PNB Vs PEMA AND CIR

115 SCRA 507 July 30, 1982 (9.) Verbena D. Balagat

Facts:

Appeal from decision of the Court of Industrial Relations (CIR)

PNB and 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 employee’s 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.

Issue:
Whether or not the cost of living allowance and longevity pay should be included in the computation of
overtime pay as held by the CIR.
Held:

NO.
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.
The bases for the computation of overtime pay are 2 computations, namely:
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.
There is nothing in Commonwealth Act 444 [or “the 8-hour Labor Law,” now Art. 87 Labor Code that
could justify PEMA’s 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.
Disposition decision appealed from is REVERSED