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115 SCRA 507

Nature: Appeal from decision of the Court of Industrial Relations (CIR)
PNB and PNB Employees Association (PEMA) had a dispute regarding the proper computation
of overtime pay. PEMA wanted the cost of living allowance (granted in 1958) and longevity pay
(granted in 1961) to be included in the computation. PNB disagreed and the 2 parties later went
before the CIR to resolve the dispute.
CIR decided in favor of PEMA and held that PNB should compute the overtime pay of its
employees on the basis of the sum total of the employees basic salary or wage plus cost of living
allowance and longevity pay. The CIR relied on the ruling in NAWASA v NAWASA Consolidated
Unions, which held 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 differentiated payments for working at undesirable times, such as at night and the board
and lodging customarily furnished the employee. This prompted PNB to appeal, hence this case.
WON the cost of living allowance and longevity pay should be included in the computation of
overtime pay as held by the CIR
Ratio Overtime pay is for extra effort beyond that contemplated in the employment contract;
additional pay given for any other purpose cannot be included in the basis for the computation of
overtime pay.
Absent a specific provision in the CBA, the bases for the computation of overtime pay are 2
computations, namely:
1. WON the additional pay is for extra work done or service rendered
2. WON the same is intended to be permanent and regular, not contingent nor temporary as a
given only to remedy a situation which can change any time.

Longevity pay cannot be included in the computation of overtime pay for the very simple reason
that the contrary is expressly stipulated in the CBA, which constitutes the law between the parties.
As regards cost of living allowance, there is nothing in Commonwealth Act 444 [or the 8-hour
Labor Law, now Art. 87 Labor Code] that could justify PEMAs posture that it should be added to
the regular wage in computing overtime pay. C.A. 444 prescribes that overtime work shall be paid
at the same rate as their regular wages or salary, plus at least 25% additional. The law did not
define what is a regular wage or salary. What the law emphasized is that in addition to regular
wage, there must be paid an additional 25% of that regular wage to constitute overtime rate of
pay. 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 makeup overtime compensation.
No rule of universal application to other cases may be justifiably extracted from the NAWASA
case. CIR relies on the part of the NAWASA decision where the SC cited American decisions
whose legislation on overtime is at variance with the law in this jurisdiction. The US 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 US for purposes of computing weekly wages
under a 40-hour 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.
To apply the NAWASA computation would require a different formula for each and every
employee. It 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.
**Overtime Pay Rationale 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. 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 are the real reasons for the extra compensation that is called overtime
**Overtime Pay Definition The additional pay for service or work rendered or performed in excess
of 8 hours a day by employees or laborers in employment covered by the 8 hour Labor Law [C.A.
444, now Art. 87 Labor Code] and not exempt from its requirements. It is computed by multiplying
the overtime hourly rate by the number of hours worked in excess of eight.
Disposition decision appealed from is REVERSED