G.R. No.

L-4148

July 16, 1952

MANILA TERMINAL COMPANY, INC., petitioner,

vs.
THE COURT OF INDUSTRIAL RELATIONS and MANILA TERMINAL RELIEF AND MUTUAL
AID ASSOCIATION, respondents.
Perkins, Ponce Enrile and Contreras for petitioner.
Antonio V. Raquiza, Honesto Ricobal and Perfecto E. Llacarfor respondent Association.
Mariano R. Padilla for respondent Court of Industrial Relations.

(b) Additional compensation of 25 per cent to those who worked from 6:00 p.m. to 6:00 a.m.
during the same period:
(c) Additional compensation of 50 per cent for work performed on Sundays and legal holidays
during the same period;
(d) Additional compensation of 50 per cent for work performed on Sundays and legal holidays
from May 24, 1947 to May 9, 1949; and
(e) Additional compensation of 25 per cent for work performed at night from May 29, 1947 to
May 9, 1949.

PARAS, C. J.:
On September 1, 1945, the Manila Terminal Company, Inc. hereinafter to be referred as to the
petitioner, undertook the arrastre service in some of the piers in Manila's Port Area at the request
and under the control of the United States Army. The petitioner hired some thirty men as
watchmen on twelve-hour shifts at a compensation of P3 per day for the day shift and P6 per
day for the night shift. On February 1, 1946, the petitioner began the postwar operation of the
arrastre service at the present at the request and under the control of the Bureau of Customs, by
virtue of a contract entered into with the Philippine Government. The watchmen of the petitioner
continued in the service with a number of substitutions and additions, their salaries having been
raised during the month of February to P4 per day for the day shift and P6.25 per day for the
nightshift. On March 28, 1947, Dominador Jimenez, a member of the Manila Terminal Relief and
Mutual Aid Association, sent a letter to the Department of Labor, requesting that the matter of
overtime pay be investigated, but nothing was done by the Department. On April 29, 1947,
Victorino Magno Cruz and five other employees, also member of the Manila Transit Mutual Aid
Association, filed a 5-point demand with the Department of Labor, including overtime pay, but the
Department again filed to do anything about the matter. On May 27, 1947, the petitioner
instituted the system of strict eight-hour shifts. On June 19, 1947, the Manila Port Terminal
Police Association, not registered in accordance with the provisions of Commonwealth Act No.
213, filed a petition with the Court of Industrial Relations. On July 16, 1947, the Manila Terminal
Relief and Mutual Aid Association was organized for the first time, having been granted
certificate No. 375 by the Department of Labor. On July 28, 1947, Manila Terminal Relief and
Mutual Aid Association filed an amended petition with the Court of Industrial Relations praying,
among others, that the petitioner be ordered to pay its watchmen or police force overtime pay
from the commencement of their employment. On May 9, 1949, by virtue of Customs
Administrative Order No. 81 and Executive Order No. 228 of the President of the Philippines, the
entire police force of the petitioner was consolidated with the Manila Harvor Police of the
Customs Patrol Service, a Government agency under the exclusive control of the Commissioner
of Customs and the Secretary of Finance The Manila Terminal Relief and Mutual Aid Association
will hereafter be referred to as the Association.
Judge V. Jimenez Yanson of the Court of Industrial Relations in his decision of April 1, 1950, as
amended on April 18, 1950, while dismissing other demands of the Association for lack of
jurisdiction, ordered the petitioner to pay to its police force
(a) Regular or base pay corresponding to four hours' overtime plus 25 per cent thereof as
additional overtime compensation for the period from September 1, 1945 to May 24, 1947;

With reference to the pay for overtime service after the watchmen had been integrated into the
Manila Harbor Police, Judge Yanson ruled that the court has no jurisdiction because it affects
the Bureau of Customs, an instrumentality of the Government having no independent personality
and which cannot be sued without the consent of the State. (Metran vs. Paredes, 45. Off. Gaz.,
2835.)
The petitioner find a motion for reconsideration. The Association also filed a motion for
reconsideration in so far its other demands were dismissed. Judge Yanson, concurred in by
Judge Jose S. Bautista, promulgated on July 13, 1950, a resolution denying both motions for
reconsideration. Presiding Judge Arsenio C. Roldan, in a separate opinion concurred in by
Judge Modesto Castillo, agreed with the decision of Judge Yanson of April 1, 1950, as to the
dismissal of other demands of the Association, but dissented therefrom as to the granting of
overtime pay. In a separate decisive opinion, Judge Juan S. Lanting concurred in the dismissal
of other demands of the Association. With respect to overtime compensation, Judge Lanting
ruled:
1. The decision under review should be affirmed in so far it grants compensation for overtime on
regular days (not Sunday and legal holidays)during the period from the date of entrance to duty
to May 24, 1947, such compensation to consists of the amount corresponding to the four hours'
overtime at the regular rate and an additional amount of 25 per cent thereof.
2. As to the compensation for work on Sundays and legal holidays, the petitioner should pay to
its watchmen the compensation that corresponds to the overtime (in excess of 8 hours) at the
regular rate only, that is, without any additional amount, thus modifying the decision under
review accordingly.
3. The watchmen are not entitled to night differential pay for past services, and therefore the
decision should be reversed with the respect thereto.
The petitioner has filed a present petition for certiorari. Its various contentions may be briefly
summed up in the following propositions: (1) The Court of Industrial Relations has no jurisdiction
to render a money judgment involving obligation in arrears. (2) The agreement under which its
police force were paid certain specific wages for twelve-hour shifts, included overtime
compensation. (3) The Association is barred from recovery by estoppel and laches. (4) the nullity
or invalidity of the employment contract precludes any recovery by the Association. (5)
Commonwealth Act No. 4444 does not authorize recovery of back overtime pay.

The contention that the Court of Industrial Relations has no jurisdiction to award a money
judgment was already overruled by this Court in G.R. No. L-4337, Detective &
protective Bureau, Inc. vs. Court of Industrial Relations and United Employees Welfare
Association, 90 Phil., 665, in this wise: "It is also argued that the respondent court has no
jurisdiction to award overtime pay, which is money judgment. We believe that under
Commonwealth Act No. 103 the Court is empowered to make the order for the purpose of
settling disputes between the employer and employee1. As a matter of fact this Court has
confirmed an order of the Court of Industrial Relations requiring the Elks Club to pay to its
employees certain sum of money as overtime back wages from June 3, 1939 to March 13, 1941.
This, in spite the allegation of lack or excess of jurisdiction on the part of said court. (45 Off.
Gaz., 3829; 80 Phil. 272)"
The important point stressed by the petitioner is that the contract between it and the Association
upon the commencement of the employment of its watchman was to the certain rates of pay,
including overtime compensation namely, P3 per day for the day shift and P6 per day for night
shift beginning September 1, 1945, and P4 per day shift and P6.25 per day for the night shift
since February, 1946. The record does not bear out these allegations. The petitioner has relied
merely on the facts that its watchmen had worked on twelve-hour shifts at specific wages per
day and that no complaint was made about the matter until, first on March 28, 1947 and,
secondly, on April 29, 1947.
In times of acute unemployment, the people, urged by the instinct of self-preservation, go from
place to place and from office to office in search for any employment, regardless of its terms and
conditions, their main concern in the first place being admission to some work. Specially for
positions requiring no special qualifications, applicants would be good as rejected if they ever try
to be inquisitive about the hours of work or the amount of salary, ever attempt to dictate their
terms. The petitioner's watchmen must have railroaded themselves into their employment, so to
speak, happy in the thought that they would then have an income on which to subsist. But, at the
same time, they found themselves required to work for twelve hours a day. True, there was
agreement to work, but can it fairly be supposed that they had the freedom to bargain in any
way, much less to insist in the observance of the Eight Hour Labor Law?

Petitioner's allegation that the association had acquiesced in the twelve-hour shifts for more than
18 months, is not accurate, because the watchmen involved in this case did not enter the
service of the petitioner, at one time, on September 1, 1945. As Judge Lanting found, "only one
of them entered the service of the company on said date, very few during the rest of said month,
some during the rest of that year (1945) and in 1946, and very many in 1947, 1948 and 1949."
The case at bar is quite on all fours with the case of Detective & Protective Bureau, Inc. vs.
Court of Industrial Relations and United Employees Welfare Association, supra, in which the
facts were as follows: "The record discloses that upon petition properly submitted, said court
made an investigation and found that the members of the United Employees Welfare Association
(hereafter called the Association) were in the employ of the petitioner Detective and Protective
Bureau, Inc. (herein called the Bureau) which is engaged in the business of furnishing security
guards to commercial and industrial establishments, paying to said members monthly salaries
out of what it received from the establishments benefited by guard service. The employment
called for daily tours of duty for more than eight hours, in addition to work on Sundays and
holidays. Nonetheless the members performed their labors without receiving extra
compensation." The only difference is that, while in said case the employees concerned were
paid monthly salaries, in the case now before us the wages were computed daily. In the case
cited, we held the following:
It appears that the Bureau had been granting the members of the Association, every
month, "two days off" days in which they rendered no service, although they received
salary for the whole month. Said Bureau contended below that the pay corresponding
to said 2 day vacation corresponded to the wages for extra work. The court rejected
the contention, quite properly we believe, because in the contract there was no
agreement to that effect; and such agreement, if any, would probably be contrary to
the provisions of the Eight-Hour Law (Act No. 444, sec. 6) and would be null and
void ab initio.
It is argued here, in opposition to the payment, that until the commencement of this
litigation the members of the Association never claimed for overtime pay. That may be
true. Nevertheless the law gives them the right to extra compensation. And they could
not be held to have impliedly waived such extra compensation, for the obvious reason
that could not have expressly waived it.

As was aptly said in Floyd vs. Du Bois Soap Co., 1942, 317 U. S. 596, 63 Sup. Ct. 159; 6 CCH
Labor Cases, Par. 51, 147, "A contract of employment, which provides for a weekly wage for a
specified number of hours, sufficient to cover both the statutory minimum wage and overtime
compensation, if computed on the basis of the statutory minimum wage, and which makes no
provision for a fixed hourly rate or that the weekly wage includes overtime compensation, does
not meet the requirements of the Act."

The foregoing pronouncements are in point. The Association cannot be said to have impliedly
waived the right to overtime compensation, for the obvious reason that they could not have
expressly waived it."

Moreover, we note that after the petition had instituted the strict eight-hour shifts, no reduction
was made in the salaries which its watchmen received under the twelve hour arrangement.
Indeed, as admitted by the petitioner, "when the members or the respondent union were placed
on strict eight-hour shifts, the lowest salary of all the members of the respondent union was
P165 a month, or P5.50 daily, for both day and night shifts." Although it may be argued that the
salary for the night shift was somewhat lessened, the fact that the rate for the day shift was
increased in a sense tends to militate against the contention that the salaries given during the
twelve-hour shifts included overtime compensation.

The principle of estoppel and the laches cannot well be invoked against the Association. In the
first place, it would be contrary to the spirit of the Eight Hour 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 or laborer 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 any claim which may cause the employer to devise a way for
exercising his right to terminate the employment.

If the principle of estoppel and laches is to be applied, it may bring about a situation, whereby
the employee or laborer, who cannot expressly renounce their 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 law by indirection.
While counsel for the petitioner has cited authorities in support of the doctrine invoked, there are
also authorities pointed out in the opinion of Judge Lanting to the contrary. Suffice it to say, in
this connection, that we are inclined to rule adversely against petitioner for the reasons already
stated.
The argument that the nullity or invalidity of the employment contract precludes recovery by the
Association of any overtime pay is also untenable. The argument, based on the supposition that
the parties are in pari delicto, was in effect turned down in Gotamo Lumber Co. vs. Court of
Industrial Relations,* 47 Off. Gaz., 3421, wherein we ruled: "The petitioner maintains that as the
overtime work had been performed without a permit from the Department of Labor, no extra
compensation should be authorized. Several decisions of this court are involved. But those
decisions were based on the reasoning that as both the laborer and employer were duty bound
to secure the permit from the Department of Labor, both were in pari delicto. However the
present law in effect imposed that duty upon the employer (C.A. No. 444). Such employer may
not therefore be heard to plead his own neglect as exemption or defense.
The employee in rendering extra service at the request of his employer has a right to
assume that the latter has complied with the requirement of the law, and therefore has
obtained the required permission from the Department of Labor.
Moreover, the Eight-Hour Law, in providing that "any agreement or contract between the
employer and the laborer or employee contrary to the provisions of this Act shall be null avoid ab
initio," (Commonwealth Act No. 444, sec. 6), obviously intended said provision for the benefit of
the laborers or employees. The employer cannot, therefore, invoke any violation of the act to
exempt him from liability for extra compensation. This conclusion is further supported by the fact
that the law makes only the employer criminally liable for any violation. It cannot be pretended
that, for the employer to commit any violation of the Eight-Hour Labor Law, the participation or
acquiescence of the employee or laborer is indispensable, because the latter in view of his need
and desire to live, cannot be considered as being on the same level with the employer when it
comes to the question of applying for and accepting an employment.
Petitioner also contends that Commonwealth Act No. 444 does not provide for recovery of back
overtime pay, and to support this contention it makes referrence to the Fair Labor Standards Act
of the United States which provides that "any employer who violates the provisions of section
206 and section 207 of this title shall be liable to the employee or employees affected in the
amount of their unpaid minimum wages or their unpaid overtime compensation as the case may
be," a provision not incorporated in Commonwealth Act No. 444, our Eight-Hour Labor Law.
We cannot agree to the proposition, because sections 3 and 5 of Commonwealth Act 444
expressly provides for the payment of extra compensation in cases where overtime services are
required, with the result that the employees or laborers are entitled to collect such extra
compensation for past overtime work. To hold otherwise would be to allow an employer to violate
the law by simply, as in this case, failing to provide for and pay overtime compensation.

The point is stressed that the payment of the claim of the Association for overtime pay covering
a period of almost two years may lead to the financial ruin of the petitioner, to the detriment of its
employees themselves. It is significant, however, that not all the petitioner's watchmen would
receive back overtime pay for the whole period specified in the appealed decision, since the
record shows that the great majority of the watchmen were admitted in 1946 and 1947, and
even 1948 and 1949. At any rate, we are constrained to sustain the claim of the Association as a
matter of simple justice, consistent with the spirit and purpose of the Eight-Hour Labor Law. The
petitioner, in the first place, was required to comply with the law and should therefore be made
liable for the consequences of its violation.
It is high time that all employers were warned that the public is interested in the strict
enforcement of the Eight-Hour Labor Law. This was designed not only to safeguard the health
and welfare of the laborer or employee, but in a way to minimize unemployment by forcing
employers, in cases where more than 8-hour operation is necessary, to utilize different shifts of
laborers or employees working only for eight hours each.
Wherefore, the appealed decision, in the form voted by Judge Lanting, is affirmed, it being
understood that the petitioner's watchmen will be entitled to extra compensation only from the
dates they respectively entered the service of the petitioner, hereafter to be duly determined by
the Court of Industrial Relations. So ordered, without costs.
Feria, Pablo, Bengzon, Padilla, Tuason, Bautista Angelo, and Labrador, JJ., concur.

G.R. No. 142824

December 19, 2001

INTERPHIL LABORATORIES EMPLOYEES UNION-FFW, ENRICO GONZALES and MA.

THERESA MONTEJO,petitioners,
vs.
INTERPHIL LABORATORIES, INC., AND HONORABLE LEONARDO A. QUISUMBING,
SECRETARY OF LABOR AND EMPLOYMENT, respondents.
KAPUNAN, J.:
Assailed in this petition for review on certiorari are the decision, promulgated on 29 December
1999, and the resolution, promulgated on 05 April 2000, of the Court of Appeals in CA-G.R. SP
No. 50978.
Culled from the questioned decision, the facts of the case are as follows:
Interphil Laboratories Employees Union-FFW is the sole and exclusive bargaining agent of the
rank-and-file employees of Interphil Laboratories, Inc., a company engaged in the business of
manufacturing and packaging pharmaceutical products. They had a Collective Bargaining
Agreement (CBA) effective from 01 August 1990 to 31 July 1993.
Prior to the expiration of the CBA or sometime in February 1993, Allesandro G. Salazar,1 VicePresident-Human Resources Department of respondent company, was approached by Nestor
Ocampo, the union president, and Hernando Clemente, a union director. The two union officers
inquired about the stand of the company regarding the duration of the CBA which was set to

expire in a few months. Salazar told the union officers that the matter could be best discussed
during the formal negotiations which would start soon.
In March 1993, Ocampo and Clemente again approached Salazar. They inquired once more
about the CBA status and received the same reply from Salazar. In April 1993, Ocampo
requested for a meeting to discuss the duration and effectivity of the CBA. Salazar acceded and
a meeting was held on 15 April 1993 where the union officers asked whether Salazar would be
amenable to make the new CBA effective for two (2) years, starting 01 August 1993. Salazar,
however, declared that it would still be premature to discuss the matter and that the company
could not make a decision at the moment. The very next day, or on 16 April 1993, all the rankand-file employees of the company refused to follow their regular two-shift work schedule of
from 6:00 a.m. to 6:00 p.m., and from 6:00 p.m. to 6:00 a.m. At 2:00 p.m. and 2:00 a.m.,
respectively, the employees stopped working and left their workplace without sealing the
containers and securing the raw materials they were working on. When Salazar inquired about
the reason for their refusal to follow their normal work schedule, the employees told him to "ask
the union officers." To minimize the damage the overtime boycott was causing the company,
Salazar immediately asked for a meeting with the union officers. In the meeting, Enrico
Gonzales, a union director, told Salazar that the employees would only return to their normal
work schedule if the company would agree to their demands as to the effectivity and duration of
the new CBA. Salazar again told the union officers that the matter could be better discussed
during the formal renegotiations of the CBA. Since the union was apparently unsatisfied with the
answer of the company, the overtime boycott continued. In addition, the employees started to
engage in a work slowdown campaign during the time they were working, thus substantially
delaying the production of the company.2
On 14 May 1993, petitioner union submitted with respondent company its CBA proposal, and the
latter filed its counter-proposal.
On 03 September 1993, respondent company filed with the National Labor Relations
Commission (NLRC) a petition to declare illegal petitioner union's "overtime boycott" and "work
slowdown" which, according to respondent company, amounted to illegal strike. The case,
docketed NLRC-NCR Case No. 00-09-05529-93, was assigned to Labor Arbiter Manuel R.
Caday.
On 22 October 1993, respondent company filed with the National Conciliation and Mediation
Board (NCMB) an urgent request for preventive mediation aimed to help the parties in their CBA
negotiations.3 The parties, however, failed to arrive at an agreement and on 15 November 1993,
respondent company filed with the Office of the Secretary of Labor and Employment a petition
for assumption of jurisdiction.
On 24 January 1994, petitioner union filed with the NCMB a Notice of Strike citing unfair labor
practice allegedly committed by respondent company. On 12 February 1994, the union staged a
strike.
On 14 February 1994, Secretary of Labor Nieves Confesor issued an assumption order4 over the
labor dispute. On 02 March 1994, Secretary Confesor issued an order directing respondent
company to "immediately accept all striking workers, including the fifty-three (53) terminated
union officers, shop stewards and union members back to work under the same terms and
conditions prevailing prior to the strike, and to pay all the unpaid accrued year end benefits of its
employees in 1993."5 On the other hand, petitioner union was directed to "strictly and
immediately comply with the return-to-work orders issued by (the) Office x x x6 The same order
pronounced that "(a)ll pending cases which are direct offshoots of the instant labor dispute are
hereby subsumed herewith."7

In the i, the case before Labor Arbiter Caday continued. On 16 March 1994, petitioner union filed
an "Urgent Manifestation and Motion to Consolidate the Instant Case and to Suspend
Proceedings" seeking the consolidation of the case with the labor dispute pending before the
Secretary of Labor. Despite objection by respondent company, Labor Arbiter Caday held in
abeyance the proceedings before him. However, on 06 June 1994, Acting Labor Secretary Jose
S. Brillantes, after finding that the issues raised would require a formal hearing and the
presentation of evidentiary matters, directed Labor Arbiters Caday and M. Sol del Rosario to
proceed with the hearing of the cases before them and to thereafter submit their report and
recommendation to his office.
On 05 September 1995, Labor Arbiter Caday submitted his recommendation to the then
Secretary of Labor Leonardo A. Quisumbing.8 Then Secretary Quisumbing approved and
adopted the report in his Order, dated 13 August 1997, hence:
WHEREFORE, finding the said Report of Labor Arbiter Manuel R. Caday to be
supported by substantial evidence, this Office hereby RESOLVES to APPROVE and
ADOPT the same as the decision in this case, and judgment is hereby rendered:
(1) Declaring the 'overtime boycott' and 'work slowdown' as illegal strike;
(2) Declaring the respondent union officers namely:

Nestor Ocampo

President

Carmelo Santos

Vice-President

Marites Montejo

Treasurer/Board Member

Rico Gonzales

Auditor

Rod Abuan

Director

Segundino Flores

Director

Hernando Clemente

Director

who spearheaded and led the overtime boycott and work slowdown, to have lost their
employment status; and
(3) Finding the respondents guilty of unfair labor practice for violating the then existing
CBA which prohibits the union or any employee during the existence of the CBA from
staging a strike or engaging in slowdown or interruption of work and ordering them to
cease and desist from further committing the aforesaid illegal acts.
Petitioner union moved for the reconsideration of the order but its motion was denied. The union
went to the Court of Appeals via a petition for certiorari. In the now questioned decision
promulgated on 29 December 1999, the appellate court dismissed the petition. The union's
motion for reconsideration was likewise denied.
Hence, the present recourse where petitioner alleged:
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS, LIKE THE
HONORABLE PUBLIC RESPONDENT IN THE PROCEEDINGS BELOW,
COMMITTED GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK AND/OR
EXCESS OF JURISDICTION WHEN IT COMPLETELY DISREGARDED "PAROL
EVIDENCE RULE" IN THE EVALUATION AND APPRECIATION OF EVIDENCE
PROFERRED BY THE PARTIES.
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK AND/OR EXCESS OF
JURISDICTION, WHEN IT DID NOT DECLARE PRIVATE RESPONDENT'S ACT OF
EXTENDING SUBSTANTIAL SEPARATION PACKAGE TO ALMOST ALL INVOLVED
OFFICERS OF PETITIONER UNION, DURING THE PENDENCY OF THE CASE, AS
TANTAMOUNT TO CONDONATION, IF INDEED, THERE WAS ANY MISDEED
COMMITTED.
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK AND/OR EXCESS OF
JURISDICTION WHEN IT HELD THAT THE SECRETARY OF LABOR AND
EMPLOYMENT HAS JURISDICTION OVER A CASE (A PETITION TO DECLARE
STRIKE ILLEGAL) WHICH HAD LONG BEEN FILED AND PENDING BEFORE THE
LABOR ARBITER.9
We sustain the questioned decision.
On the matter of the authority and jurisdiction of the Secretary of Labor and Employment to rule
on the illegal strike committed by petitioner union, it is undisputed that the petition to declare the
strike illegal before Labor Arbiter Caday was filed long before the Secretary of Labor and
Employment issued the assumption order on 14 February 1994. However, it cannot be denied
that the issues of "overtime boycott" and "work slowdown" amounting to illegal strike before
Labor Arbiter Caday are intertwined with the labor dispute before the Labor Secretary. In fact, on
16 March 1994, petitioner union even asked Labor Arbiter Caday to suspend the proceedings
before him and consolidate the same with the case before the Secretary of Labor. When Acting
Labor Secretary Brillantes ordered Labor Arbiter Caday to continue with the hearing of the illegal
strike case, the parties acceded and participated in the proceedings, knowing fully well that there
was also a directive for Labor Arbiter Caday to thereafter submit his report and recommendation
to the Secretary. As the appellate court pointed out, the subsequent participation of petitioner
union in the continuation of the hearing was in effect an affirmation of the jurisdiction of the
Secretary of Labor.

The appellate court also correctly held that the question of the Secretary of Labor and
Employment's jurisdiction over labor and labor-related disputes was already settled
in International Pharmaceutical, Inc. vs. Hon. Secretary of Labor and Associated Labor
Union (ALU)10 where the Court declared:
In the present case, the Secretary was explicitly granted by Article 263(g) of the Labor
Code the authority to assume jurisdiction over a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national interest, and
decide the same accordingly. Necessarily, this authority to assume jurisdiction over
the said labor dispute must include and extend to all questions and controversies
arising therefrom, including cases over which the labor arbiter has exclusive
jurisdiction.
Moreover, Article 217 of the Labor Code is not without, but contemplates, exceptions
thereto. This is evident from the opening proviso therein reading '(e)xcept as
otherwise provided under this Code . . .' Plainly, Article 263(g) of the Labor Code was
meant to make both the Secretary (or the various regional directors) and the labor
arbiters share jurisdiction, subject to certain conditions. Otherwise, the Secretary
would not be able to effectively and efficiently dispose of the primary dispute. To hold
the contrary may even lead to the absurd and undesirable result wherein the
Secretary and the labor arbiter concerned may have diametrically opposed rulings. As
we have said, '(i)t is fundamental that a statute is to be read in a manner that would
breathe life into it, rather than defeat it.
In fine, the issuance of the assailed orders is within the province of the Secretary as
authorized by Article 263(g) of the Labor Code and Article 217(a) and (5) of the same
Code, taken conjointly and rationally construed to subserve the objective of the
jurisdiction vested in the Secretary.11
Anent the alleged misappreciation of the evidence proffered by the parties, it is axiomatic that
the factual findings of the Labor Arbiter, when sufficiently supported by the evidence on record,
must be accorded due respect by the Supreme Court.12 Here, the report and recommendation of
Labor Arbiter Caday was not only adopted by then Secretary of Labor Quisumbing but was
likewise affirmed by the Court of Appeals. We see no reason to depart from their findings.
Petitioner union maintained that the Labor Arbiter and the appellate court disregarded the "parol
evidence rule"13when they upheld the allegation of respondent company that the work schedule
of its employees was from 6:00 a.m. to 6:00 p.m. and from 6:00 p.m. to 6:00 am. According to
petitioner union, the provisions of their CBA on working hours clearly stated that the normal
working hours were "from 7:30 a.m. to 4:30 p.m."14 Petitioner union underscored that the regular
work hours for the company was only eight (8) hours. It further contended that the Labor Arbiter
as well as the Court of Appeals should not have admitted any other evidence contrary to what
was stated in the CBA.
The reliance on the parol evidence rule is misplaced. In labor cases pending before the
Commission or the Labor Arbiter, the rules of evidence prevailing in courts of law or equity are
not controlling.15 Rules of procedure and evidence are not applied in a very rigid and technical
sense in labor cases.16 Hence, the Labor Arbiter is not precluded from accepting and evaluating
evidence other than, and even contrary to, what is stated in the CBA.
In any event, the parties stipulated:
Section 1. Regular Working Hours A normal workday shall consist of not more than
eight (8) hours. The regular working hours for the Company shall be from 7:30 A.M. to

4:30 P.M. The schedule of shift work shall be maintained; however the company may
change the prevailing work time at its discretion, should such change be necessary in
the operations of the Company. All employees shall observe such rules as have been
laid down by the company for the purpose of effecting control over working hours.17
It is evident from the foregoing provision that the working hours may be changed, at the
discretion of the company, should such change be necessary for its operations, and that the
employees shall observe such rules as have been laid down by the company. In the case before
us, Labor Arbiter Caday found that respondent company had to adopt a continuous 24-hour
work daily schedule by reason of the nature of its business and the demands of its clients. It was
established that the employees adhered to the said work schedule since 1988. The employees
are deemed to have waived the eight-hour schedule since they followed, without any question or
complaint, the two-shift schedule while their CBA was still in force and even prior thereto. The
two-shift schedule effectively changed the working hours stipulated in the CBA. As the
employees assented by practice to this arrangement, they cannot now be heard to claim that the
overtime boycott is justified because they were not obliged to work beyond eight hours.
As Labor Arbiter Caday elucidated in his report:
Respondents' attempt to deny the existence of such regular overtime schedule is
belied by their own awareness of the existence of the regular overtime schedule of
6:00 A.M. to 6:00 P.M. and 6:00 P.M. to 6:00 A.M. of the following day that has been
going on since 1988. Proof of this is the case undisputedly filed by the union for and in
behalf of its members, wherein it is claimed that the company has not been computing
correctly the night premium and overtime pay for work rendered between 2:00 A.M.
and 6:00 A.M. of the 6:00 P.M. to 6:00 A.M. shift. (tsn pp. 9-10, testimony of
Alessandro G. Salazar during hearing on August 9, 1994). In fact, the union VicePresident Carmelo C. Santos, demanded that the company make a recomputation of
the overtime records of the employees from 1987 (Exh. "P"). Even their own witness,
union Director Enrico C. Gonzales, testified that when in 1992 he was still a Quality
Control Inspector at the Sucat Plant of the company, his schedule was sometime at
6:00 A.M. to 6:00 P.M., sometime at 6:00 A.M. to 2:00 P.M., at 2:00 P.M. to 10:00 P.M.
and sometime at 6:00 P.M. to 6:00 A.M., and when on the 6 to 6 shifts, he received the
commensurate pay (t.s.n. pp. 7-9, hearing of January 10, 1994). Likewise, while in the
overtime permits, dated March 1, 6, 8, 9 to 12, 1993, which were passed around daily
for the employees to sign, his name appeared but without his signatures, he however
had rendered overtime during those dates and was paid because unlike in other
departments, it has become a habit to them to sign the overtime schedule weekly
(t.s.n. pp. 26-31, hearing of January 10, 1994). The awareness of the respondent
union, its officers and members about the existence of the regular overtime schedule
of 6:00 A.M. to 6:00 P.M. and 6:00 P.M. to 6:00 A.M. of the following day will be further
shown in the discussion of the second issue.18
As to the second issue of whether or not the respondents have engaged in "overtime
boycott" and "work slowdown" from April 16, 1993 up to March 7, 1994, both
amounting to illegal strike, the evidence presented is equally crystal clear that the
"overtime boycott" and "work slowdown" committed by the respondents amounted to
illegal strike.
As undisputably testified to by Mr. Alessandro G. Salazar, the company's VicePresident-Human Resources Department, sometime in February, 1993, he was
approached by the union President Nestor Ocampo and Union Director Hernando
Clemente who asked him as to what was the stand of the company regarding the
duration of the CBA between the company and which was set to expire on July 31,
1993. He answered that the matter could be best discussed during the formal
renegotiations which anyway was to start soon. This query was followed up sometime

in March, 1993, and his answer was the same. In early April, 1993, the union
president requested for a meeting to discuss the duration and effectivity of the CBA.
Acceding to the request, a meeting was held on April 15, 1993 wherein the union
officers asked him if he would agree to make the new CBA effective on August 1, 1993
and the term thereof to be valid for only two (2) years. When he answered that it was
still premature to discuss the matter, the very next day, April 16, 1993, all the rank and
file employees of the company refused to follow their regular two-shift work schedule
of 6:00 A.M. to 6:00 P.M. and 6:00 P.M. to 6:00 A.M., when after the 8-hours work,
they abruptly stopped working at 2:00 P.M. and 2:00 A.M., respectively, leaving their
place of work without sealing the containers and securing the raw materials they were
working on. When he saw the workers leaving before the end of their shift, he asked
them why and their reply was "asked (sic) the union officers." Alarmed by the overtime
boycott and the damage it was causing the company, he requested for a meeting with
the union officers. In the meeting, he asked them why the regular work schedule was
not being followed by the employees, and union Director Enrico Gonzales, with the
support of the other union officers, told him that if management would agree to a twoyear duration for the new CBA and an effectivity date of August 1, 1993, all employees
will return to the normal work schedule of two 12-hour shifts. When answered that the
management could not decide on the matter at the moment and to have it discussed
and agreed upon during the formal renegotiations, the overtime boycott continued and
the employees at the same time employed a work slowdown campaign during working
hours, causing considerable delay in the production and complaints from the
clients/customers (Exh. "O", Affidavit of Alessandro G. Salazar which formed part of
his direct testimony). This testimonial narrations of Salazar was, as earlier said,
undisputed because the respondents' counsel waived his cross examination (t.s.n. p.
15, hearing on August 9, 1994).
Aside from the foregoing undisputed testimonies of Salazar, the testimonies of other
Department Managers pointing to the union officers as the instigators of the overtime
boycott and work slowdown, the testimony of Epifanio Salumbides (Exh. "Y") a union
member at the time the concerted activities of the respondents took place, is quoted
hereunder:
"2. Noon Pebrero 1993, ipinatawag ng Presidente ng Unyon na si Nestor
Ocampo ang lahat ng taga-maintenance ng bawat departamento upang
dumalo sa isang miting. Sa miting na iyon, sinabi ni Rod Abuan, na isang
Direktor ng Unyon, na mayroon ilalabas na memo ang Unyon na nag-uutos
sa mga empleyado ng Kompanya na mag-imbento ng sari-saring dahilan
para lang hindi sila makapagtrabaho ng "overtime". Sinabihan rin ako ni
Tessie Montejo na siya namang Treasurer ng Unyon na 'Manny, huwag ka
na lang pumasok sa Biyernes para hindi ka masabihan ng magtrabaho ng
Sabado at Linggo' na siya namang araw ng "overtime" ko x x x
"3. Nakalipas ang dalawang buwan at noong unang bahagi ng Abril 1993,
miniting kami ng Shop Stewards namin na sina Ariel Abenoja, Dany
Tansiongco at Vicky Baron. Sinabihan kami na huwag ng mag-overtime pag
nagbigay ng senyas ang Unyon ng "showtime."
"4. Noong umaga ng ika-15 ng Abril 1993, nagsabi na si Danny Tansiongco
ng "showtime". Dahil dito wala ng empleyadong nag-overtime at sabaysabay silang umalis, maliban sa akin. Ako ay pumasok rin noong Abril 17 at
18, 1993 na Sabado at Linggo.
"5. Noong ika-19 ng Abril 1993, ako ay ipinatawag ni Ariel Abenoja Shop
Steward, sa opisina ng Unyon. Nadatnan ko doon ang halos lahat ng
opisyales ng Unyon na sina:

Nestor Ocampo

Presidente

Carmelo Santos

Bise-Presidente

Nanding Clemente

Director

TessMontejo

Chief Steward

Segundo Flores

Director

Enrico Gonzales

Auditor

Boy Alcantara

Shop Steward

Rod Abuan

Director

at marami pang iba na hindi ko na maala-ala. Pagpasok ko, ako'y

pinaligiran ng mga opisyales ng Unyon. Tinanong ako ni Rod Aguan kung
bakit ako "nag-overtime" gayong "Binigyan ka na namin ng instruction na
huwag pumasok, pinilit mo pa ring pumasok." "Management ka ba o
Unyonista." Sinagot ko na ako ay Unyonista. Tinanong niya muli kung bakit
ako pumasok. Sinabi ko na wala akong maibigay na dahilan para lang hindi
pumasok at "mag-overtime." Pagkatapos nito, ako ay pinagmumura ng mga
opisyales ng Unyon kaya't ako ay madaliang umalis.
xxx

xxx

xxx

Likewise, the respondents' denial of having a hand in the work slowdown since there
was no change in the performance and work efficiency for the year 1993 as compared
to the previous year was even rebuffed by their witness Ma. Theresa Montejo, a
Quality Control Analyst. For on cross-examination, she (Montejo) admitted that she
could not answer how she was able to prepare the productivity reports from May 1993
to February 1994 because from April 1993 up to April 1994, she was on union leave.
As such, the productivity reports she had earlier shown was not prepared by her since
she had no personal knowledge of the reports (t.s.n. pp. 32-35, hearing of February

27, 1995). Aside from this admission, the comparison made by the respondents was
of no moment, because the higher production for the years previous to 1993 was
reached when the employees regularly rendered overtime work. But undeniably,
overtime boycott and work slowdown from April 16, 1993 up to March 7, 1994 had
resulted not only in financial losses to the company but also damaged its business
reputation.
Evidently, from all the foregoing, respondents' unjustified unilateral alteration of the 24hour work schedule thru their concerted activities of "overtime boycott" and "work
slowdown" from April 16, 1993 up to March 7, 1994, to force the petitioner company to
accede to their unreasonable demands, can be classified as a strike on an installment
basis, as correctly called by petitioner company x x x19
It is thus undisputed that members of the union by their own volition decided not to render
overtime services in April 1993.20 Petitioner union even admitted this in its Memorandum, dated
12 April 1999, filed with the Court of Appeals, as well as in the petition before this Court, which
both stated that "(s)ometime in April 1993, members of herein petitioner, on their own volition
and in keeping with the regular working hours in the Company x x x decided not to render
overtime".21 Such admission confirmed the allegation of respondent company that petitioner
engaged in "overtime boycott" and "work slowdown" which, to use the words of Labor Arbiter
Caday, was taken as a means to coerce respondent company to yield to its unreasonable
demands.
More importantly, the "overtime boycott" or "work slowdown" by the employees constituted a
violation of their CBA, which prohibits the union or employee, during the existence of the CBA, to
stage a strike or engage in slowdown or interruption of work.22 In Ilaw at Buklod ng Manggagawa
vs. NLRC ,23 this Court ruled:
x x x (T)he concerted activity in question would still be illicit because contrary to the
workers' explicit contractual commitment "that there shall be no strikes, walkouts,
stoppage or slowdown of work, boycotts, secondary boycotts, refusal to handle any
merchandise, picketing, sit-down strikes of any kind, sympathetic or general strikes, or
any other interference with any of the operations of the COMPANY during the term of
x x x (their collective bargaining) agreement."
What has just been said makes unnecessary resolution of SMC's argument that the
workers' concerted refusal to adhere to the work schedule in force for the last several
years, is a slowdown, an inherently illegal activity essentially illegal even in the
absence of a no-strike clause in a collective bargaining contract, or statute or rule. The
Court is in substantial agreement with the petitioner's concept of a slowdown as a
"strike on the installment plan;" as a willful reduction in the rate of work by concerted
action of workers for the purpose of restricting the output of the employer, in relation to
a labor dispute; as an activity by which workers, without a complete stoppage of work,
retard production or their performance of duties and functions to compel management
to grant their demands. The Court also agrees that such a slowdown is generally
condemned as inherently illicit and unjustifiable, because while the employees
"continue to work and remain at their positions and accept the wages paid to them,"
they at the same time "select what part of their allotted tasks they care to perform of
their own volition or refuse openly or secretly, to the employer's damage, to do other
work;" in other words, they "work on their own terms." x x x24
Finally, the Court cannot agree with the proposition that respondent company, in extending
substantial separation package to some officers of petitioner union during the pendency of this
case, in effect, condoned the illegal acts they committed.

Respondent company correctly postured that at the time these union officers obtained their
separation benefits, they were still considered employees of the company. Hence, the company
was merely complying with its legal obligations.25 Respondent company could have withheld
these benefits pending the final resolution of this case. Yet, considering perhaps the financial
hardships experienced by its employees and the economic situation prevailing, respondent
company chose to let its employees avail of their separation benefits. The Court views the
gesture of respondent company as an act of generosity for which it should not be punished.
WHEREFORE, the petition is DENIED DUE COURSE and the 29 December 1999 decision of
the Court of Appeals is AFFIRMED.
SO ORDERED.
Davide, Jr., C .J ., Pardo, and Ynares-Santiago, JJ ., concur.
Puno, J ., on official leave.

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.

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 & L-14255, May 27, 1960; Ajax International
Corp. v. Seguritan, L-16038, October 25, 1960; Sampaguita Pictures, Inc., et al. vs. CIR, L16404, 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.

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.

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.

[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

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

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,

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

"(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

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.

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 "coffee-money", 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. 147-V 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.

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?

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, 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.

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 Eight-Hour 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

11. Leonardo Patnugot

oiler

82.50

12. Bienvenido Crisostomo

oiler

82.50

13. Isidro Malabanan

cook

82.50

14. Saturnino Tumbokon

seaman

67.50

82.50

15. Bonifacio Cortez

quartermaster

82.50

4. Pedro Filamor
quartermaster
then his wage was reduced to P67.50 per
month as cook;

82.50

16. Victorio Carillo

cook

67.50

17. Francisco Atilano

cook

67.50

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

seaman

82.50
18. Gualberto Legaspi

seaman

67.50

6. Juanito de Luna

oiler

82.50

19. Numeriano Juanillo

quartermaster

82.50

7. Benigno Curambao

oiler

82.50

20. Moises Nicodemus

quartermaster

82.50

8. Salvador Mercadillo

oiler

82.50

21. Arsenio Indiano

seaman

82.50

9. Nicasio Sta. Lucia

cook

82.50

22. Ricardo Autencio

oiler

82.50

10. Damaso Arciaga

seaman

82.50

23. Mateo Arciaga

seaman

67.50

1. Ambrosio Taada ..
but after passing the examinations his
wages were increased to P225 per month;

oiler

2. Patricio Santiago ..
but after passing the examinations his
wages were increased to P225 per month;

quartermaster

3. Fidelino Villanueva

oiler

P82.50

82.50

24. Romulo Magallanes

quartermaster

82.50

25. Antonio Belbes

seaman

67.50

26. Benjamin Aguirre

quartermaster

82.50

27. Emilio Anastasio

quartermaster

82.50

28. Baltazar Labrada

oiler

82.50

29. Emeterio Magallanes

seaman

67.50

30. Agripino Laurente

quartermaster

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. vs- Court 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. 70-V, 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.

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 mon

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.

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 premises2 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?

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.

[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

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

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 (ALU-TUCP),
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 30-minute 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 30-minute 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 30-minute 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), Vitug, Panganiban, and Quisumbing, JJ., concur.

G.R. No. L-30452 September 30, 1982

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.

MERCURY DRUG CO., INC., petitioner,

vs.
NARDO DAYAO, ET AL., respondents,

For reasons stated in the Order dated March 24, 1965, two Court resolved
the motions to dismiss, as follows:

Caparas & Ilagan for petitioner.

1. Ground No. 1 of management's motion to dismiss was denied for lack of

merit.

Gerardo P. Cabo Chan and Elias Banzali for respondents.

GUTIERREZ, JR., J.:

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 employeremployee 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,

(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

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:

(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.

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)

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 twentyfive 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.

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. ...

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 petitionercompany 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

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).

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 petitionercompany. The first hinges on the jurisdiction of the respondent court to
award additional compensation for nighttime work. Petitioner wants Us to reexamine 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
petitioner-company, 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 -

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

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., L-16440, 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

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 petitionercompany's contention that the respondent court's ruling on the additional compensation for
nighttime work is not supported by substantial evidence.

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:

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 reexamine 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

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.

G.R. No. L-27761 September 30, 1981

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.

BISIG NG MANGGAGAWA NG PHILIPPINE REFINING CO., INC., plaintiff-appellants,

vs.
PHILIPPINE REFINING CO., INC., defendant-appellee.

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.

ABAD SANTOS, J.:

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.

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 ;

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 abovequoted 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 twentyfive 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.

For a better appreciation of this case, certain prefatory facts must be recalled. Sometime in
February, 1956, the workers' affiliates of respondent Union staged a strike against petitioner
company. This labor dispute was certified by the President to the Court of Industrial Relations
which was docketed as Case No. 13-IPA. After six years, the said Court issued an order on
November 8, 1962 directing petitioner company to reinstate the members of respondent union.
On March 12, 1963 some 88 union members were thus reinstated by petitioner. However,
petitioner discriminated against the reemployed workers with respect to wage rates, off-season
pay, cost of living allowance, milling bonus and Christmas bonus by depriving them of aforesaid
benefits or by granting to some members benefits lesser than those given to members of the
Pasudeco Workers Union, another labor group in the service of petitioner. By reason of such
denial and/or grant of lower benefits to respondent's members because of their union affiliation
and union activities, respondent filed with the CIR a complaint dated September 10, 1964 for
unfair labor practice against petitioner which case was docketed as Case No. 4264ULP.chanroblesvirtualawlibrary chanrobles virtual law library
On December 4, 1972, the CIR handed down a decision adjudging herein petitioner guilty of
unfair labor practice acts as charged and finding the same to have been committed, and thereby
directing petitioner to cease and desist from further committing the said unfair labor practice acts
and directing petitioner to pay wage differentials to certain workers and fringe benefits as would
be found due and payable to them and to readmitted seasonal and casual members of
respondent union totalling 88 with the exception of 7
workers.chanroblesvirtualawlibrary chanrobles virtual law library
In a resolution dated May 28, 1973, the CIR denied petitioner's motion for reconsideration of
aforesaid decision filed on December 14, 1972. Petitioner appealed the above decision and
resolution to this Court on June 15, 1973 praying in its petition for the nullification of said
decision and motion for being contrary to law, and for the rendition of a new judgment dismissing
CIR Case No. 4264-ULP.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.
Barredo (Chairman), Aquino, Concepcion Jr. and De Castro, JJ., concur.

G.R. No. L-39387 June 29, 1982

PAMPANGA SUGAR DEVELOPMENT CO., INC., Petitioner, vs. COURT OF INDUSTRIAL
RELATIONS AND SUGAR WORKERS ASSOCIATION, respondents.
MAKASIAR, J.:
Petitioner Pampanga Sugar Development Company, Inc. seeks the reversal of the order dated
June 6, 1974 of respondent Court of Industrial Relations awarding to respondent Sugar Workers
Association's (Union) counsel attorney's fees equivalent to 20% of the judgment in CIR Case No.
4264- ULP and ordering the lower court's Examining Division to compute the wage and fringe
benefits differentials due the 28 individual workers who did not execute quitclaims as well as
attorney's fees corresponding to 20% of the benefits due to 53 workers who entered into
agreements waiving their rights and benefits under the decision dated December 4, 1972 in the
aforecited case; also, the setting aside of the CIR resolution of September 3, 1974 denying
petitioner's motion for reconsideration of the questioned order (pp. 15 & 57,
rec.).chanroblesvirtualawlibrary chanrobles virtual law library

This Court, in its resolution of July 31, 1973, denied the said petition for review (docketed as
G.R. No. L-36994) for lack of merit. Petitioner then moved for reconsideration of aforesaid denial
which was denied on October 4, 1973 for lack of merit. Said resolution denying the motion for
reconsideration thus became final and executory on October 12,
1973.chanroblesvirtualawlibrary chanrobles virtual law library
With the finality of the December 4, 1972 decision having been settled, respondent Union filed
with the CIR a motion for computation of final judgment and a petition for attorney's lien both
dated October 17, 1973 (pp. 47 & 50, rec.).chanroblesvirtualawlibrary chanrobles virtual law
library
Petitioner company filed its answer to motion for computation of final judgment and the petition
for attorney's lien under date of November 20, 1973 (p. 52,
rec.).chanroblesvirtualawlibrary chanrobles virtual law library
The CIR, acting on the aforesaid motions of respondent Union, issued its order of June 6, 1974
approving and granting to respondent's counsel, Atty. Ignacio Lacsina, attorney's fees equivalent
to 20% of the total amount of final judgment or whatever recovery or settlement is made and
directing its Examining Division to compute the wage and fringe benefits differentials due the 28
individual workers who did not waive or quitclaim their rights established by the decision of

December 4, 1972 as well as the attorney's fees equivalent to 20% of the total wage and fringe
benefits differentials due the fifty-three (53) individual workers who executed agreements with
the company waiving and quitclaiming their rights, benefits and privileges under the aforesaid
decision (pp. 15 & 57, rec.).chanroblesvirtualawlibrary chanrobles virtual law library
Petitioner moved for reconsideration of aforecited order on June 26, 1974 and on July 5, 1974,
the arguments supporting said motion for reconsideration followed (pp. 63 & 65,
rec.).chanroblesvirtualawlibrary chanrobles virtual law library
Respondent Union then filed its motion to strike out the motion for reconsideration dated July 23,
1974 (p. 72, rec.). In a resolution of September 3, 1974, respondent lower court denied
petitioner's motion for reconsideration.chanroblesvirtualawlibrary chanrobles virtual law library
Thus, this appeal from the subject order and resolution of the
CIR.chanroblesvirtualawlibrary chanrobles virtual law library
Petitioner alleges the following assignment of errors: chanrobles virtual law library
1. The Court of Industrial Relations erred in awarding attorney's fees to the union's counsel
equivalent to 20% of the total amount of final judgment or whatever recovery or settlement is
made thereunder; because, aside from being inequitable, exorbitant, excessive and
unconscionable, the same is without legal basis.chanroblesvirtualawlibrary chanrobles virtual
law library
2. The Court of Industrial Relations erred in ordering the Chief of its examining division or his
duly authorized representative to examine the payrolls, vouchers, books of account and other
pertinent documents of petitioner, and to compute the wage and fringe-benefits differentials
allegedly due the members of respondent Union because such examination and computation
have become academic.chanroblesvirtualawlibrary chanrobles virtual law library
3. The Court of Industrial Relations erred in not denying or dismissing the two motions filed by
respondent union on October 18, 1973 praying therein that the union's counsel be awarded
attorney's fees and that an order be issued directing the examining division of the court to
compute the wage and fringe benefits differentials allegedly due the members of the union under
the decision of December 4, 1972.chanroblesvirtualawlibrary chanrobles virtual law library
Respondents, however, contend that - chanrobles virtual law library
1. The issue of quitclaims is now res judicata;
2. The CIR finding that 81 members of respondent union are entitled to adjudged benefits is no
longer alterable after decision has become final; chanrobles virtual law library
3. The CIR power to adjust unfair labor practices is unaffected by individual
settlements; chanrobles virtual law library
4. The rights of labor are unwaivable; quitclaims null and void; and chanrobles virtual law library

5. The question regarding alleged unreasonableness of award of attorney's fees, not raised
before Court a quo, is barred on appeal.
After a careful evaluation of the petitioners' and respondents' pleadings, this Court, finds the
allegations of petitioner to be without merit.chanroblesvirtualawlibrary chanrobles virtual law
library
On the first assignment of error, paragraph (a), the petitioner failed to raise the issue before the
trial court. This Court notes that petitioner's answer to the motion for computation of final
judgment and to petition for attorney's lien filed by the respondent in the trial court did not raise
the foregoing issue. It is a well-settled doctrine in this jurisdiction that issues not raised in the
trial court may not be raised on appeal. Otherwise, there will be no end to litigations thus
defeating the ends of justice.chanroblesvirtualawlibrary chanrobles virtual law library
Nevertheless, this Court finds the allegations to be devoid of merit. Petitioner's contention that
there is no basis for respondent's petition for attorney's lien filed with the trial court containing
allegations relative to attorney's fees as agreed upon between him and his client, the
complainant Sugar Workers' Association, is untenable. The written conformity of the President of
said Sugar Workers Association on behalf thereof confirms the existence of such an agreement
on attorney's fees and constitutes an irrefutable evidence of such agreement. The trial court,
therefore, had sufficient evidence upon which it based its decision. The petitioner did not contest
the allegations contained in the respondent's petition for attorney's lien before the trial court. This
constitutes an implied admission thereof. Moreover, it is evident from the tenor of the trial court's
order issued on June 6, 1974 that the said court carefully evaluated the respondent's petition for
attorney's lien and even reduced the percentage from 25 IC to 20
%.chanroblesvirtualawlibrary chanrobles virtual law library
On the first assignment of error, paragraph (b), this Court likewise finds the same to be without
merit. This issue has already been resolved by this Court when the petitioner filed its first petition
for certiorari (G.R. No. L- 36994) seeking nullification of the trial court's judgment on the same
issue. Petitioner's allegations were rejected by this Court in said case. It may not now be
repeated and raised on appeal before this Court, the same beingres
judicata.chanroblesvirtualawlibrary chanrobles virtual law library
Be that as it may, the allegations of petitioner to the effect that by reason of the quitclaims there
is nothing upon which the attorney's lien attaches, is not valid. This Court finds the quitclaims not
valid. Firstly, said quitclaims were secured on December 27, 1972 by petitioner after it lost its
case in the lower court when the latter promulgated its decision on the case on December 4,
1972. Obviously in its desire to deny what is due the sugar workers concerned and frustrate the
decision of the lower court awarding benefits to them, it used its moral ascendancy as employer
over said workers to secure said quitclaims. Predicated on said quitclaims, petitioner filed a
petition for certiorari before this Court but the same was denied by the Court on July 31,
1973 and October 4, 1973. Petitioner now has the audacity to return before this Court still
invoking said quitclaims, which We again reject.
Secondly, while rights may be waived, the same must not be contrary to law, public order, public
policy, morals or good customs or prejudicial to a third person with a right recognized by law (Art.
6, New Civil Code). The quitclaim agreements contain the following provisions in paragraph I 1,
No. 3, thereof: chanrobles virtual law library

3. Nothing herein stipulated shall be construed as an admission and/or recognition by the Party
of The Second Part of its failure refusal and/or omission as employer, to faithfully comply with
the pertinent laws, rules and regulations and/or agreements, nor its liability therefor and
thereunder.
Needless to state, the foregoing provisions are contrary to law, It exempts the petitioner from
any legal liability. The above- quoted provision renders the quitclaim agreements void ab initio in
their entirety since they obligated the workers concerned to forego their benefits, while at the
same time, exempted the petitioner from any liability that it may choose to reject. This runs
counter to Article 22 of the New Civil Code which provides that no one shall be unjustly enriched
at the expense of another.
Thirdly, the alleged quitclaim agreements are contrary to public policy. Once a civil action is filed
in court, the cause of action may not be the subject of compromise unless the same is by leave
of the court concerned. Otherwise, this will render the entire judicial system irrelevant to the
prejudice of the national interest. Parties to litigations cannot be allowed to trifle with the judicial
system by coming to court and later on agreeing to a compromise without the knowledge and
approval of the court. This converts the judiciary into a mere tool of party-litigants who act
according to their whims and caprices. This is more so when the court has already rendered its
decision on the issues submitted.chanroblesvirtualawlibrary chanrobles virtual law library
In the case at bar, the lower court has already rendered a decision on the issues presented
before the alleged quitclaims agreements were made. The quitclaim agreements were secured
by petitioner while it filed a petition for certiorari before this Court for a review of the lower court's
decision. The quiclaim agreements taken together with the petitioner's petition for certiorari of
the trial court's decision clearly and unmistakably shows the bad faith of the petitioner and its
outright refusal to comply with its legal obligations. And now it has the temerity to attempt to use
this Court as its instrument for the purpose.chanroblesvirtualawlibrary chanrobles virtual law
library
This Court rejects the contention of petitioner to the effect that the lien of an attorney on the
judgment or decree for the payment of money and the preference thereof which he has secured
in favor of his client takes legal effect only from and after, but not before notice of said lien has
been entered in the record and served on the adverse party, citing the cases of Menzi and Co.
vs. Bastida (63 Phil. 16) and Macondray & Co. vs. Jose (66 Phil. 590) in support
thereof.chanroblesvirtualawlibrary chanrobles virtual law library
This Court finds the petitioner's contentions and citations applicable only when the case has
already been decided with finality. In the case at bar, the original case was decided with finality
only after this Court denied the petitioner's motion for reconsideration of this Court's denial of its
petition for certiorari on the lower court's decision.chanroblesvirtualawlibrary chanrobles virtual
law library
This Court is appalled by the attempt of petitioner to mislead it by alleging that the lower court
recognized the validity and effectivity of the 53 individual agreements when it declared allegedly
that "rights may be waived. " The records show that the lower court qualified its statement to the
effect that the waiver must not be contrary to law, public order, public policy, morals or good
customs, or prejudicial to a third person with a right recognized by law citing Article 6 of the New
Civil Code. This attempt by petitioner casts a serious doubt on the integrity and good faith not

only of the petitioner but also of its counsel.chanroblesvirtualawlibrary chanrobles virtual law
library
This Court rejects the allegation of petitioner to the effect that the 53 agreements gave
substance to the policy of the Industrial Peace Act of encouraging the parties to make all
reasonable efforts to settle their differences by mutual agreement, citing the case of Filomena
Dionela, et al. vs. CIR, et al. (L-18334, August 31, 1963).chanroblesvirtualawlibrary chanrobles
virtual law library
Petitioner's contention and the case cited in support thereof apply only where there is good faith
on the part of the party litigants. In the case at bar, petitioner acted with evident bad faith and
malice. Petitioner secured the 53 quitclaim agreements individually with the 53 sugar workers
without the intervention of respondent's lawyer who was representing them before the lower
court. This subterfuge is tantamount to a sabotage of the interest of respondent association.
Needless to say, the means employed by petitioner in dealing with the workers individually,
instead of collectively through respondent and its counsel, violates good morals as they
undermine the unity of respondent union and fuels industrial disputes, contrary to the declared
policy in the Industrial Peace Act.chanroblesvirtualawlibrary chanrobles virtual law library
This Court likewise rejects petitioner's allegation that the 53 quitclaim agreements were in the
nature of a compromise citing the case of Republic vs. Estenzo, et al., (L-24656, September 25,
1968, 25 SCRA 122) and Articles 2028 and 2040 of the New Civil
Code.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioner's allegations and citations apply only to compromises between the party-litigants done
in good faith. In the case at bar, there was no compromise between the petitioner and the
respondent Sugar Workers Association. In respect of the 53 quitclaims, these are not
compromise agreements between the petitioner and respondent union. They are separate
documents of renunciation of individual rights. Compromise involves the mutual renunciation of
rights by both parties on a parity basis. The quitclaims, however, bind the workers to renounce
their rights while the petitioner not only does not renounce anything but also acquires exemption
from any legal liability in connection therewith.chanroblesvirtualawlibrary chanrobles virtual law
library
On the First Assignment of Error, Paragraph (c), the petitioner anchors his allegations on the
technical procedural requirements of Section 37, Rule 138 of the New Rules of Court. This
Court, however, finds petitioner's allegation without merit. Said provision of the Rules of Court is
meant to protect the interest of an attorney's client and the adverse party by seeing to it that they
are given the opportunity to contest the creation of the attorney's lien. It will be noted from the
records that the client Sugar Workers Union was not only notified but also affixed its conformity
to the respondents' motion for attorney's lien. With respect to the adverse party, the petitioner in
this case, said adverse party's interest was amply protected by the lower court when the latter
admitted petitioner's answer to respondent's motion for computation of final judgment and to
respondent's counsel's petition for attorney's lien. Petitioner did not raise the aforesaid
technicality in its answer before the lower court. It cannot now raise it for the first time on
appeal.chanroblesvirtualawlibrary chanrobles virtual law library
On the First Assignment of Error, Paragraph (d), this Court finds petitioner's allegations to the
effect that the attorney's fees awarded are inequitable, exorbitant, excessive and

unconscionable, citing in the process the case of Meralco Workers' Union vs. Gaerlan (32 SCRA
419), completely without basis nor merit.chanroblesvirtualawlibrary chanrobles virtual law library
Again, petitioner did not raise this issue in the lower court. It cannot now raise said issue for the
first time on appeal before this Court. Nevertheless, petitioner has failed to prove any of its
allegations. Hence, this Court finds the same worthless. The Meralco case does not apply in this
case for the reason that the facts and circusmtances are entirely
different.chanroblesvirtualawlibrary chanrobles virtual law library

[G.R. No. L-30279. July 30, 1982.]

PHILIPPINE NATIONAL BANK, Petitioner, v. 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
forRespondents.
SYNOPSIS

On the Second Assignment of Error, this Court finds petitioner's allegation to the effect that the
lower court erred in ordering the computation of judgment on the ground that by reason of the
quitclaim agreements the computation of judgment has become academic, to be without merit
and grossly inane.chanroblesvirtualawlibrary chanrobles virtual law library
The allegations of petitioner are premised on its previous allegations regarding the quitclaims.
This Court has earlier stated that the quitclaim agreements are void ab initio.The lower court
was correct in directing the computation of judgment, there being a basis
therefor.chanroblesvirtualawlibrary chanrobles virtual law library
On the Third Assignment of Error, this Court likewise finds petitioner's allegations which are
based on its allegations in support of the first and second assignments of errors, without merit,
as heretofore discussed.chanroblesvirtualawlibrary chanrobles virtual law library
WHEREFORE, THE PETITION IS HEREBY DISMISSED AND RESPONDENT CIR (NOW THE
NLRC) IS HEREBY DIRECTED TO IMPLEMENT ITS ORDER DATED JUNE
6,1974.chanroblesvirtualawlibrary chanrobles virtual law library
COSTS AGAINST PETITIONER.chanroblesvirtualawlibrary chanrobles virtual law library
SO ORDERED.
Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.chanroblesvirtualawlibrary chanrobles
virtual law library
Teehankee (Chairman), J., concur in the result.chanroblesvirtualawlibrary chanrobles virtual law
library
Melencio-Herrera, J., is on leave.

In connection with an industrial dispute certified by the President of the Philippines, respondent
Court of Industrial Relations (CIR) ruled, that petitioner Philippine National Bank (PNB) should
include cost-of-living allowances (equity pay) and longevity pay to the sum total of every
employees basic salary or wage as basis for computation of the overtime pay of its employees.
Respondent CIRs decision was based on its interpretation of the applicable law, the Eight-Hour
Labor Law (Commonwealth Act No. 444), in the light of its own impression of the Supreme
Courts opinion in NAWASA v. NAWASA Consolidated Unions (G. R. No. L-18938, promulgated
August 31, 1964, 11 SCRA 766) wherein it was held that in computing the daily wage of
employees and workers who worked seven days a week their 25% Sunday differential pay
should be included; and the computation should not be based exclusively on the basic wage.
On review, the Supreme Court held that: (a) longevity pay cannot be included in the computation
of overtime pay since the contrary is expressly stipulated in the collective bargaining agreement
which constitutes the law between the parties; (b) notwithstanding the portions of the NAWASA
opinion relied upon by respondent PEMA, there is nothing in the Eight- Hour Labor Law that
could justify its posture that the cost of living allowance should be added to the regular wage in
computing overtime pay; (c) the NAWASA ruling relied upon by respondent PEMA was obiter
dictum, the only issue therein being whether or not "in computing the daily wage, the additional
compensation for Sunday should be included" ; and (d) in the absence of any specific provision
in a collective bargaining agreement, what are decisive in determining the basis for computation
of overtime pay are two 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.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATIONS; EIGHT-HOUR LABOR LAW (COMMONWEALTH ACT

NO. 444); OVERTIME PAY; RATIONALE OF. 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.
2. ID.; ID.; OVERTIME WORK, MEANING OF. Overtime work is actually the lengthening of
hours devoted to the interests of the employer and the requirements of his enterprise.

3. ID.; ID.; WAGE; MEANING OF. Wage under the Minimum Wage Law (Republic Act No.
602), 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."cralaw virtua1aw library
4. ID.; ID.; LONGEVITY PAY; CANNOT BE INCLUDED IN COMPUTATION OF OVERTIME PAY
WHERE THE CONTRARY IS EXPRESSLY STIPULATED IN THE COLLECTIVE BARGAINING
AGREEMENT; CASE AT BAR. In the instant case, longevity pay 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 v. Aboitiz, 45 SCRA 577; See also Shell Oil Workers Union, Et. Al. v. Shell
Company of the Philippines, 70 SCRA 242-243.)
5. ID.; ID.; COST-OF-LIVING ALLOWANCES; GRANT THEREOF NOT JUSTIFIED IN CASE AT
BAR. Notwithstanding the portions of NAWASAs 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.
6. ID.; ID.; ID.; OPINION IN NAWASA v. NAWASA CONSOLIDATED UNIONS, ET AL. NOT
CONTROLLING IN CASE AT BAR. True it is that in the opinion in the case of NAWASA v.
NAWASA Consolidated Unions, Et Al., 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 workmans standpoint (International L. Assn. v. National Terminals Corp.
C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunao v. National Terminals Corp. 139 F. 2d
853)." (11 SCRA 783) But nowhere did NAWASA refer to extra, temporary and contingent
compensation unrelated to work done or service rendered, which is the very nature of cost-ofliving allowance. Withal, in strict sense, the cited NAWASA ruling was obiter dictum, since the
only issue before the Court there was whether or not "in computing the daily wage, (whether) the
additional compensation for Sunday should be included."cralaw virtua1aw library
7. ID.; ID.; OVERTIME PAY; BASIS OF COMPUTATION BEYOND THAT PROVIDED BY LAW
SHOULD BE THE COLLECTIVE BARGAINING AGREEMENT. The basis of computation of
overtime pay beyond that required by Commonwealth Act No. 444 must be the collective
bargaining agreement (Shell Oil Workers Union v. Shell Company of the Philippines, L-3065859, March 31, 1976, 70 SCRA 238), for, it is not for the court to impose upon the parties anything
beyond what they have agreed upon which is not tainted with illegality (Bisig ng Manggagawa
case). 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 of them to do more than what is
legally obliged.
8. ID.; ID.; ID.; BASIS THEREFOR ABSENT ANY SPECIFIC PROVISION IN THE COLLECTIVE
BARGAINING AGREEMENT. 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 the ruling in NAWASA v. NAWASA Consolidated Unions.

Et. Al., G.R. No. L-l8938, August 31, 1964.

AQUINO, J., concurring:chanrob1es virtual 1aw library
LABOR AND SOCIAL LEGISLATIONS; COMMONWEALTH ACT NO. 444 (EIGHT-HOUR
LABOR LAW); OVERTIME PAY; SHOULD BE BASED ON THE REGULAR WAGES OR
SALARY; DOES NOT INCLUDE COST-OF-LIVING ALLOWANCE, LONGEVITY PAY OR
OTHER FRINGE BENEFITS. Sections 3 and 4 of the Eight-Hour Labor Law,. Commonwealth
Act No. 444, provide that the overtime pay of workers should be based on the "regular wages or
salary" or "regular remuneration" of the laborers and employees. These terms should be given
their ordinary meaning. Hence, they do not include the cost-of-living allowance, longevity pay or
other fringe benefits, which items constitute extra pay or additions to the regular or basic pay. In
Shell Oil Workers Union v. Shell Company of the Philippines, L-30658-59, March 31, 1976, 70
SCRA 238, this Court held that, notwithstanding the ruling in NAWASA Consolidated Unions, Et.
Al. (130 Phil. 736, 754), the fringe benefits should not be added to the basic pay in computing
the overtime pay. Consequently, the Industrial Court erred in including the cost-of-living
allowance and the longevity pay as part of the employees basic salary or wage on which the
overtime pay should be based.

DECISION

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 way certified by the
President. Pertinent portions of the order read thus:jgc:chanrobles.com.ph
"x

"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;
"x

"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 resolve;" (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:chanrob1es virtual 1aw library
First Cause of Action

a. In a Resolution No. 1162 dated September 16, 1957, the Respondents 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 one-hour and extra overtime already rendered by all
officers and employees of the Respondent Bank.

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 v. NAWASA
Consolidated Unions, Et. Al. (supra), which we quote in part:jgc:chanrobles.com.ph
"x

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 v.
NAWASA Consolidated Unions, Et Al., G.R. No. L-18938, 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.
x

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 Courts 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. 84-86, Record.) 1
Resolving the issues of jurisdiction and prematurity thus raised by PNB, the court
held:jgc:chanrobles.com.ph
"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.chanrobles.com :
virtual law library
"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,

4. Petitioners 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.
x

. . . 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.
x

"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.chanrobles.com : virtual law library
"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:chanrob1es virtual 1aw library
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. 57, 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
action 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 above-mentioned 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 PEMA,
except the additional rate of work for night pay, and rendered the following
judgment:jgc:chanrobles.com.ph
"WHEREFORE, in view of the foregoing, this Court hereby promulgates the
following:jgc:chanrobles.com.ph
"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 employees basic salary or wage plus cost of living allowance and
longevity pay under the following schedule:chanrob1es virtual 1aw library
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 60% 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:chanrob1es virtual 1aw library
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 v.
NAWASA Consolidated Unions, G.R. No. L-18938, August 31, 1964, 11 SCRA 766. Thus the
decision under review states:chanroblesvirtualawlibrary
"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. 9495, Record.)
The second refers to a subsequent decision of the same Industrial Court in Shell Oil Workers
Union v. Shell Co., Et Al., Case No. 2410-V and Shell & Affiliates Supervisors Union v. 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:jgc:chanrobles.com.ph
"The main issue:jgc:chanrobles.com.ph
"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:chanrob1es virtual 1aw library
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:chanrob1es virtual 1aw library

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:chanrob1es virtual 1aw library
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. It 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 Courts 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 in
tend 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 workers
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:chanrob1es virtual 1aw library
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. Yangerman-Reynolds 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 workmans standpoint (International L. Assn. 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.chanrobles lawlibrary : rednad
"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 as to be received during the week. But to use this analogy in another factsituation 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 Courts 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 all embracing and can be used with the authority of a statutes 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
shall 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 Companys 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, Ibid).
"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 all 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 Courts decision did not prosper. Affirming the appealed decision, We
held:jgc:chanrobles.com.ph
"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-1 for the Petitioners and Exhibit 1-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:chanrob1es virtual 1aw library
The regular rate of pay on the basis of which overtime must be computed must reflect all
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, nonovertime work week, and an employees regular compensation is the compensation which
regularly and actually reaches him, . . . (56 C.J.S. 704; Italics 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 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. (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-1, Petitioners and 1-A, Respondent) of the
Collective Bargaining Agreement of the parties, the premium rate of overtime pay is as high as
150% on regular working days up to 250% on Sundays and recognized national holidays." (Shell
Oil Workers Union v. 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:chanrobles.com : virtual law library
"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 v. 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, PNBs Brief.)
To be sure, there could be some plausibility in PNBs 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 all 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 PEMAs original memo, as follows:jgc:chanrobles.com.ph
"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 CIRs injunction against striking, and the employer-employee
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 v. 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 v. CIR, etc., L-25389 & 25390,
June 27/68).
"In Phil. Postal Savings Bank, Et. Al. v. 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 Courts
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.chanrobles virtual lawlibrary
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 PEMAs
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:jgc:chanrobles.com.ph
"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.
x

"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."cralaw virtua1aw library
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 prearranged 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.chanrobles.com : virtual law
library
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 for the things he loses which We have a
ready 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:jgc:chanrobles.com.ph
"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 employees wage below the minimum wage
applicable to the employee under this Act. 2 (Italics supplied)."cralaw virtua1aw library
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:jgc:chanrobles.com.ph

"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. (Italics
ours)."cralaw virtua1aw library

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.s.n., pp. 18-19,
Hearing of August 16, 1965)
which testimony was affirmed by Mr. Panfilo Domingo, on cross-examination by counsel for the
respondent, reading as follows:jgc:chanrobles.com.ph
"ATTORNEY GESMUNDO:jgc:chanrobles.com.ph

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 minimum 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.cralawnad
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:jgc:chanrobles.com.ph
"ATTORNEY GESMUNDO
Questioning . . .
Q. Calling your attention to paragraph No. 1, entitled monthly living allowance, which has been
marked as Exhibit A-1, 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 P150.00 a

"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:jgc:chanrobles.com.ph
"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:jgc:chanrobles.com.ph
"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, PNBs
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 banks 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."cralaw virtua1aw
library
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 PEMAs 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 non-sequitur as to the

other.chanrobles.com : virtual law library
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 courts arbitration powers.
As pointed out earlier in this opinion, Our task here is twofold: 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
v. Aboitiz, 45 SCRA 577, See also Shell Oil Workers Union Et. Al. v. 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?chanrobles law
library
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 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:jgc:chanrobles.com.ph
"Thus the following proceeding took place at the Court a quo:jgc:chanrobles.com.ph
"ATTY. GESMUNDO:chanrob1es virtual 1aw library
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.
x

"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, well, 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:chanrobles law library
"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 thus Court to construe CA 444 in the light of
NAWASA, considering the fact-situation of the instant case.
In this respect, it is Our considered opinion, after mature deliberation, that notwithstanding the
portions of the NAWASAs opinion relied upon by PEMA, there is nothing in CA 444 that could
justify its possible 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 workmens
standpoint (International L. Assn v. 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 cost-of-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 additional 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 of them to do more than what is
legally obliged.

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.

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.chanrobles law library

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 or additions to the regular or basic pay.

Having arrived at the foregoing conclusions, We deem it unnecessary to discuss any of the other
issues raised by the parties.

In Shell Oil Workers Union v. 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 connecting the overtime pay.

WHEREFORE, judgment is hereby rendered reversing the decision appealed from, without
costs.

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.chanrobles law library :
red

I agree that the Industrial Court erred in including the cost-of-living allowance and the longevity
pay as part of the employees basic salary or wage on which the overtime pay should be based.

Guerrero, De Castro, Plana, Escolin, Vasquez, Relova, and Gutierrez, Jr., JJ., concur.
Endnotes:

Melencio-Herrera J., in the result.

Fernando, C.J., Concepcion, Jr., and Abad Santos, JJ., took no part.
Teehankee and Makasiar, JJ., reserve their votes.
Separate Opinions
AQUINO, J., concurring:chanrob1es virtual 1aw library
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 employees 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 v. NAWASA Consolidated Unions, 120 Phil. 736, 754). That ruling was
rendered in connection with the computation of the workers daily wage for purposes of the fiveday, forty-hour week prescribed in Republic Act No. 1880.chanrobles virtual lawlibrary
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 v.
Harnischfeger Corp., 325 U.S. 427; Walling v. Youngerman-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 workmans standpoint (International L. Assn. v. National Terminals Corp., 50 F. Supp. 26;
Cabunac v. National Terminals Corporation, 139 F. 2nd 853).
These rulings cannot be applied under the Eight-Hour Labor Law, Commonwealth Act No. 444,

1. Actually, PNB did not take much time in granting the first demand in the interest of industrial
peace. (T.s.n., p. 6, Session of August 16, 1965.).
2. The same definition is given by the New Labor Code Sec. 97 (f), Chapter 1, Title II; see also
Shell Oil Workers Union Et. Al. v. Shell Company of the Philippines, infra.).
3. Needless to say, in the absence of any showing the contrary, PNB must be presumed to have
complied and continues to comply with all these decrees.
4. As may be gleaned from what PEMA states on page 1 of its motion for reconsideration filed
with the court below (p. 133 of the Record) the overtime pays provided in the collective
bargaining agreement were time and one third or base pay plus 33 1/3% beyond regular hours
work provided that if such overtime is performed between 6:00 p.m. and 6:00 a.m., it is plus
50%, whereas the law requires only an addition of 25%.

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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrarychanrobles virtual law library
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).
chanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrarychanrobles virtual law
library
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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrarychanrobles virtual law library
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?
chanrobles virtual law library

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).chanroblesvirtualawlibrarychanrobles virtual
law library
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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrarychanrobles virtual law
library
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.