial Relations, G.R.
No. L-0213 (May 27,1957).
We do not share the view taken in the resolution
appealed from. As the trial Judge correctly said, in
Ms dissent from said resolution,:

xxx xxx xxx

In the case of Sanchez v. Court of Industrial Relations,
supra, this Court stated:
To the reproach against the challenged order in
the brief of petitioners in view of only two of the
seven claimants testifying, a statement by
this Court in Ormoc Sugar Co., Inc. vs. OSCO
Workers Fraternity Labor Union would suffice by
way of refutation. Thus: "This Court fully agrees
with the respondent that quality and not quantity
of witnesses should be the primordial
consideration in the appraisal of evidence.' Barely
eight days later, in another decision, the above
statement was given concrete expression. Thus:
'The bases of the awards were not only the
respective affidavits of the claimants but the
testimonies of 24 witnesses (because 6 were not
given credence by the court below) who Identified
the said 239 claimants. The contention of
petitions on this point is therefore unfounded
Moveover in Philippine Land-Air-Sea Labor Union
(PLASLU) v. Sy Indong company Rice & Corn Mill,
this Court, through the present Chief Justice
rejected as untenable the theory of the Court of
Industrial Relations concerning the imperative
needs of all the claimants to testify personality
and prove their charges in the complaint. As
tersely put: 'We do not share the view taken in
the resolution appealed from.
The petitioner's contention that its employees fully understood
what they signed when they entered into the contracts of
employment and that they should be bound by their voluntary
commitments is anachronistic in this time and age.
The Mercury Drug Co., Inc., maintains a chain of drugstores that
are open every day of the week and, for some stores, up to very
late at night because of the nature of the pharmaceutical retail
business. The respondents knew that they had to work Sundays
and holidays and at night, not as exceptions to the rule but as
part of the regular course of employment. Presented with
contracts setting their compensation on an annual basis with an
express waiver of extra compensation for work on Sundays and

holidays, the workers did not have much choice. The private
respondents were at a disadvantage insofar as the contractual
relationship was concerned. Workers in our country do not have
the luxury or freedom of declining job openings or filing
resignations even when some terms and conditions of
employment are not only onerous and inequitous but illegal. It
is precisely because of this situation that the framers of the
Constitution embodied the provisions on social justice (Section
6, Article 11) and protection to labor (Section 9, Article I I) in the
Declaration of Principles And State Policies.
It is pursuant to these constitutional mandates that the courts
are ever vigilant to protect the rights of workers who are placed
in contractually disadvantageous positions and who sign
waivers or provisions contrary to law and public policy.
WHEREFORE, the petition is hereby dismissed. The decision and
resolution appealed from are affirmed with costs against the
petitioner.
SO ORDERED.
Teehankee (Chairman), Makasiar, Melencio-Herrera, Plana,
Vasquez and Relova, JJ.,concur.

NIGHT DIFFERENTIAL
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-17068
December 30, 1961

NATIONAL SHIPYARDS AND STEEL

CORPORATION, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and DOMINADOR
MALONDRAS, respondents.
N. C. Virata for petitioner.
Mariano B. Tuason for respondent Court.
Manuel P. Calanog for respondent Dominador Malondras.
REYES, J.B.L., J.:
Petition filed by the National Shipyards and Steel Corporation
(otherwise known as the NASSCO) to review certain orders of
the respondent Court of Industrial Relations requiring it to pay
its bargeman Dominador Malondras overtime service of 16
hours a day for a period from January 1, 1954 to December 31,
1956, and from January 1, 1957 to April 30, 1957, inclusive.
The petitioner NASSCO, a government-owned and controlled
corporation, is the owner of several barges and tugboats used
in the transportation of cargoes and personnel in connection
with its business of shipbuilding and repair. In order that its
bargeman could immediately be called to duty whenever their
services are needed, they are required to stay in their
respective barges, for which reason they are given living
quarters therein as well as subsistence allowance of P1.50 per
day during the time they are on board. However, upon prior
authority of their superior officers, they may leave their barges
when said barges are idle.
On April 15, 1957, 39 crew members of petitioner's tugboat
service, including therein respondent Dominador Malondras,
filed with the Industrial Court a complaint for the payment of
overtime compensation (Case No. 1059-V). In the course of the
proceeding, the parties entered into a stipulation of facts
wherein the NASSCO recognized and admitted
4. That to meet the exigencies of the service in the
performance of the above work, petitioners have to work
when so required in excess of eight (8) hours a day
and/or during Sundays and legal holidays (actual
overtime service is subject to determination on the basis
of the logbook of the vessels, time sheets and other
pertinent records of the respondent).
xxx
xxx
xxx

6. The petitioners are paid by the respondent their

regular salaries and subsistence allowance, without
additional compensation for overtime work;
Pursuant to the above stipulation, the Industrial Court, on
November 22, 1957, issued an order directing the court
examiner to compute the overtime compensation due the
claimants.
On February 14, 1958, the court examiner submitted his report
covering the period from January 1 to December 31, 1957. In
said report, the examiner found that the petitioners in Case No.
1058-V, including herein respondent Dominador Malondras,
rendered an average overtime service of five (5) hours each day
for the period aforementioned, and upon approval of the report
by the Court, all the claimants, including Malondras, were paid
their overtime compensation by the NASSCO.
Subsequently, on April 30, 1958, the court examiner submitted
his second partial report covering the period from January 1,
1954 to December 31, 1956, again giving each crewman an
average of five (5) overtime hours each day. Respondent
Malondras was not, however, included in this report as his daily
time sheets were not then available. Again upon approval by
the Court, the crewmen concerned were paid their overtime
compensation.
Because of his exclusion from the second report of the
examiner, and his time sheets having been located in the
meantime, Dominador Malondras, on September 18, 1959, filed
petitions in the same case asking for the compensation and
payment of his overtime compensation for the period from
January 1, 1954 to December 31, 1956, and from January to
April 30, 1957 which, he alleged, was not included in the first
report of the examiner because his time sheets for these
months could not be found at the time. Malondras' petition was
opposed by the NASSCO upon the argument, among others,
that its records do not indicate the actual number of working
hours rendered by Malondras during the periods in question.
Acting on the petition and opposition, the Industrial Court
ordered the examiner to examine the log books, daily time
sheets, and other pertinent records of the corporation for the
purpose of determining and computing whatever overtime
service Malondras had rendered from January 1, 1954 to
December 31, 1956.

On January 15, 1960, the chief examiner submitted a report

crediting Malondras with a total of 4,349 overtime hours from
January 1, 1954 to December 31, 1956, at an average of five (5)
overtime hours a day, and after deducting the aggregate
amount of subsistence allowance received by Malondras during
this period, recommended the payment to him of overtime
compensation in the total sum of P2,790.90.
On February 20, 1960, the Court ordered the examiner to make
a re-examination of the records with a view to determining
Malondras' overtime service from January 1, 1954 to December
31, 1956, and from January 1, 1957 to April 30, 1957, but
without deducting from the compensation to be paid to him his
subsistence allowance. Pursuant to this last order, the
examiner, on April 23, 1960, submitted an amended report
giving Malondras an average of sixteen (16) overtime hours a
day, on the basis of his time sheets, and recommending the
payment to him of the total amount of P15,242.15 as overtime
compensation during the periods covered by the report. This
report was, over the NASSCO's vigorous objections, approved by
the Court below on May 6, 1960. The NASSCO moved for
reconsideration, which was denied by the Court en banc, with
one judge dissenting. Whereupon, the NASSCO appealed to this
Court.
There appears to be no question that respondent Malondras
actually rendered overtime services during the periods covered
by the examiner's report. This is admitted in the stipulation of
facts of the parties in Case No. 1058-V; and it was on the basis
of this admission that the Court below, in its order of November
22, 1957, ordered the payment of overtime compensation to all
the petitioners in Case No. 1058-V, including respondent
Dominador Malondras, after the overtime service rendered by
them had been determined and computed on the basis of the
log books, time sheets and other pertinent records of the
petitioner corporation.
The only matter to be determined here is, therefore, the
number of hours of overtime for which Malondras should be
paid for the periods January 1, 1954 to December 31, 1956, and
from January to April 30, 1957. Respondents urge that this is a
question of fact and not subject to review by this Court, there
being sufficient evidence to support the Industrial Court's ruling

on this point. It appears, however, that in crediting Malondras

with 16 hours of overtime service daily for the periods in
question, the court examiner relied only on his daily time sheets
which, although approved by petitioner's officers in charge and
its auditors, do not show the actual number of hours of work
rendered by him each day but only indicate, according to the
examiner himself, that:
almost everyday Dominador Malondras was on "Detail"
or "Detailed on Board". According to the officer in charge
of Dominador Malondras, when he (Dominador
Malondras) was on "Detail" or "Detailed on Board", he
was in the boat for twenty-four (24) hours.
In other words, the court examiner interpreted the words
"Detail" or "Detailed on Board" to mean that as long as
respondent Malondras was in his barge for twenty-four hours,
he should be paid overtime for sixteen hours a day or the time
in excess of the legal eight working hours that he could not
leave his barge. Petitioner NASSCO, upon the other hand,
argues that the mere fact that Malondras was required to be on
board his barge all day so that he could immediately be called
to duty when his services were needed does not imply that he
should be paid overtime for sixteen hours a day, but that he
should receive compensation only for the actual service in
excess of eight hours that he can prove. This question is clearly
a legal one that may be reviewed and passed upon by this
Court.lawphil.net
We can not agree with the Court below that respondent
Malondras should be paid overtime compensation for every
hour in excess of the regular working hours that he was on
board his vessel or barge each day, irrespective of whether or
not he actually put in work during those hours. Seamen are
required to stay on board their vessels by the very nature of
their duties, and it is for this reason that, in addition to their
regular compensation, they are given free living quarters and
subsistence allowances when required to be on board. It could
not have been the purpose of our law to require their employers
to pay them overtime even when they are not actually working;
otherwise, every sailor on board a vessel would be entitled to
overtime for sixteen hours each day, even if he had spent all
those hours resting or sleeping in his bunk, after his regular tour

of duty. The correct criterion in determining whether or not

sailors are entitled to overtime pay is not, therefore, whether
they were on board and can not leave ship beyond the regular
eight working hours a day, but whether they actually rendered
service in excess of said number of hours. We have ruled to that
effect in Luzon Stevedoring Co., Inc. vs. Luzon Marine
Department Union, et al., L-9265, April 29, 1957:
I. Is the definition for "hours of work" as presently
applied to dryland laborers equally applicable to
seamen? Or should a different criterion be applied by
virtue of the fact that the seaman's employment is
completely different in nature as well as in condition of
work from that of a dryland laborer?
xxx
xxx
xxx
Section 1 of Commonwealth Act No. 444, known as the
Eight-Hour Labor Law, provides:
"SEC. 1. The legal working day for any person
employed by another shall be of not more than
eight hours daily. When the work is not
continuous, the time during which the laborer is
not working AND CAN LEAVE HIS WORKING PLACE
and can rest completely, shall not be counted."
The requisites contained in this section are further
implemented by contemporary regulations issued by
administrative authorities (Sections 4 and 5 of Chapter
III, Article 1, Code of Rules and Regulations to implement
the Minimum Wage Law).
For the purposes of this case, we do not need to set for
seamen a criterion different from that applied to laborers
on land, for under the provisions of the above quoted
section, the only thing to be done is to determine the
meaning and scope of the term "working place" used
therein. As we understand this term, alaborer need not
leave the premises of the factory shop or boat in order
that his period of rest shall not be counted, it being
enough that he "cease to work", may rest completely
and leave or may leave at his will the spot where he
actually stays while working, to go somewhere else,
whether within or outside the premises of said factory,
shop or boat. If these requisites are complied with, the

period of such rest shall not be counted. (Emphasis

supplied)
While Malondras' daily time sheets do not show his actual
working hours, nevertheless, petitioner has already admitted in
the Stipulation of Facts in this case that Malondras and his coclaimants did render service beyond eight (8) hours a day when
so required by the exigencies of the service; and in fact,
Malondras was credited and already paid for five (5) hours daily
overtime work during the period from May 1 to December 31,
1957, under the examiner's first report. Since Malondras has
been at the same job since 1954, it can be reasonably inferred
that the overtime service he put in whenever he was required to
be aboard his barge all day from 1954 to 1957 would be more
or less consistent. In truth, the other claimants who served with
Malondras under the same conditions and period have been
finally paid for an overtime of 5 hours a day, and no substantial
difference exists between their case and the present one, which
was not covered by the same award only because Malondras'
time records not found until later.
The next question is whether or not the subsistence allowance
received by Malondras for the periods covered by the report in
question should be deducted from his overtime compensation.
We do not think so, for the Stipulation of the Facts of the parties
show that this allowance is independent of and has nothing to
do with whatever additional compensation for overtime work
was due the petitioner NASSCO's bargemen. According to the
petitioner itself, the reason why their bargemen are given living
quarters in their barges and subsistence allowance at the rate
of P1.50 per day was because they were required to stay in
their respective barges in order that they could be immediately
called to duty when their services were needed (Petition, par. 5,
p. 2). Petitioner having already paid Malondras and his
companions overtime for 1957 without deduction of the
subsistence allowances received by them during this period,
and Malondras' companions having been paid overtime for the
other years also without deducting their subsistence
allowances, there is no valid reason why Malondras should be
singled out now and his subsistence allowance deducted from
the overtime compensation still due him.

The last question involves petitioner's claim that it was error for
the examiner to base Malondras' overtime compensation for the
whole year 1954 at P6.16 a day, when he was appointed in the
tubgoat service only on October 1, 1954, and before that was a
derrick man with a daily salary of P6.00. In answer, respondent
Malondras asserts that the report of the examiner, based on his
time sheets from January 1, 1954, show that he had already
been rendering overtime service from that date. This answer
does not, however, deny that Malondras started to get P6.16 a
day only in October, 1954, and was before that time receiving
only P6.00 daily, as claimed by petitioner. We think, therefore,
that the records should be reexamined to find out Malondras'
exact daily wage from January 1, 1954 to September, 1954, and
his overtime compensation for these months computed on the
basis thereof.
WHEREFORE, the order appealed from is modified in the sense
that respondent Malondras should be credited five (5) overtime
hours instead of sixteen (16) hours a day for the periods
covered by the examiner's report. The court below is ordered to
determine from the records the exact daily wage received by
respondent Malondras from January 1, 1954 to September,
1954, and to compute accordingly his overtime compensation
for that period. In all other respects, the judgment appealed
from is affirmed. No costs in this instance. So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion,
Barrera, Paredes, Dizon and De Leon, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-27761 September 30, 1981
BISIG NG MANGGAGAWA NG PHILIPPINE REFINING CO.,
INC., plaintiff-appellants,

vs.
PHILIPPINE REFINING CO., INC., defendant-appellee.
ABAD SANTOS, J.:
This is an appeal from the decision of the Court of First Instance
of Manila dated December 8, 1966, in Civil Case No. 65082,
holding that Christmas bonus and other fringe benefits are
excluded in the computation of the overtime pay of the
members of the appellant union under Section 6, Article VI of
the 1965 collective bargaining agreement which reads as
follows:
Overtime pay at the rate of regular base pay plus
50% thereof shag be paid for all work performed
in excess of eight hours on ordinary days within
the work week (that is to say, Monday to Friday).
On April 15,1966, the Bisig ng Manggagawa ng Philippine
Refining Company, Inc., as the representative union of the rank
and file employees of the Philippine Refining Co., Inc., filed with
the Court of First Instance of Manila a petition for declaratory
relief praying, among others
That a declaratory judgment be rendered
declaring and adjudicating the qqqtive rights and
duties of petitioner and respon dent under the
above quoted provision of their Collective 13 agreements and further declaring that the
Christmas bonus of one month or thirty days pay
and other de determinable benefits should be
included for the purpose of computation of the
overtime pay spread throughout the twelve
months period of each year from August, 1963 up
to the present and subsequently hereafter; and
that respondent be therefore directed to pay such
differential in the overtime pay of all the
employees of the herein respondent ;
Petitioner union contended that the respondent company was
under obligation to include the employees' Christmas bonus and
other fringe benefits in the computation of their overtime pay
by virtue of the ruling of this Court in the case of NAWASA vs.
NAWASA Consolidated Unions, et all G.R. No. L-18938, August
31, 1964, 11 SCRA 766.

On May 3, 1966, the Philippine Refining Co.. Inc. filed its answer
to the petition alleging, among others, that never did the
parties intend, in the 1965 collective bargaining agreement and
in prior agreements, to include the employees' Christmas bonus
and other fringe benefits in the computation of the overtime
pay and that the company precisely agreed to a rate of 50%,
which is much higher than the 25% required by the Eight-Hour
Labor Law (Commonwealth Act No. 444, as amended), on the
condition that in computing the overtime pay only the "regular
base pay" would be considered. Furthermore, respondent
company contended that the ruling of this Court in the NAWASA
case relative to the computation of overtime compensation
could not be applied to its employees since it was a private
corporation and not a government-owned or controlled
corporation like the NAWASA.
After the requisite pre-trial was held, the Court of First Instance
of Manila issued an order dated September 16, 1966, limiting
the issues to the proper interpretation of the above quoted
provision of the 1965 collective bargaining agreement and to
the applicability to the case of the NAWASA ruling and requiring
the parties to submit evidence as to the circumstances under
which the questioned provision had been included in the
agreement of 1965.
During the trial, the parties presented their respective
witnesses from whose testimonies the following facts were
established: that the collective bargaining agreements entered
into between the parties before 1965 all contained a provision
similar to the aforequoted Sec. 6, Art. VI of the 1965 collective
bargaining agreement; that in the enforcement of said earlier
agreements, the overtime compensation of the employees was
computed on the basis solely of their basic monthly pay, i.e.,
excluding the employees' Christmas bonus and other fringe
benefits; that in the negotiations which led to the execution of
the 1965 collective bargaining agreement, the matter of the
proper interpretation of the phrase "regular base pay" was
discussed; that the petitioner union demanded that the
NAWASA ruling should be applied by including the employees'
Christmas bonus and other fringe benefits in the computation of
the overtime compensation; that the respondent company
refused to give in to such demand contending that (1) the

company agreed to a 5% overtime rate, which was higher than

the 25% rate required by law, precisely on the condition that
the same should be computed solely on the basis of the
employees' basic monthly salary, excluding Christmas bonus
and other fringe benefits; (2) the parties had the freedom to
choose the basis for computing the overtime pay provided that
the same should not be less than the minimum prescribed by
law; and (3) the NAWASA decision was inapplicable to a private
corporation like the Philippine Refining Co., Inc.; that while
refusing to grant petitioner's demand, the respondent company
nevertheless agreed to submit to a court for resolution the issue
of the applicability to their case of the NAWASA ruling, with the
undertaking to abide by whatever decision the court would
render; and, that the parties agreed that, in the meantime, they
would exclude the Christmas bonus and other fringe benefits in
the computation of the overtime compensation.
On December 8, 1966, the Court of First Instance of Manila
rendered a decision the dispositive portion of which reads as
follows:
IN VIEW OF THE FOREGOING, judgment is hereby
rendered, declaring that the term "regular base
pay" in Section 6, Ararticle VI of Exhibit A refers
only to "regular base pay" and does not include
Christmas bonus and other fringe benefits.
Without pronouncement as to costs.
SO ORDERED.
Said court held that while the NAWASA ruling concerning the
meaning of the phrase "regular pay" of the Eight-Hour Labor
Law could be applied to employees of private corporations like
the Philippine Refining Company, the same was, nevertheless,
inapplicable to the case at bar which involved the interpretation
of the phrase "regular base pay which was different from
"regular pay". It declared that "regular base pay" referred only
to the basic or monthly pay exclusive of Christmas bonus and
other fringe benefits. Furthermore, the validity of the provision
of the 1965 collective bargaining agreement concerning the
computation of the employees' overtime pay on the basis of
their "regular base pay" was upheld by the court for the reason
that the same was even higher than the overtime pay
prescribed by law. The court emphasized that contracts are

binding on the parties insofar as they are not contrary to law,

morals and public order.
A motion for reconsideration of the decision was filed by the
petitioner union but the same was denied in an order dated
February 17, 1967. Hence, the present appeal which raises pure
questions of law, namely: (1) whether or not the phrase "regular
base pay" as used in the above-quoted provision of the 1965
CBA includes Christmas bonus and other fringe benefits; and (2)
whether or not the stipulation in the CBA on overtime pay
violates the Nawasa doctrine if the answer to question No. I is in
the negative.
We answer both questions in the negative.
The phrase "regular base pay" is clear, unequivocal and
requires no interpretation. It means regular basic pay and
necessarily excludes money received in different concepts such
as Christmas bonus and other fringe benefits. In this connection
it is necessary to remember that in the enforcement of previous
collective bargaining agreements containing the same provision
of overtime pay at the rate of regular base pay plus 50@'c
thereof", the overtime compensation was invariably based only
on the regular basic pay, exclusive of Christmas bonus and
other tinge benefits. Appellant union knew all the while of such
interpretation and precisely attempted to negotiate for a
provision in the subject collective bargaining agreement that
would include the Christmas bonus and other fringe benefits in
the computation of the overtime pay. Significantly, the appellee
company did not agree to change the phrase "regular base pay"
as it could not consent to the inclusion of the fringe benefits in
the computation of the overtime pay. Hence, the appellant
union could not question the intended definition of the phrase
but could only claim that the same violated the Nawasa
doctrine and insist that the phrase should be redefined to
conform to said doctrine.
We are thus tasked not so much with the interpretation of the
phrase "regular base pay" in the CBA, which unquestionably
excludes Christmas bonus and other fringe benefits, but with
the question of whether as understood, the contractual
stipulation violates the ruling laid down in the Nawasa case.
The pertinent portions of the decision in the case of NAWASA vs.
NAWASA Consolidated Unions (L-18938, August 31, 1964, 11

SCRA 766, 782-783) invoked by the appellant union read as

follows:
It has been held that for purposes of computing
overtime compensation a regular wage includes
all payments which the parties have agreed shall
be received during the work week, including
piece work wages, differential payments for
working at undesirable times, such as at night or
on Sundays and holidays, and the cost of board
and lodging customarily furnished the employee
Walling v. Yangermah-Reynolds Hardwork Co., 325
U.S. 419; Walling v. Harischfeger Corp., 325 U.S.
427. The 'regular rate' of pay also ordinarily
includes incentive bonus or profit-sharing
payments made in addition to the normal basic
pay (56 C.J.S., pp. 704-705), and it was also held
that the higher rate for night, Sunday and holiday
work is just as much a regular rate as the lower
rate for daytime work. The higher rate is merely
an inducement to accept employment at times
which are not as desirable from a workman's
standpoint (International L. Ass'n. v. National
Terminals Corp. c.c. Wise, 50 F. Supp. 26, affirmed
CCA Casbunao v. National Terminals Corp. 139 F.
2d 853).
Respondent court, therefore, correctly included
such differential pay in computing the weekly
wages of those employees and laborers who
worked seven days a week and were continuously
receiving 25% Sunday differential for a period of
three months immediately p g the
implementation of Republic Act 1880. "
The appellant union contends that by virtue of the forego. ing
the Philippine Refining Co., Inc., is under obligation to include
the, employees' Christmas bonus and other fringe benefits in
the computation of their overtime compensation which, as
agreed, is "regular base pay plus 50% thereof".
The legal provisions pertinent to the subject of overtime
compensation are found in Secs. 3 and 4 of Commonwealth Act
No. 444, as amended, which read as follows:

SEC. 3. Work may be performed beyond eight

hours a day in case of actual or impending
emergencies ...; but in all such cases, the
laborers and employees shall be entitled to
receive compensation for the overtime work
performed at the same rate as their regular
wages or salary, plus at least twenty-five per
centum additional.
SEC. 4. No person, firm, or corporation, business
establishment or place or center of labor shall
compel an employee or laborer to work during
Sunday and legal holidays, unless he is paid an
additional sum of at least twenty-five per centum
of his regular renumeration (Emphasis supplied.)
Applying the aforequoted NAWASA ruling to the above provision
of law, We arrive at the following conclusion: an employers
covered by said law are under legal compulsion to grant their
employees overtime compensation in amounts not less than
their basic pay and the fringe benefits regularly and
continuously received by them plus 25% thereof. This does not
however mean that agreements concerning overtime
compensation should always provide for a computation based
on the employee's "regular wage or salary i.e. regular base pay
plus fringe benefits regularly and continuously received. For it is
axiomatic that in multiplication, the product is directly related to
the multiplicand the multiplier, and that the multiplicand Is
inversely related to the multiplier conviniently, the same
product may be obtained despite reduction of the multiplicand
provided that the multiplier is correspondingly increased.
Conformably with the foregoing mathematical axioms there is
still compliance with the above-stated ruling despite the fact
that the overtime compensation is based only on the
employee's "regular base pay" (the multiplicand) as long as the
rate of 25% (the multiplier) is increased by such amount as to
produce a result (the product) which is not less than the result
to be obtained in computing 25% of the employee's "regular
wage or salary" ("regular base pay" plus fringe benefits
regularly and continuously received). In fine, the parties may
agree for the payment of overtime compensation in an amount
to be determined by applying a formula other than the statutory

formula of "regular wage or qqqs plus at least twenty-five per

centum additional" provided that the result in applying the
contractual formula is not less than the result in applying said
statutory formula.
In the case at bar, it is admitted that the contractual formula of
"regular base pay plus 50% thereof" yields an overtime
compensation which is higher than the result in applying the
statutory formula as elaborated in the Nawasa case.
Consequently, its validity is upheld and the parties are enjoined
to accord due respect to it.
WHEREFORE, the decision appealed from is hereby affirmed in
all respects. Without pronouncement as to costs.
SO ORDERED.
Barredo (Chairman), Aquino, Concepcion Jr. and De Castro, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-30279 July 30, 1982
PHILIPPINE NATIONAL BANK, petitioner,
vs.
PHILIPPINE NATIONAL BANK EMPLOYEES ASSOCIATION
(PEMA) and COURT OF INDUSTRIAL
RELATIONS, respondents.
Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for
petitioner.
Leon O. Ty, Gesmundo Fernandez & Zulueta, Oliver B.
Gesmundo and Israel Bocobo for respondents.
BARREDO, J.:
Appeal by the Philippine National Bank from the decision of the
trial court of the Court of Industrial Relations in Case No. IPA-53
dated August 5, 1967 and affirmed en banc by said court on
January 15, 1968.
This case started on January 28, 1965 in consequence of the
certification of the President of the Philippines of an industrial
dispute between the Philippine National Bank Employees
Association (PEMA, for short), on the one hand, and the

Philippine National Bank (PNB, for short), on the other, which

arose from no more than the alleged failure of the PNB to
comply with its commitment of organizing a Committee on
Personnel Affairs to take charge of screening and deliberating
on the promotion of employees covered by the collective
bargaining agreement then in force between the said parties.
On January 28, 1965, the Industrial Court issued an order aimed
at settling the dispute temporarily between the parties, which
was certified by the President. Pertinent portions of the order
read thus:
xxx xxx xxx
1. That in order to settle the strike and for the
employees to return to work immediately starting
January 29, 1965, the Committee on Personnel
Affairs is hereby created to start functioning on
February 1, 1965;
xxx xxx xxx
f. That in return for this concession,
an injunction against future strikes
or lockouts shall be issued by the
Court to last for a period of six
months but which shall terminate
even before that period should all
disputes of the parties be already
resolved; (Page 84, Record.)
According to the very decision now on appeal, "on May 22,
1965, petitioner (private respondent herein) filed another
pleading submitting to this Court for determination certain
matters which it claims cannot be resolved by the parties, which
are as follows:
First Cause of Action
a. In a Resolution No. 1162 dated September 16,
1957, the Respondent's Board of Directors
approved a revision of the computation of
overtime pay retroactive as of July 1, 1954, and
authorized a recomputation of the regular onehour and extra overtime already rendered by all
officers and employees of the Respondent Bank.
The details of the benefits involved in said
Resolution are contained in a Memorandum of the
Respondent Bank dated September 18, 1957.

b. Since the grant of the benefits in question, the

employees of the Respondent, represented by the
petitioner, have always considered them to be a
part of their salaries and/or fringe benefits;
nevertheless, the Respondent, in 1963, without
just cause, withdrew said benefits and in spite of
repeated demands refused, and still refuses to
reinstate the same up to the present.
Second Cause of Action
c. After the promulgation of the Decision in
National Waterworks and Sewerage Authority vs.
NAWASA Consolidated Unions, et al. G.R. No. L18938, Aug. 31, 1964, the Petitioner has
repeatedly requested Respondent that the cost of
living allowance and longevity pay be taken into
account in the computation of overtime pay,
effective as of the grant of said benefits on
January 1, 1958, in accordance with the ruling in
said Decision of the Supreme Court.
d. Until now Respondent has not taken any
concrete steps toward the payment of the
differential overtime and nighttime pays arising
from the cost of living allowance and longevity
pay.
xxx xxx xxx
Respondent in its answer of June 7, 1965 took exception to this
mentioned petition on several grounds, namely, (1) the said
alleged causes of action were not disputes existing between the
parties, (2) the same are mere money claims and therefore not
within this Court's jurisdiction, and (3) that the parties have not
so stipulated under the collective bargaining agreement
between them, or the same is premature as the pertinent
collective bargaining agreement has not yet expired." (Pp. 8486, Record.) 1
Resolving the issues of jurisdiction and prematurity thus raised
by PNB, the court held:
As to the first ground, it is well to note that this
Court in its Order of January 28, 1965 has
enjoined the parties not to strike or lockout for a
period of six (6) months starting from said date.
In a very definite sense the labor disputes

between the parties have been given a specific

period for the settlement of their differences. The
fact that thereafter the question of the manner of
payment of overtime pay is being put in issue,
appears to indicate that this was a part of the
labor dispute. If we are to consider that this
question, particularly the second cause of action,
has in fact existed as early as 1958, shows the
necessity of resolving the same now. And the
same would indeed be an existing issue
considering that the present certification came
only in 1965.
It is further to be noted that the presidential
certification has not limited specific areas of the
labor dispute embraced within the said
certification. It speaks of the existence of a labor
dispute between the parties and of a strike
declared by the PEMA, for which the Court has
been requested to take immediate steps in the
exercise of its powers under the law.
Even on the assumption that the present issue is
not one embraced by the presidential certification
or it is an issue presented by one party on a
cause arising subsequent to the certification, the
same would still be subject to the jurisdiction of
this Court. In "Apo Cement Workers Union versus
Cebu Portland Cement", Case No. 11 IPA (G.R. No.
L-12451, July 10, 1957), the Court en banc (where
this Sala has taken an opposite view) upheld its
jurisdiction under the circumstances just
enumerated. It would seem that this question has
been further settled by our Supreme Court in
"National Waterworks & Sewerage Authority vs.
NAWASA Consolidated Unions, et al." (supra),
which we quote in part:
xxx xxx xxx
4. Petitioner's claim that the issue of overtime
compensation not having been raised in the
original case but merely dragged into it by
intervenors, respondent Court cannot take

cognizance thereof under Section 1, Rule 13 of

the Rules of Court.
xxx xxx xxx
... The fact that the question of overtime payment
is not included in the principal case in the sense
that it is not one of the items of dispute certified
to by the President is of no moment, for it comes
within the sound discretion of the Court of
Industrial Relations. Moreover, in labor disputes
technicalities of procedure should as much as
possible be avoided not only in the interest of
labor but to avoid multiplicity of action. This claim
has no merit.
xxx xxx xxx
As to the objection posed that the issues are
mere money claims, there appears to be no
ground for the same. In the first place, although
the same involves a claim for additional
compensation it is also a part of the labor dispute
existing between the parties and subject to the
compulsory arbitration powers of the Court,
pursuant to Section 10 of Rep. Act No. 875. In the
second place, on the basis of the so-called
PRISCO doctrine (G.R. No. L- 13806, May
23,.1960), there is an existing and current
employer-employee relationship between the
respondent and the members of petitioner union,
for whom the additional overtime compensation
is claimed.
With respect to ground three of the answer on
which objection is based, on C.A. 444, as
amended, Section 6 thereof, provides as follows:
'Any agreement or contract
between the employer and the
laborer or employee contrary to the
provisions of this Act shall be null
and void ab initio'.
The instant action is partially subject to the
provisions of Commonwealth Act 444, as
amended. Even if, the parties have stipulated to
the extent that overtime will not be paid, the

same will not be binding. More so under the

present circumstances, where the only question is
the correctness of the computation of the
overtime payments.
While the Court notes that the first cause of
action has become moot and academic in view of
the compliance by respondent, hence there is no
further need to resolve the same (t.s.n., pp. 5-7,
August 16, 1965), the settlement of said first
cause of action further strengthens the view that
the second cause of action is indeed an existing
dispute between the parties. Both causes of
fiction involve overtime questions. Both stem
from dates well beyond and before the
presidential certification of the present
proceedings. If respondent has been fit to take
steps to expedite and resolve, without court
intervention, the first cause of action, it cannot
deny the existence of the second cause of action
as the first and second appear to be interrelated
matters. (Pp. 86-89, Record)
And We agree that the foregoing holding is well taken. It would
be more worthwhile to proceed to the basic issues immediately
than to add anything more of Our own discourse to the
sufficiently based disposition of the court a quo of the abovementioned preliminary questions.
After discussing the pros and cons on the issue involved in the
second cause of action as to whether or not the cost-of-living
allowance otherwise denominated as equity pay and longevity
pay granted by the bank, the first beginning January 1, 1958
and the latter effective July 1, 1961, should be included in the
computation of overtime-pay, the court granted the demands of
PE MA, except the additional rate of work for night pay, and
rendered the following judgment:
WHEREFORE, in view of the foregoing, this Court
hereby promulgates the following:
1. The respondent Philippine National Bank is
hereby required to pay overtime and nighttime
rates to its employees from January 28, 1962;
and such overtime compensation shall be based
on the sum total of the employee's basic salary or

wage plus cost of living allowance and longevity

pay under the following schedule:
'a. Overtime services rendered
shall be paid at the rate of time
and one-third, but overtime work
performed between 6:00 P.M. and
6- .00 A.M. shall be paid at the rate
of 150% or 50% beyond the regular
rate;
'b. The rate for work performed in
the night shift, or during the period
from 6:00 P.M. to 6:00 A.M. shall be
compensated at the rate of 150%
or 50% beyond the regular rate,
provided the work performed
involved a definite night shift and
not merely a continuation by way
of overtime of the regular and
established hours of the
respondent Bank.
2. The Chief of the Examining Division of the
Court or any of his duly designated
representatives is hereby ordered to compute the
overtime rates due each employee of the
respondent Bank from January 28, 1962, in
accordance with the above determination; and to
complete the same within a period of sixty (60)
days from receipt of this Order. However,
considering that the Philippine National Bank is a
government depository, and renders and
performs functions distinct and unique; and, while
it may be a banking institution, its relationship
with other government agencies and the public is
such that it has no basis for comparison with
other banking institutions organized under the
corporation law or special charter. To require it to
pay immediately the liability after the exact
amount shall have been determined by the Court
Examiner and duly approved by the Court, as in
other cases, would work undue hardship to the

whole government machinery, not to mention the

outstanding foreign liabilities and outside
commitments, if any. Moreover, the records show
that this case was initiated long before the taking
over of the incumbent bank officials.
Accordingly, the Court feels that the payment
shall be subject to the negotiations by the parties
as to time, amount, and duration.
The Court may intervene in said negotiations for
the purpose of settling once and for all this case
to maintain industrial peace pursuant to Section
13 of Commonwealth Act 103, as amended, if
desired, however by the parties.
After all this is not an unfair labor practice case.
SO ORDERED. (Pp. 98-100, Record.)
In connection with the above decision, two interesting points
appear at once to be of determinative relevance:
The first is that in upholding its jurisdiction to take cognizance
of the demand in question about cost-of-living allowance and
longevity pay, the Industrial Court carefully noted that it was
not resolving a petition for declaratory relief in the light of the
decision of this Court in NAWASA vs. NAWASA Consolidated
Unions, G.R. No. L- 18938, August 31, 1964, 11 SCRA 766. Thus
the decision under review states:
Incidentally, the present action is not one for
declaratory relief as to the applicability of a
judicial decision to the herein parties. A careful
perusal of the pleadings indicates that what is
being sought is the payment of differential
overtime and nighttime pay based on existing law
and jurisprudence. The cause of action is not
anchored on any decision of any court but on
provisions of the law which have been in effect at
the time of the occurrence of the cause of the
action in relation to a labor dispute. Hence, this is
not a petition for declaratory relief. (Pp. 94-95,
Record.)
The second refers to a subsequent decision of the
same Industrial Court in Shell Oil Workers Union vs. Shell Co., et
al., Case No. 2410-V and Shell & Affiliates Supervisors Union vs.
Shell Company of the Philippines, et al., Case No. 2411- V, in

which the court made an explanatory discourse of its

understanding of the NAWASA ruling, supra, and on that basis
rejected the claim of the workers. In brief, it held that (1)
NAWASA does not apply where the collective bargaining
agreement does not provide for the method of computation of
overtime pay herein insisted upon by private respondent PEMA
and (2) the fact-situation in the Shell cases differed from that of
NAWASA, since the sole and definite ratio decidendi in NAWASA
was merely that inasmuch as Republic Act 1880 merely fixed a
40-hour 5-day work for all workers, laborers and employees
including government-owned corporations like NAWASA, the
weekly pay of NAWASA workers working more than five days a
week should remain intact; with overtime pay in excess of eight
hours work and 25 % additional compensation on Sundays.
There was no pronouncement at all therein regarding the basis
of the computation of overtime pay in regard to bonuses and
other fringe benefits.
For being commendably lucid and comprehensive, We deem it
justified to quote from that Shell decision:
The main issue:
The Unions appear to have read the NAWASA
case very broadly. They would want it held that in
view of the said ruling of the Supreme Court,
employers and employees must, even in the face
of existing bargaining contracts providing
otherwise, determine the daily and hourly rates of
employees in this manner: Add to basic pay all
the money value of all fringe benefits agreed
upon or already received by the workers
individually and overtime pay shall be computed
thus
Basic yearly Rate plus Value of all Fringe Benefits
divided by number of days worked during the
year equals daily wage; Daily wage divided by 8
equals hourly rate. Hourly rate plus premium rate
equals hourly overtime rate.
The NAWASA case must be viewed to determine
whether it is that broad. NAWASA case must be
understood in its setting. The words used by the
Supreme Court in its reasoning should not be
disengaged from the fact-situation with which it

was confronted and the specific question which it

was there required to decide. Above all care
should be taken not to lose sight of the truth that
the facts obtaining, the issue settled, and the law
applied in the said case, and these, though
extractable from the records thereof as material
in the resolution herein, were, as they are,
primarily declarative of the rights and liabilities of
the parties involved therein.
Recourse to the records of the NAWASA case
shows that the fact- situation, as far as can be
materially connected with the instant case, is as
follows:
In view of the enactment of Rep.
Act 1880, providing that the legal
hours of work for government
employees, (including those in
government-owned or controlled
corporations) shall be eight (8)
hours a day for five (5) days a
week or forty (40) hours a week, its
implementation by NAWASA was
disputed by the Union. The workers
affected were those who, for a
period of three (3) months prior to
or immediately preceding the
implementation of Rep. Act 1880,
were working seven (7) days a
week and were continuously
receiving 25% Sunday differential
pay. The manner of computing or
determining the daily rate of
monthly salaried employees.
And the Supreme Court, specifically laid out the
issue to be decided, as it did decide, in the
NAWASA, as follows:
7. and 8. How is a daily wage of a weekly
employee computed in the light of Republic Act
1880?'(G.R. L-18938)
Resolving the above issue, it was held;

According to petitioner, the daily

wage should be computed
exclusively on the basic wage
without including the automatic
increase of 25% corresponding to
the Sunday differential. To include
said Sunday differential would be
to increase the basic pay which is
not contemplated by said Act.
Respondent court disagrees with
this manner of computation. lt
holds that Republic Act 1880
requires that the basic weekly
wage and the basic monthly salary
should not be diminished
notwithstanding the reduction in
the number of working days a
week. If the automatic increase
corresponding to the salary
differential should not be included
there would be a diminution of the
weekly wage of the laborer
concerned. Of course, this should
only benefit those who have been
working seven days a week and
had been regularly receiving 25%
additional compensation for
Sunday work before the effectivity
of the Act.
It is thus necessary to analyze the Court's
rationale in the said NAWASA case, 'in the light of
Rep. Act 1880', and the 'specific corollaries'
discussed preparatory to arriving at a final
conclusion on the main issue. What was required
to be done, by way of implementing R. A. 1880?
The statute directs that working hours and days
of government employees (including those of
government owned and controlled proprietary
corporations) shall be reduced to five days-forty
hours a week. But, the same law carried the

specific proviso, designed to guard against

diminution of salaries or earnings of affected
employees. The Supreme Court itself clearly
spelled this out in the following language: 'It is
evident that Republic Act 1880 does not intend to
raise the wages of the employees over what they
are actually receiving. Rather, its purpose is to
limit the working days in a week to five days, or
to 40 hours without however permitting any
reduction in the weekly or daily wage of the
compensation which was previously received. ...
If the object of the law was to keep intact, (not
either to increase it or decrease it) it is but
natural that the Court should concern itself, as it
did, with the corollary, what is the weekly wage of
worker who, prior to R.A. 1880, had been working
seven (7) days a week and regularly receiving
differential payments for work on Sundays or at
night? It seems clear that the Court was only
concerned in implementing correctly R.A. 1880 by
ensuring that in diminishing the working days and
hours of workers in one week, no diminution
should result in the worker's weekly or daily
wage. And, the conclusion reached by the
Supreme Court was to affirm or recognize the
correctness of the action taken by the industrial
court including such differential pay in computing
the weekly wages of these employees and
laborers who worked seven days a week and
were continuously receiving 25% Sunday
differential for a period of three months
immediately preceding the implementation of
R.A. 1880.' Nothing was said about adding the
money value of some other bonuses or
allowances or money value of other fringe
benefits, received outside the week or at some
other periods. That was not within the scope of
the issue before the Court. in fact, the limited
application of the decision is expressed in the
decision itself. The resolution of this particular

issue was for the benefit of only a segment of the

NAWASA employees. Said the Court 'Of course,
this should only benefit those who have been
working seven days a week and had been
regularly receiving 25% additional compensation
for Sunday work before the effectivity of the Act.'
Unions make capital of the following
pronouncement of the Supreme Court in the
NAWASA case:
It has been held that for purposes
of computing overtime
compensation a regular wage
includes all payments which the
parties have agreed shall be
received during the work week,
including piece-work wages,
differential payments for working
at undesirable times, such as at
night or on Sundays and holidays,
and the cost of board and lodging
customarily furnished the
employee (Walling v. YangermanReynolds Hardwook Co., 325 U.S.
419; Walling v. Harischfeger Corp.
325 U.S. 427). The 'Regular rate of
pay also ordinarily includes
incentive bonus or profit- sharing
payments made in addition to the
normal basic pay (56 C.J.S., pp.
704-705), and it was also held that
the higher rate for night, Sunday
and holiday work is just as much as
regular rate as the lower rate for
daytime work. The higher rate is
merely an inducement to accept
employment at times which are not
at desirable form a workman's
standpoint (International L. Ass'n.
Wise 50 F. Supp. 26, affirmed C.C.A.

Carbunao v. National Terminals

Corp. 139 F. 853).
But this paragraph in the decision appears to
have been used and cited by the Court to sustain
the action of the court a quo: that it was correct
to include the 25% Sunday premium for the
purpose of setting the weekly wage of specified
workers whose weekly earnings before the
passage of R.A. 1880 would be diminished, if said
premium pay regularly received for three months
were not included. It is significant that the
citations therein used by the Supreme Court are
excerpts from American decisions whose
legislation on overtime is at variance with the law
in this jurisdiction in this respect: the U.S.
legislation considers work in excess of forty hours
a week as overtime; whereas, what is generally
considered overtime in the Philippines is work in
excess 'of the regular 8-hours a day. It is
understandably material to refer to precedents in
the U.S. for purposes of computing weekly wages
under a 40- hour a week rule, since the particular
issue involved in NAWASA is the conversion of
prior weekly regular earnings into daily rates
without allowing diminution or addition.
No rule of universal application to other cases
may, therefore, be justifiably extracted from the
NAWASA case. Let it be enough that in arriving at
just solution and correct application of R.A. 1880,
an inference was drawn from other decisions that
a regular wage includes payments 'agreed by the
parties to be received during the week.' But to
use this analogy in another fact- situation would
unmitigatingly stretch its value as basis for legal
reasoning, for analogies are not perfect and can
bring a collapse if stretched far beyond their
logical and reasoned efficacy. Neither would it be
far to ascribe to the Supreme Court's citation of
foreign jurisprudence, which was used for
purposes of analogy, the force of statute law, for

this would be the consequence if it were allowed

to be used as authority for all fact-situations,
even if different from the NAWASA case. This,
because courts do not legislate. All they do is
apply the law.
The above discussions impel the objective analyst
to reject the proposition that the NAWASA
decision is an embracing and can be used with
the authority of a statute's effects on existing
contracts.
It appears that the answer to dispute lies, not in
the text of the NAWASA case but in the terms and
conditions and practice in the implementation of,
the agreement, an area which makes resolution
of the issue dependent on the relation of the
terms and conditions of the contract to the
phraseology and purpose of the Eight-Hour Labor
Law (Act 444).
The more we read the NAWASA case, the more
we are convinced that the overtime computation
set therein cannot apply to the cases at bar. For
to do so would lead to unjust results, inequities
between and among the employees themselves
and absurd situations. To apply the NAWASA
computation would require a different formula for
each and every employee, would require
reference to and continued use of individual
earnings in the past, thus multiplying the
administrative difficulties of the Company. It
would be cumbersome and tedious a process to
compute overtime pay and this may again cause
delays in payments, which in turn could lead to
serious disputes. To apply this mode of
computation would retard and stifle the growth of
unions themselves as Companies would be
irresistibly drawn into denying, new and
additional fringe benefits, if not those already
existing, for fear of bloating their overhead
expenses through overtime which, by reason of

being unfixed, becomes instead a veritable

source of irritant in labor relations.
One other reason why application of the NAWASA
case should be rejected is that this Court is not
prepared to accept that it can lay down a less
cumbersome formula for a company-wide
overtime pay other than that which is already
provided in the collective bargaining agreement.
Courts cannot make contracts for the parties
themselves.
Commonwealth Act 444 prescribes that overtime
work shall be paid 'at the same rate as their
regular wages or salary, plus at least twenty-five
per centum additional' (Secs. 4 & 5). The law did
not define what is a 'regular wage or salary'.
What the law emphasized by way of repeated
expression is that in addition to 'regular wage',
there must be paid an additional 25% of that
'regular wage' to constitute overtime rate of pay.
The parties were thus allowed to agree on what
shag be mutually considered regular pay from or
upon which a 25% premium shall be based and
added to make up overtime compensation. This
the parties did by agreeing and accepting for a
very long period to a basic hourly rate to which a
premium shall be added for purposes of overtime.
Also significant is the fact that Commonwealth
Act 444 merely sets a minimum, a least premium
rate for purposes of overtime. In this case, the
parties agreed to premium rates four (4) or even
six (6) times than that fixed by the Act. Far from
being against the law, therefore, the agreement
provided for rates 'commensurate with the
Company's reputation of being among the
leading employers in the Philippines' (Art. 1, Sec.
2, Coll. Barg. Agreement) at the same time that
the Company is maintained in a competitive
position in the market Coll. Barg. Agreement,
lbid).
Since the agreed rates are way above prevailing
statutory wages and premiums, fixed by

themselves bona fide through negotiations

favored by law, there appears no compelling
reason nor basis for declaring the same illegal. A
basic principle forming an important foundation
of R.A. 875 is the encouragement given to parties
to resort to peaceful settlement of industrial
problems through collective bargaining. It
behooves this Court, therefore, to help develop
respect for those agreements which do not
exhibit features of illegality This is the only way
to build confidence in the democratic process of
collective bargaining. Parties cannot be permitted
to avoid the implications and ramifications of the
agreement.
Although this Court has gone very far in resolving
an doubts and in giving great weight to evidence
and presumptions in favor of labor, it may not go
as far as reconstruct the law to fit particular
cases." (Pp. 174-181, Record)
Proof of the correctness of the aforequoted considerations, the
appeal of the workers from the Industrial Court's decision did
not prosper. Affirming the appealed decision, We held:
The theory, therefore, of the petitioners is to the
effect that, notwithstanding the terms and
conditions of their existing collective bargaining
agreement with respondent Shell Company,
particularly Exhibit 'A-l' for the Petitioners and
Exhibit 'l-A' for the Respondent (which is
Appendix 'B' of the Collective Bargaining
Agreement of the parties), considering the ruling
in the NAWASA case, a recomputation should be
made of their basic wage by adding the money
value of the fringe benefits enjoyed by them from
whence the premium rates agreed upon shall be
computed in order to arrive at the correct
computation of their overtime compensation from
the Company. On the other hand, respondent
Shell Company maintains that the NAWASA case
should not be utilized as the basis for the
alteration of their mode of computing overtime

rate of pay as set forth in their collective

Bargaining Agreement. It insists that their
collective bargaining agreement should be the
law between them.
After a careful and thorough re-examination of
the NAWASA case, supra, and a minute
examination of the facts and the evidence of the
case now before Us, We rule that the NAWASA
case is not in point and, therefore, is inapplicable
to the case at bar.
The ruling of this Court in the NAWASA case
contemplates the regularity and continuity of the
benefits enjoyed by the employees or workers
(for at least three (3) months) as the condition
precedent before such additional payments or
benefits are taken into account. This is evident in
the aforequoted ruling of this Court in the
NAWASA case as well as in the hereinbelow cited
authorities, to wit:
The 'regular rate' of pay on the
basis of which overtime must be
computed must reflect an
payments which parties have
agreed shall be received regularly
during the work week, exclusive of
overtime payments.' Walling v.
Garlock Packing Co. C.C.A.N.Y., 159
F. 2d 44, 45. (Page 289, WORDS
And PHRASES, Permanent Edition,
Vol. 36A; Italics supplied); and
As a general rule the words 'regular
rate' mean the hourly rate actually
paid for the normal, non-overtime
work week, and an employee's
regular compensation is the
compensation which regularly and
actually reaches him, ... .' (56 C.J.S.
704; Emphasis supplied).
Even in the definition of wage under the Minimum
Wage Law, the words 'customarily furnished' are

used in referring to the additional payments or

benefits, thus, 'Wage' paid to any employee shag mean the
remuneration or earnings, however designated,
capable of being expressed in terms of money,
whether fixed or ascertained on a time, task,
piece, commission basis, or other method of
calculating the same, which is payable by an
employer to an employee under a written or
unwritten contract of employment for work done
or to be done or for services rendered or to be
rendered, and includes the fair and reasonable
value, as determined by the Secretary of Labor,
of board, lodging or other facilities customarily
furnished by the employer to the employee.' (Sec.
2 (g), R.A. No. 602).
Having been stipulated by the parties that ... the
Tin Factory Incentive Pay has ceased in view of
the closure of the factory in May 1966 the fringe
benefits as described show that they are
occasionally not regularly enjoyed and that not all
employees are entitled to them', herein
petitioners failed to meet the test laid down by
this Court in the NAWASA case. Further, the
collective bargaining agreement resorted to by
the parties being in accordance with R.A. 875,
with its provision on overtime pay far way beyond
the premium rate provided for in Sections 4 and 5
of Commonwealth Act 444, the same should
govern their relationship. Since this is their
contract entered into by them pursuant to
bargaining negotiations under existing laws, they
are bound to respect it. It is the duty of this Court
to see to it that contracts between parties, not
tainted with infirmity or irregularity or illegality,
be strictly complied with by the parties
themselves. This is the only way by which unity
and order can be properly attained in our society.
It should be noted in passing that Commonwealth
Act 444 prescribes only a minimum of at least

25% in addition to the regular wage or salary of

an employee to constitute his overtime rate of
pay, whereas, under Appendix 'B', (Exhs. 'A-l',
Petitioners and 'l-A', Respondent) of the Collective
Bargaining Agreement of the parties, the
premium rate of overtime pay is as high as l50%
on regular working days up to 250 % on Sundays
and recognized national holidays. (Shell Oil
Workers Union vs. Shell Company of the
Philippines, G.R. No. L-30658-59, March 31, 1976,
70 SCRA 242-243.)
In the instant case, on May 22, 1965 PEMA alleged in the court
below the following cause of action as amended on June 7,
1965:
Since the start of the giving of cost of living
allowance and longevity pay and reiterated, after
the promulgation of the Decision in National
Waterworks and Sewerage Authority vs. NAWASA
Consolidated Unions et al., G.R. No. L-18938,
August 31, 1964, the petitioner has repeatedly
requested respondent that the cost of living
allowance and longevity pay be taken into
account in the computation of overtime pay,
effective as of the grant of said benefits on
January 1, 1958, in accordance with the ruling in
said Decision of the Supreme Court. (Page 14,
PNB's Brief.)
To be sure, there could be some plausibility in PNB's pose
regarding the jurisdiction of the Industrial Court over the above
cause of action. But, as We have already stated, We agree with
the broader view adopted by the court a quo on said point, and
We find that it is in the best interests of an concerned that this
almost 25-year dispute be settled once and for all without the
need of going through other forums only for the matter to
ultimately come back to this Court probably years later, taking
particular note as We do, in this regard, of the cases cited on
pages 9-10 of PEMA's original memo, as follows:
Realizing its error before in not considering the
present case a certified labor dispute, the Bank
now concedes that the case at bar 'belongs to
compulsory arbitration'. Hence, the lawful powers

of the CIR over the same. However, the Bank says

'overtime differential is but a money claim, (and)
respondent court does not have jurisdiction to
take cognizance of the same'.
But this is not a pure money claim (pp. 10-11,
Opposition) because other factors are involved certification by the President, the matter may
likely cause a strike, the dispute concerns
national interest and comes within the CIR's
injunction against striking, and the employeremployee relationship between the Bank and the
employees has not been severed. Besides,
'money claim' is embraced within the term
'compensation' and therefore falls squarely under
the jurisdiction of the CIR in the exercise of its
arbitration power (Sec. 4, CA 103; Please see also
Republic vs. CIR, L- 21303, Sept. 23/68;
Makalintal J., NWSA Case, L-26894-96, Feb. 28/69;
Fernando, J.).
What confers jurisdiction on the Industrial Court,
says Justice J.B.L. Reyes, is not the form or
manner of certification by the President, but the
referral to said court of the industrial dispute
between the employer and the employees.
(Liberation Steamship vs. CIR, etc., L-25389 &
25390, June 27/68).
In Phil. Postal Savings Bank, et al. vs. CIR, et al.,
L-24572, Dec. 20/67, this Honorable Court,
speaking through Chief Justice Concepcion, held
that the certification of the issue 'as a dispute
affecting an industry indispensable to the
national interest' leaves 'no room for doubt on
the jurisdiction of the CIR to settle such dispute.'
Relatedly, however, it is to be noted that it is clear from the
holding of the Industrial Court's decision We have earlier
quoted, "the cause of action (here) is not on any decision of any
court but on the provisions of the law which have been in effect
at the time of the occurrence of the cause of action in relation
to a labor dispute". Viewed from such perspective laid by the
lower court itself, it can hardly be said that it indeed exercised
purely its power of arbitration, which means laying down the

terms and conditions that should govern the relationship

between the employer and employees of an enterprise
following its own appreciation of the relevant circumstances
rather empirically. More accurately understood, the court in fact
indulged in an interpretation of the applicable law, namely, CA
444, in the light of its own impression of the opinion of this
Court in NAWASA and based its decision thereon.
Accordingly, upon the fact-situation of this case hereunder to be
set forth, the fundamental question for Us to decide is whether
or not the decision under appeal is in accordance with that law
and the cited jurisprudence. In brief, as PEMA posits, is NAWASA
four-square with this case? And even assuming, for a while, that
in a sense what is before Us is an arbitration decision, private
respondent itself admits in its above-mentioned memorandum
that this Court is not without power and authority to determine
whether or not such arbitration decision is against the law or
jurisprudence or constitutes a grave abuse of discretion. Thus,
in PEMA's memorandum, it makes the observation that
"(F)urthermore, in the Shell cases, the unions are using the
NAWASA decision as a source of right for recomputation, while
in the PNB, the Union merely cites the NAWASA doctrine, not as
a source of right, but as a legal authority or reference by both
parties so the Union demand may be granted. " (Motion to
Dismiss, p. 3.)
Obviously, therefore, the polestar to which Our mental vision
must be focused in order that We may arrive at a correct legal
and equitable determination of this controversy and, in the
process make NAWASA better understood as We believe it
should be, is none other than Sections 3 and 4 of Com. Act No.
444, the Eight Hour Labor Law, which pertinently provide thus:
SEC. 3. Work may be performed beyond eight
hours a day in case of actual or impending
emergencies caused by serious accidents, fire,
flood, typhoon, earthquake, epidemic, or other
disaster or calamity in order to prevent loss to life
and property or imminent danger to public safety;
or in case of urgent work to be performed on the
machines, equipment, or installations in order to
avoid a serious loss which the employer would
otherwise suffer, or some other just cause of a

similar nature; but in all such cases the laborers

and employees shall be entitled to receive
compensation for the overtime work performed at
the same rate as their regular wages or salary,
plus at least twenty-five per centum additional.
In case of national emergency the Government is
empowered to establish rules and regulations for
the operation of the plants and factories and to
determine the wages to be paid the laborers.
xxx xxx xxx
SEC. 4. No person, firm, or corporation, business
establishment or place or center of labor shall
compel an employee or laborer to work during
Sundays and legal holidays, unless he is paid an
additional sum of at least twenty-five per centum
of his regular remuneration: Provided, however,
that this prohibition shall not apply to public
utilities performing some public service such as
supplying gas, electricity, power, water, or
providing means of transportation or
communication.
The vital question is, what does "regular wage or salary" mean
or connote in the light of the demand of PEMA?
In Our considered opinion, the answer to such question lies in
the basic rationale of overtime pay. Why is a laborer or
employee who works beyond the regular hours of work entitled
to extra compensation called in this enlightened time, overtime
pay? Verily, there can be no other reason than that he is made
to work longer than what is commensurate with his agreed
compensation for the statutorily fixed or voluntarily agreed
hours of labor he is supposed to do. When he thus spends
additional time to his work, the effect upon him is multi-faceted:
he puts in more effort, physical and/or mental; he is delayed in
going home to his family to enjoy the comforts thereof; he
might have no time for relaxation, amusement or sports; he
might miss important pre-arranged engagements; etc., etc. It is
thus the additional work, labor or service employed and the
adverse effects just mentioned of his longer stay in his place of
work that justify and is the real reason for the extra
compensation that he called overtime pay.

Overtime work is actually the lengthening of hours developed to

the interests of the employer and the requirements of his
enterprise. It follows that the wage or salary to be received
must likewise be increased, and more than that, a special
additional amount must be added to serve either as
encouragement or inducement or to make up fop the things he
loses which We have already referred to. And on this score, it
must always be borne in mind that wage is indisputably
intended as payment for work done or services rendered. Thus,
in the definition of wage for purposes of the Minimum Wage
Law, Republic Act No. 602, it is stated:
'Wage' paid to any employee shall mean the
remuneration or earnings, however designated,
capable of being expressed in terms of money,
whether fixed or ascertained on a time task,
piece, commission basis or other method of
calculating the same, which is payable by an
employer to an employee under a written or
unwritten contract of employment for work done
or to be done or for services rendered or to be
rendered and includes the fair and reasonable
value as determined by the Secretary of Labor, of
board, lodging or other facilities customarily
furnished by the employer to the employee. 'Fair
and reasonable value' shall not include a profit to
the employer which reduces the wage received
by the employee below the minimum wage
applicable to the employee under this Act, nor
shall any transaction between an employer or any
person affiliated with the employer and the
employee of the employer include any profit to
the employer or affiliated person which reduces
the employee's wage below the wage applicable
to the employee under this Act.' 2 (Emphasis
supplied).
As can be seen, wage under said law, in whatever means or
form it is given to the worker, is "for work done or to be done or
for services rendered or to be rendered" and logically "includes
(only) the fair and reasonable value as determined by the

Secretary of Labor, of board, lodging or other facilities

customarily furnished by the employer to the employee".
Indeed, for the purpose of avoiding any misunderstanding or
misinterpretation of the word "wage" used in the law and to
differentiate it from "supplement", the Wage Administration
Service to implement the Minimum Wage Law, defined the
latter as:
extra remuneration or benefits received by wage
earners from their employers and include but are
not restricted to pay for vacation and holidays not
worked; paid sick leave or maternity leave;
overtime rate in excess of what is required by
law; pension, retirement, and death benefits;
profit-sharing, family allowances; Christmas, war
risk and cost-of-living bonuses; or other bonuses
other than those paid as a reward for extra
output or time spent on the job. (Emphasis ours).
In these times when humane and dignified treatment of labor is
steadily becoming universally an obsession of society, we, in
our country, have reached a point in employer- employee
relationship wherein employers themselves realize the
indispensability of at least making the compensation of workers
equal to the worth of their efforts as much as this case can be
statistically determined. Thus, in order to meet the effects of
uncertain economic conditions affecting adversely the living
conditions of wage earners, employers, whenever the financial
conditions of the enterprise permit, grant them what has been
called as cost-of-living allowance. In other words, instead of
leaving the workers to assume the risks of or drift by
themselves amidst the cross -currents of country-wide
economic dislocation, employers try their best to help them tide
over the hardships and difficulties of the situation. Sometimes,
such allowances are voluntarily agreed upon in collective
bargaining agreements. At other times, it is imposed by the
government as in the instances of Presidential Decrees Nos.
525, 928, 1123, 1389, 1614, 1678, 1751 and 1790; Letters of
Instructions No. 1056 and Wage Order No. 1. Notably,
Presidential Decree No. 1751 increased the statutory wage at all
levels by P400 in addition to integrating the mandatory
emergency living allowances under Presidential Decree No. 525

and Presidential Decree No. 1123 into the basic pay of all
covered workers.
Going over these laws, one readily notices two distinctive
features: First, it is evidently gratifying that the government, in
keeping with the humanitarian trend of the times, always makes
every effort to keep wages abreast with increased cost of living
conditions, doing it as soon as the necessity for it arises.
However, obviously, in order not to overdo things, except when
otherwise provided, it spares from such obligation employers
who by mutual agreement with their workers are already paying
what the corresponding law provides (See Sec. 4 of P.D. No.
525; Section 2 of P.D. No. 851 until P.D. 1684 abolished all
exemptions under P.D. No. 525, P.D. No. 1123, P.D. No. 851 and
P.D. No. 928 among distressed employers who even though
given sufficient lapse of time to make the necessary adjustment
have not done so.)3
In the case at bar, as already related earlier, the cost-of-living
allowance began to be granted in 1958 and the longevity pay in
1981. In other words, they were granted by PNB upon realizing
the difficult plight of its labor force in the face of the unusual
inflationary situation in the economy of the country, which,
however acute, was nevertheless expected to improve. There
was thus evident an inherently contingent character in said
allowances. They were not intended to be regular, much less
permanent additional part of the compensation of the
employees and workers. To such effect were the testimonies of
the witnesses at the trial. For instance, Mr. Ladislao Yuzon
declared:
ATTORNEY GESMUNDO
Questioning ....
Q. Calling your attention to
paragraph No. 1, entitled monthly
living allowance, which has been
marked as Exhibit 'A-l', will you
kindly tell us the history of this
benefit- monthly living allowance,
why the same has been granted?
A. Well, in view of the increasing
standard of living, we decided to
demand from management in our
set of demands ... included in our

set of demands in 1957-1958 a

monthly living allowance in
addition to our basic salary. This
benefit was agreed upon and
granted to take effect as of January
1, 1958. That was the first time it
was enjoyed by the employees of
the Philippine National Bank. It
started on a lesser amount but
year after year we have been
demanding for increases on this
living allowance until we have
attained the present amount of P 1
50.00 a month, starting with
P40.00 when it was first granted.
The same is still being enjoyed by
the employees on a much higher
amount. There were a few
variations to that. (t. t.s.n., pp. 1819, Hearing of August 16, 1965)
which testimony was affirmed by Mr. Panfilo Domingo, on crossexamination by counsel for the respondent, reading as follows:
ATTORNEY GESMUNDO:
Q. Do you recall Mr. Domingo, that
in denying the cost of living
allowance and longevity pay for
incorporation with the basic salary,
the reason given by the
management was that as according
to you, it will mean an added cost
and ' furthermore it will increase
the contribution of the Philippine
National Bank to the GSIS, is that
correct?
A. This is one of the reasons, of the
objections for the inclusion of the
living allowance and longevity pay
to form part of the basic pay, I
mean among others, because the
basic reason why management
would object is the cost of living

allowance is temporary in nature,

the philosophy behind the grant of
this benefit, Nonetheless, it was
the understanding if I recall right
that in the event that cost of living
should go down then there should
be a corresponding decrease in the
cost of living allowance being
granted I have to mention this
because this is the fundamental
philosophy in the grant of cost of
living allowance. (Pp. 19-20,
Record.)
Much less were they dependent on extra or special work done
or service rendered by the corresponding recipient. Rather, they
were based on the needs of their families as the conditions of
the economy warranted. Such is the inexorable import of the
pertinent provisions of the collective bargaining agreement:
MONTHLY LIVING ALLOWANCE
All employees of the Bank shall be granted a
monthly living allowance of P140, plus P10 for
each minor dependent child below 21 years of
age, but in no case shall the total allowance
exceed P200 or 25% of the monthly salary,
whichever is higher, subject to the following
conditions:
a) That this new basic allowance
shall be applicable to all
employees, irrespective of their
civil status;
b) That a widow or widower shall
also enjoy the basic allowance of
P140 a month, plus the additional
benefit of P10 for each minor
dependent child but not to exceed
P200 or 25% of basic salary
whichever is higher.
c) That in case the husband and
wife are both employees in the
Bank both shall enjoy this new
basic monthly living allowance of

P140 but only one of spouses shall

be entitled to claim the additional
benefit of P10 for each minor
legitimate or acknowledged child.
(Pp. 30-31, PNB's memo.)
So also with the longevity pay; manifestly, this was not based
on the daily or monthly amount of work done or service
rendered it was more of a gratuity for their loyalty, or their
having been in the bank's employment for consideration
periods of time. Indeed, with particular reference to the
longevity pay, the then existing collective bargaining contract
expressly provided: "... That this benefit shall not form part of
the basic salaries of the officers so affected."
PEMA may contend that the express exclusion of the longevity
pay, means that the cost-of-living allowance was not intended
to be excluded. Considering, however, the contingent nature of
the allowances and their lack of relation to work done or service
rendered, which in a sense may be otherwise in respect to
longevity pay PEMA's contention is untenable. The rule
of exclusio unius, exclusio alterius would not apply here, if only
because in the very nature of the two benefits in question,
considerations and conclusions as to one of them could be nonsequitur as to the other.
Withal, there is the indisputable significant fact that after 1958,
everytime a collective bargaining agreement was being entered
into, the union always demanded the integration of the cost-ofliving allowances and longevity pay, and as many times, upon
opposition of the bank, no stipulation to such effect has ever
been included in any of said agreements. And the express
exclusion of longevity pay was continued to be maintained.
On this point, the respondent court held that under its broad
jurisdiction, it was within the ambit of its authority to provide for
what the parties could not agree upon. We are not persuaded to
view the matter that way. We are not convinced that the
government, thru the Industrial Court, then, could impose upon
the parties in an employer-employee conflict, terms and
conditions which are inconsistent with the existing law and
jurisprudence, particularly where the remedy is sought by the
actors more on such legal basis and not purely on the court's
arbitration powers.

As pointed out earlier in this opinion, Our task here is two-fold:

First, reviewing the decision under scrutiny as based on law and
jurisprudence, the question is whether or not the rulings therein
are correct. And second, reading such judgment as an
arbitration decision, did the court a quo gravely abuse its
discretion in holding, as it did, that cost-of-living allowance and
longevity pay should be included in the computation of
overtime pay?
In regard to the first question, We have already pointed out to
start with, that as far as longevity pay is concerned, it is beyond
question that the same cannot be included in the computation
of overtime pay for the very simple reason that the contrary is
expressly stipulated in the collective bargaining agreement and,
as should be the case, it is settled that the terms and conditions
of a collective bargaining agreement constitute the law between
the parties. (Mactan Workers Union vs. Aboitiz, 45 SCRA 577.
See also Shell Oil Workers Union et al. vs. Shell Company of the
Philippines, supra) The contention of PEMA that the express
provision in the collective bargaining agreement that "this
benefit (longevity pay) shall not form part of the basic salaries
of the officers so affected" cannot imply the same Idea insofar
as the computation of the overtime pay is concerned defies the
rules of logic and mathematics. If the basic pay cannot be
deemed increased, how could the overtime pay be based on
any increased amount at all?
However, the matter of the cost-of-living allowance has to be
examined from another perspective, namely, that while PEMA
had been always demanding for its integration into the basic
pay, it never succeeded in getting the conformity of PNB
thereto, and so, all collective bargaining agreements entered -4
into periodically by the said parties did not provide therefor. And
it would appear that PEMA took the non-agreement of the bank
in good grace, for the record does not show that any remedial
measure was ever taken by it in connection therewith. In other
words, the parties seemed to be mutually satisfied that the
matter could be better left for settlement on the bargaining
table sooner or later, pursuant to the spirit of free bargaining
underlying Republic Act 875, the Industrial Peace Act then in
force. Or, as observed by PEMA in its memorandum, (page 23),
the parties "agreed to let the question remain open-pending

decision of authorities that would justify the demand of the

Union." Indeed, on pages 23-24 of said memorandum, the
following position of PEMA is stated thus:
Thus the following proceeding took place at the
Court a quo:
ATTY. GESMUNDO:
That is our position, Your Honor, because
apparently there was an understanding reached
between the parties as to their having to wait for
authorities and considering that the issue or one
of the issues then involved in the NAWASA case
pending in the CIR supports the stand of the
union, that the principle enunciated in connection
with that issue is applicable to this case.
xxx xxx xxx
Q. Do we understand from you,
Mister Yuson, that it was because of
the management asking you for
authorities in allowing the
integration of the cost of living
allowance with your basic salary
and your failure to produce at the
time such authorities that the
union then did not bring any case
to the Court?
A. Well, in the first place, it is not
really my Idea to be bringing
matters to the Court during my
time but I would much prefer that
we agree on the issue. Well, insofar
as you said that the management
was asking me, welt I would say
that they were invoking (on)
authorities that we can show in
order to become as a basis for
granting or for agreeing with us
although we were aware of the
existence of a pending case which
is very closely similar to our
demand, yet we decided to wait
until this case should be decided by

the Court so that we can avail of

the decision to present to
management as what they are
asking for. (t.s.n., pp. 31-32, 35-36,
Aug. 28,1965.)
Now, to complete proper understanding of the character of the
controversy before Us, and lest it be felt by those concerned
that We have overlooked a point precisely related to the matter
touched in the above immediately preceding paragraph, it
should be relevant to quote a portion of the "Stipulation of
Facts" of the parties hereto:
1. This particular demand was among those
submitted by Petitioner-Union in the current
collective bargaining negotiations to the
Respondent Bank. However, since this case was
already filed in court on May 22, 1965, the parties
agreed not to include this particular demand in
the discussion, leaving the matter to the
discretion and final judicial determination of the
courts of justice." (Page 81, Rec.)
In fine, what the parties commonly desire is for this Court to
construe CA 444 in the light of NAWASA, considering the factsituation of the instant case.
In this respect, it is Our considered opinion, after mature
deliberation, that notwithstanding the portions of the NAWASA's
opinion relied upon by PEMA, there is nothing in CA 444 that
could justify its posture that cost-of-living allowance should be
added to the regular wage in computing overtime pay.
After all, what was said in NAWASA that could be controlling
here? True, it is there stated that "for purposes of computing
overtime compensation, regular wage includes all payments
which the parties have agreed shall be received during the work
week, including - differential payments for working at
undesirable times, such as at night and the board and lodging
customarily furnished the employee. ... The 'regular rate' of pay
also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (56 C.J.S.,
pp. 704-705), and it was also held that the higher rate for night,
Sunday and holiday work is just as much a regular rate as the
lower rate for daytime work. The higher rate is merely an
inducement to accept employment at times which are not as

desirable from a workmen's standpoint (International L. Ass'n

vs. National Terminals Corp. C.C. Wise, 50 F. Supp. 26, affirmed
C.C.A. Carbunoa v. National Terminals Corp. 139 F. 2d 853)." (11
SCRA, p. 783)
But nowhere did NAWASA refer to extra, temporary and
contingent compensation unrelated to work done or service
rendered, which as explained earlier is the very nature of costof- living allowance. Withal, in strict sense, what We have just
quoted from NAWASA was obiter dictum, since the only issue
before the Court there was whether or not "in computing the
daily wage, (whether) the addition compensation for Sunday
should be included. " (See No. 7 of Record)
In any event, as stressed by Us in the Shell cases, the basis of
computation of overtime pay beyond that required by CA 444
must be the collective bargaining agreement, 4 for, to reiterate
Our postulation therein and in Bisig ng Manggagawa, supra, it is
not for the court to impose upon the parties anything beyond
what they have agreed upon which is not tainted with illegality.
On the other hand, where the parties fail to come to an
agreement, on a matter not legally required, the court abuses
its discretion when it obliges any 6f them to do more than what
is legally obliged.
Doctrinally, We hold that, in the absence of any specific
provision on the matter in a collective bargaining agreement,
what are decisive in determining the basis for the computation
of overtime pay are two very germane considerations, namely,
(1) whether or not the additional pay is for extra work done or
service rendered and (2) whether or not the same is intended to
be permanent and regular, not contingent nor temporary and
given only to remedy a situation which can change any time.
We reiterate, overtime pay is for extra effort beyond that
contemplated in the employment contract, hence when
additional pay is given for any other purpose, it is illogical to
include the same in the basis for the computation of overtime
pay. This holding supersedes NAWASA.
Having arrived at the foregoing conclusions, We deem it
unnecessary to discuss any of the other issues raised by the
parties.
WHEREFORE, judgment is hereby rendered reversing the
decision appealed from, without costs.

Guerrero, De Castro, Plana, Escolin, Vasquez, Relova and

Gutierrez, Jr., JJ., concur.
Fernando, C.J., Concepcion and Abad Santos, JJ., took no part.
Melencio-Herrera J., concur in the result.
Separate Opinions
AQUINO, J., concurring:
I concur in the result. This case involves the correctness of the
holding of the Court of Industrial Relations that the Philippine
National Bank should compute the overtime pay of its
employees from January 28, 1962 on the basis of the sum total
Of the. employee's basic salary or wage plus cost-of- living
allowance (equity pay) and longevity pay.
The Industrial Court relied on the ruling that in computing the
daily wage of employees and workers who worked seven days a
week their 25% Sunday differential pay should be included. The
computation should not be based exclusively on the basic wage
(National Waterworks and Sewerage Authority vs. NAWASA
Consolidated Unions, 120 Phil. 736, 754). That ruling was
rendered in connection with the computation of the worker's
daily wage for purposes of the five-day, forty-hour week
prescribed in Republic Act No. 1880.
That ruling was in turn based on the holding that for purposes
of computing overtime pay a regular wage includes all
payments received by the worker for work at night, Sundays
and holidays and the cost of board and lodging customarily
furnished the employees (Walling vs. Harnischfeger Corp., 325
U.S..427; Walling vs. Yangerman-Reynolds Hardwood Co., 325
U.S. 419).
There is also a ruling that the regular pay includes incentive
bonus or profit-sharing payments made in addition to the
normal basic pay (56 C.J.S. 704-705) and that the higher rate
for night, Sunday and holiday work is just as much a regular
rate as the lower rate for daytime work. The higher rate is
merely an inducement to accept employment at times which
are not as desirable from a workman's standpoint (International
L. Assn. vs. National Terminals Corp., 50 F. Supp. 26; Cabunac
vs. National Terminals Corporation, 139 F. 2nd 853).
These rulings cannot be applied under the Eight- Hour Labor
Law, Commonwealth Act No. 444, because sections 3 and 4

thereof provide that the overtime pay should be based on the

"regular wages or salary" or "regular remuneration" of the
laborers and employees.
Those terms should be sensibly interpreted. They should be
given their ordinary meaning. Those terms do not include the
cost-of- living allowance, longevity pay or other fringe benefits,
which items constitute extra pay oradditions to the regular or
basic pay.
The rulings in American cases cited in the NWSA case are not
controlling and should not be applied to this case. Our law
makes the regular pay the basis for computing the overtime
pay. The collective bargaining agreements between the PNB
and the union provide that the longevity pay does not "form
part of the basic salaries of the employees involved.
In Shell Oil Workers Union vs. Shell Company of the Philippines,
L-30658-59, March 31, 1976, 70 SCRA 238, this Court held that,
notwithstanding the ruling in the NWSA case, the fringe benefits
should not be added to the basic pay in computing the overtime
pay.
I agree that the Industrial Court erred in including the cost-ofliving allowance and the longevity pay as part of the employee's
basic salary or wage on which the overtime pay should be
based.
Teehankee, J., I reserve my vote.
Makasiar, J., I reserve my vote.
Separate Opinions
AQUINO, J., concurring:
I concur in the result. This case involves the correctness of the
holding of the Court of Industrial Relations that the Philippine
National Bank should compute the overtime pay of its
employees from January 28, 1962 on the basis of the sum total
Of the. employee's basic salary or wage plus cost-of- living
allowance (equity pay) and longevity pay.
The Industrial Court relied on the ruling that in computing the
daily wage of employees and workers who worked seven days a
week their 25% Sunday differential pay should be included. The
computation should not be based exclusively on the basic wage
(National Waterworks and Sewerage Authority vs. NAWASA
Consolidated Unions, 120 Phil. 736, 754). That ruling was
rendered in connection with the computation of the worker's

daily wage for purposes of the five-day, forty-hour week

prescribed in Republic Act No. 1880.
That ruling was in turn based on the holding that for purposes
of computing overtime pay a regular wage includes all
payments received by the worker for work at night, Sundays
and holidays and the cost of board and lodging customarily
furnished the employees (Walling vs. Harnischfeger Corp., 325
U.S..427; Walling vs. Yangerman-Reynolds Hardwood Co., 325
U.S. 419).
There is also a ruling that the regular pay includes incentive
bonus or profit-sharing payments made in addition to the
normal basic pay (56 C.J.S. 704-705) and that the higher rate
for night, Sunday and holiday work is just as much a regular
rate as the lower rate for daytime work. The higher rate is
merely an inducement to accept employment at times which
are not as desirable from a workman's standpoint (International
L. Assn. vs. National Terminals Corp., 50 F. Supp. 26; Cabunac
vs. National Terminals Corporation, 139 F. 2nd 853).
These rulings cannot be applied under the Eight- Hour Labor
Law, Commonwealth Act No. 444, because sections 3 and 4
thereof provide that the overtime pay should be based on the
"regular wages or salary" or "regular remuneration" of the
laborers and employees.
Those terms should be sensibly interpreted. They should be
given their ordinary meaning. Those terms do not include the
cost-of- living allowance, longevity pay or other fringe benefits,
which items constitute extra pay oradditions to the regular or
basic pay.
The rulings in American cases cited in the NWSA case are not
controlling and should not be applied to this case. Our law
makes the regular pay the basis for computing the overtime
pay. The collective bargaining agreements between the PNB
and the union provide that the longevity pay does not "form
part of the basic salaries of the employees involved.
In Shell Oil Workers Union vs. Shell Company of the Philippines,
L-30658-59, March 31, 1976, 70 SCRA 238, this Court held that,
notwithstanding the ruling in the NWSA case, the fringe benefits
should not be added to the basic pay in computing the overtime
pay.
I agree that the Industrial Court erred in including the cost-ofliving allowance and the longevity pay as part of the employee's

basic salary or wage on which the overtime pay should be

based.
Teehankee, J., I reserve my vote.
Makasiar, J., I reserve my vote.

QUITCLAIM