BISIG NG MANGGAGAWA NG PHILIPPINE REFINING CO., INC., PLAINTIFF-APPELLANT, VS. PHILIPPINE REFINING CO., INC., DEFENDANT-APPELLEE.

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
shall 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 fining
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 respective rights and duties of petitioner and respondent
under the above quoted provision of their Collective Bargaining Agreements and
further declaring that the Christmas bonus of one month or thirty days pay and
other determinable fringe benefits should be included for the purpose of
computation of the overtime pay spread throughout the twelve months period of
each year from August, 1963 up to the present and subsequently hereafter; and
that respondent be therefore directed to pay such differential in the overtime
pay of all the employees of the herein respondent;”

Petitioner union contended that the
respondent company was under obligation to include the employees’ Christmas
bonus and other fringe benefits in the computation of their overtime pay by
virtue of the ruling of this Court in the case of NAWASA vs. NAWASA
Consolidated Unions, et al., G.R. No. L-18938, August 31, 1964, 11 SCRA 766.

On May 3, 1966, the Philippine Refining Co., Inc. filed its
answer to the petition alleging, among others, that never did the parties
intend, in the 1965 collective bargaining agreement and in prior agreements, to
include the employees’ Christmas bonus and other fringe benefits in the
computation of the overtime pay and that the company precisely agreed to a rate
of 50%, which is much higher than the 25% required by the Eight-Hour Labor Law
(Commonwealth Act No. 444, as amended), on the condition that in computing the
overtime pay only the “regular base pay” would be considered.  Furthermore, respondent company contended
that the ruling of this Court in the NAWASA case relative to the computation of
overtime compensation could not be applied to its employees since it was a
private corporation and not a government-owned or controlled corporation like
the NAWASA.

After the requisite pre-trial was held, the Court of First
Instance of Manila issued an order dated September 16, 1966, limiting the
issues to the proper interpretation of the above-quoted provision of the 1965
collective bargaining agreement and to the applicability to the case of the
NAWASA ruling and requiring the parties to submit evidence as to the circumstances
under which the questioned provision had been included in the agree­ment of
1965.

During the trial, the parties presented their respective
witnesses from whose testimonies the following facts were established:  that the collective bargaining agreements
entered into between the parties before 1965 all contained a provision similar
to the aforequoted Sec. 6, Art. VI of the 1965 collective bargaining agreement;
that in the enforcement of said earlier agreements, the overtime compensation
of the employees was computed on the basis solely of their basic monthly pay,
i.e., excluding the employees’ Christmas bonus and other fringe benefits; that
in the negotiations which led to the execution of the 1965 collective
bargaining agreement, the matter of the proper interpretation of the phrase
“regular base pay” was discussed; that the petitioner union demanded
that the NAWASA ruling should be applied by including the employees’ Christmas
bonus and other fringe benefits in the computation of the overtime compensation;
that the respondent company refused to give in to such demand contending that –
(1) the company agreed to a 50% overtime rate, which was higher than the 25%
rate required by law, precisely on the condition that the same should be
computed solely on the basis of the employees’ basic monthly salary, excluding
Christmas bonus and other fringe benefits; (2) the parties had the freedom to
choose the basis for computing the overtime pay provided that the same should
not be less than the minimum prescribed by law; and (3) the NAWASA decision was
inapplicable to a private corporation like the Philippine Refining Co., Inc.;
that while refusing to grant petitioner’s demand, the respondent company nevertheless
agreed to submit to a court for resolution the issue of the applicability to
their case of the NAWASA ruling, with the undertaking to abide by whatever
decision the court would render; and, that the parties agreed that, in the
meantime, they would exclude the Christmas bonus and other fringe benefits in
the computation of the overtime compensation.

On December 8, 1966,
the Court of First Instance of Manila rendered a decision the dispositive
portion of which reads as follows:

“IN VIEW OF THE FOREGOING, judgment is hereby rendered,
declaring that the term ‘regular base pay’ in Section 6, Article VI of Exhibit
A refers only to ‘regular base pay’ and does not include Christ­mas bonus and
other fringe benefits.  Without pronouncement as to costs.

“SO ORDERED. “

Said court held that while the NAWASA
ruling concerning the meaning of the phrase “regular pay” of the
Eight-Hour Labor Law could be applied to employees of private corporations like
the Philippine Refining Company, the same was, nevertheless, inapplicable to
the case at bar which involved the interpretation of the phrase “regular
base pay”, which was different from “regular pay”.  It declared that “regular base pay”
referred only to the basic or monthly pay exclusive of Christmas bonus and
other fringe benefits.  Furthermore, the
validity of the provision of the 1965 collective bargaining agreement
concerning the computation of the employees’ overtime pay on the basis of their
“regular base pay” was upheld by the court for the reason that the
same was even higher than the overtime pay prescribed by law.  The court emphasized that contracts are
binding on the parties insofar as they are not contrary to law, morals and
public order.

A motion for reconsideration of the decision was filed by the
petitioner union but the same was denied in an order dated February 17, 1967.  Hence, the present appeal which raises pure
questions of law, namely: (1) whether or not the phrase “regular base
pay” as used in the above-quoted provision of the 1965 CBA includes
Christmas bonus and other fringe benefits; and (2) whether or not the
stipulation in the CBA on overtime pay violates the Nawasa doctrine if the
answer to question No. 1 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% thereof”, the overtime compensation was invariably based only
on the regular basic pay, exclusive of Christmas bonus and other fringe
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 C. C.A. 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 preceding the
implementation of Republic Act 1880.”

The appellant union contends that by virtue of the foregoing, 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 x x x; but in all such cases,
the laborers and employees shall be entitled to receive compensation for the
overtime work performed at the same rate as their regular wages or salary,
plus at least twenty-five per centum additional.

“SEC. 4.  No person, firm, or corporation, business
establishment or place or center of labor shall compel an employee or laborer
to work during Sunday and legal holidays, unless he is paid an additional sum
of at least twenty-five per centum of his regular renumeration.“  (Underscoring supplied.)

Applying the aforequoted NAWASA ruling to
the above provision of law, We arrive at the following
conclusion:  all 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 and the multiplier, and
that the multiplicand is inversely related to the multiplier; consequently, 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 salary, plus at least twenty-five per centum
additional” provided that the result in applying the contractual formula
is not less than the result in applying said statutory formula.

In the case at bar, it is admitted that the contractual formula
of “regular base pay plus 50 thereof” yields an overtime compensation
which is higher than the result in applying the statutory formula as elaborated
in the Nawasa case.  Consequently, its
validity is upheld and the parties are enjoined to accord due respect to it.

WHEREFORE, the decision appealed from is hereby affirmed
in all respects.  Without
pronouncement as to costs.

SO ORDERED.

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