2S LABSTAN Case Digests

TOPIC MODULE 5: Hours of Work AUTHOR #13_CARPIO

H(1) Overtime Work – definition and nature of overtime work

CASE TITLE ENGINEER LEONCIO SALAZAR v. NATIONAL LABOR RELATIONS GR NO 109210

COMMISSION and H.L. CARLOS CONSTRUCTION, CO., INC.
(Salazar v. NLRC)
Project Engineer, terminated kasi patapos na ung project. Nahanap ng April 17, 1996
TICKLER overtime pay? Di ka entitled boy!
DATE KAPUNAN, J.

DOCTRINE The duties and responsibilities of an employee will qualify them as “officers or members of the managerial
staff” as defined in Section 2, Rule 1, Book III of the IRR if:
(1) Their primary duty consists of the performance of work directly related to management policies of
their employer;
(2) They customarily and regularly exercise discretion and independent judgement;
(3) They regularly and directly assist the managerial employee whose primary duty consist consists of
the management of a department of the establishment in which they are employed;
(4) They execute, under general supervision, work along specialized or technical lines requiring special
training, experience or knowledge;
(5) They execute, under general supervision, special assignments and tasks, and
(6) They do not devote more than 20% of their hours worked in a work-week to activities which are not
directly and clearly related to the performance of their work hereinbefore described.
FACTS On April 17, 1990, respondent company H.L. Carlos Construction Co., Inc. (Carlos Construction) employed Engr.
Leoncio Salazar as construction/project engineer at a monthly salary of P4,500 for the construction of the Monte
de Piedad building in Cubao. Allegedly, by virtue of an oral contract, Salazar would also receive a share in the
profits after completion of the project and that his services in excess of 8 hours on regular days and services
rendered on weekends and legal holidays shall be compensable over time at the rate of P27.85 per hour. In April
16, 1991, Salazar received a memorandum issued by Carlos Construction’s project manager, Engr. Nestor
Delantar informing him of the termination of his services effective at the close of office hours on April 30, 1991
because of the greatly diminished volume of work for the company’s engineering and technical personnel due to
the impending completion of the project he is working on and the lack of up-coming contracted works in the
immediate future. Salazar’s termination however did not prejudice his re-employment in the company’s local and
overseas projects should the need arises. The memo was noted by company vice president Mario Cornista.

In September 1991, petitioner Salazar filed a complaint against respondent company for illegal dismissal, unfair
labor practice, illegal detention, non-payment of wages, overtime rendered, service incentive leave, commission,
allowances, profit-sharing, and separation pay with the NLRC. Labor Arbiter (LA) Raul Aquion however dismissed
the complaint for lack of merits. The LA ruled that Salazar was a managerial employee and therefore exempt
from payment of benefits such as overtime pay, service incentive leave (SIL) and premium pay for holidays and
rest days. It also held that Salazar was not entitled to separation pay as he was hired as a project employee and
his services were terminated due project completion thus, not unlawful. Likewise, his claim for share in the
project’s profits, reimbursement of legal expenses and unpaid wages were denied for lack of basis. Consequently,
petitioner appealed to the NLRC but the latter affirmed the LA’s decision en toto. With his Motion for
Reconsideration denied, hence, this petition.
ISSUE/S 1. Whether or not Salazar was a managerial employee?
2. Whether or not Salazar is entitled to overtime pay, premium pay for services rendered on rest days
and holidays and service incentive leave pay pursuant to Articles 87, 93, 94 and 95 of the Labor
Code?
3. Whether or not petitioner is entitled to profit sharing by virtue of his alleged verbal contract?
4. Whether or not petitioner is entitled to separation pay?

RULING/S 1. NO, Salazar is a NOT a managerial employee but he falls squarely under the category of “officers or
members of a managerial staff” as defined under Sec. 2(c) Omnibus Rules Implementing (IRR) the Labor
Code.

In National Sugar Refineries Corporation v. NLRC, the court ruled the duties and responsibilities of an employee
will qualify them as “officers or members of the managerial staff” as defined in Section 2, Rule 1, Book III of
the IRR if: (1) their primary duty consists of the performance of work directly related to management
policies of their employer; (2) they customarily and regularly exercise discretion and independent

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judgement; (3) they regularly and directly assist the managerial employee whose primary duty consist
consists of the management of a department of the establishment in which they are employed; (4) they
execute, under general supervision, work along specialized or technical lines requiring special training,
experience or knowledge; (5) they execute, under general supervision, special assignments and tasks,
and they do not devote more than 20% of their hours worked in a work-week to activities which are not
directly and clearly related to the performance of their work hereinbefore described.

Salazar’s supervisory duties as Carlos Construction’s project engineer which he himself did not dispute, qualify
him under this category. In his original complaint, Salazar stated that the nature of his work is “supervisory-
engineering” and in his petition and other pleadings submitted to the courts, he confirmed that his job was to
supervise the laborers in the construction project. Clearly, he is an officer or member of the managerial staff.

2. NO. While Salazar cannot be strictly classified as a managerial employee under Article 82 IRR, he is still,
nonetheless not entitled to payment of overtime pay, premium pay for services rendered on rest days and
holidays and service incentive leave pay pursuant to Articles 87, 93, 94 and 95 of the Labor Code because
he falls squarely under another exempt category – “officers or members of a managerial staff”.

Section 2 of the IRR provides that “the provisions of this Rule shall not apply to the following persons if they
qualify for exemption under the condition set forth herein.” Subsection (c) of the same defines and covers
“officers or members of a managerial staff.” As Salazar falls under this category, he is clearly not entitled to
the said benefits.

Salazar however claims that the NLRC failed to give due weight and consideration to the fact that respondent
company compensated him for his overtime services as indicated in the various disbursement vouchers
submitted as evidence. Such contention is untenable. The fact that petitioner was paid overtime benefits
DOES NOT automatically and necessarily denoted that he is entitled to such benefits. Article 82 of the
Labor Code specifically delineates who are entitled to the overtime premiums and service incentive
leave pay provided under Article 87, 93, 94, and 95 of the same Code and the exemptions thereto. As
previously determined, petitioner falls under the exemptions and therefore has no legal claim to the said benefits.
It is well and good that Salazar was compensated for his overtime services. However, this DOES NOT
TRANSLATE into a right on the part of the petitioner to demand additional payment when, under the
law, he is clearly exempted therefrom.

3. NO, Salazar is not entitled to profit sharing the disbursement vouchers which he claimed to prove existence
of the alleged verbal agreement is not sufficient. Nowhere in the disbursement vouchers can show even
the slightest hint of a profit-sharing agreement between petitioner Salazar and respondent company.
Benefits or privileges of this nature are usually in WRITING, and Salazar failed to establish that said
benefits or privileges have been given to any of respondent’s employees as a matter of practice or policy.

4. NO, Salazar is a project employee, and therefore, not entitled to separation pay. Article 280 of the Labor
Code defines the term “project employee” as “where the employment has been FIXED for a SPECIFIC
PERIOD or UNDERTAKING THE COMPLETION or TERMINATION of which has been DETERMINED
at the time of the engagement of the employee or where the work or services to be performed is
SEASONAL in nature and the employment is for the duration of the season.”

In the case, it was duly established that Carlos Construction hired Salazar as project or construction engineer
specifically for its Monde de Piedad building project. A fact which too, was declared by Salazar in his own words,
“as construction or engineer of its contracted project, the Monte de Piedad..” Accordingly, as project employee,
petitioner’s services are deemed conterminous with the project, that is, his services may be terminated as
soon as the project for which he was hired is completed. There can be no dispute that Salazar’s dismissal was
due to the completion of the construction of the building as he himself stated that it took him and his assisting
laborer’s until May 15, 1991 to complete the finishing touches on the building, for which he is entitled to payment
of services. Furthermore, Department Order No. 19 of the Department Labor and Employment (Guidelines
Governing the Employment of Workers in the Construction Industry) reiterates the same rule stipulated in
Policy Instruction No. 20 (Stabilizing Employee-Employer Relations in the Construction Industry) which explicitly
mandates that “Project employees are NOT entitled to termination pay if they are terminated as a result
of the completion of the project or any phase thereof in which they are employed, regardless of the
number of projects in which they have been employed by a particular construction company. Moreover,
the company is NOT required to obtain a clearance from the Secretary of Labor in connection with such

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termination. What is required of the company is a REPORT to the nearest Public Employment Office for
statistical purposes.

NOTES Article 82, LABOR CODE. Coverage. The provisions of this Title shall apply to employees in all establishments
and undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations.

As used herein, "managerial employees" refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff.

"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual hours of work in the field cannot
be determined with reasonable certainty.

Article 87, LABOR CODE. Overtime work. Work may be performed beyond eight (8) hours a day provided that
the employee is paid for the overtime work, an additional compensation equivalent to his regular wage plus at
least twenty-five percent (25%) thereof. Work performed beyond eight hours on a holiday or rest day shall be
paid an additional compensation equivalent to the rate of the first eight hours on a holiday or rest day plus at least
thirty percent (30%) thereof.

Article 93, LABOR CODE. Compensation for rest day, Sunday or holiday work. Where an employee is
made or permitted to work on his scheduled rest day, he shall be paid an additional compensation of at least
thirty percent (30%) of his regular wage. An employee shall be entitled to such additional compensation for work
performed on Sunday only when it is his established rest day.

When the nature of the work of the employee is such that he has no regular workdays and no regular rest days
can be scheduled, he shall be paid an additional compensation of at least thirty percent (30%) of his regular wage
for work performed on Sundays and holidays.

Work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30%)
of the regular wage of the employee. Where such holiday work falls on the employee’s scheduled rest day, he
shall be entitled to an additional compensation of at least fifty per cent (50%) of his regular wage.

Where the collective bargaining agreement or other applicable employment contract stipulates the payment of a
higher premium pay than that prescribed under this Article, the employer shall pay such higher rate.

Article 94, LABOR CODE. Right to holiday pay. Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than ten (10) workers;

The employer may require an employee to work on any holiday but such employee shall be paid a compensation
equivalent to twice his regular rate; and

As used in this Article, "holiday" includes: New Year’s Day, Maundy Thursday, Good Friday, the ninth of April,
the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of
December and the day designated by law for holding a general election.

Article 95, LABOR CODE. Right to service incentive leave. Every employee who has rendered at least one
year of service shall be entitled to a yearly service incentive leave of five days with pay.

This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying
vacation leave with pay of at least five days and those employed in establishments regularly employing less than
ten employees or in establishments exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of such establishment.

The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any court or
administrative action.

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SECTION 2(c), RULE 1, BOOK III, OMNIBUS RULES IMPLEMENTING THE LABOR CODE (IRR)
SECTION 2. Exemption. — The provisions of this Rule shall not apply to the following persons if they qualify for
exemption under the conditions set forth herein:
(a) Government employees whether employed by the National Government or any of its political subdivision,
including those employed in government-owned and/or controlled corporations;
(b) Managerial employees, if they meet all of the following conditions:
(1) Their primary duty consists of the management of the establishment in which they are employed or of
a department or sub-division thereof.
(2) They customarily and regularly direct the work of two or more employees therein.
(3) They have the authority to hire or fire employees of lower rank; or their suggestions and
recommendations as to hiring and firing and as to the promotion or any other change of status of other
employees, are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of their
employer;
(2) Customarily and regularly exercise discretion and independent judgment; and
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of
the management of the establishment in which he is employed or subdivision thereof; or (ii) execute under
general supervision work along specialized or technical lines requiring special training, experience, or
knowledge; or (iii) execute, under general supervision, special assignments and tasks; and
(4) Who do not devote more than 20 percent of their hours worked in a work week to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2) and (3)
above.
(d) Domestic servants and persons in the personal service of another if they perform such services in the
employer's home which are usually necessary or desirable for the maintenance and enjoyment thereof, or
minister to the personal comfort, convenience, or safety of the employer as well as the members of his employer's
household.
(e) Workers who are paid by results, including those who are paid on piece-work, "takay," "pakiao" or task basis,
and other non-time work if their output rates are in accordance with the standards prescribed under Section 8,
Rule VII, Book Three of these regulations, or where such rates have been fixed by the Secretary of Labor and
Employment in accordance with the aforesaid Section.
(f) Non-agricultural field personnel if they regularly perform their duties away from the principal or branch office
or place of business of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty.

Article 280, LABOR CODE. Regular and casual employment. The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or desirable
in the usual business or trade of the employer, except where the employment has been fixed for a specific project
or undertaking the completion or termination of which has been determined at the time of the engagement of the
employee or where the work or service to be performed is seasonal in nature and the employment is for the
duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists.

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