5. Overtime Work

OVERTIME PAY (OT)

Work exceeding eight hours within the worker’s 24- hour workday regardless whether the work covers 2 calendar days. Work within the employee’s shift is not overtime.

Overtime Pay Rates

NOTE: Since OT work is considered hourly, the pay rate is computed on per hour basis. The daily wage is divided by 8 to get the hourly base rate.

If employee is paid on a monthly salary basis, the daily rate is obtained by the following formula:

Daily Rate = (Monthly Salary  x 12) / Total No. of Days Considered paid in a year

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It is permissible for the employer to stipulate that the employee’s monthly salary constitutes payment for all the days of the month, including rest days and holidays, where the employee’s monthly salary, when converted by the increased divisor into its daily equivalent, would still meet minimum wage. (Interphil Laboratories Employees Union-FFW v. Interphil Laboratories, Inc., G.R. No. 142824, 2001)

Regular Wage

Includes the cash wage only, without deduction on account of facilities provided by the employer. (Bisig ng Manggagawa ng Philippine Refining Co. v. Philipine Refining Co., G.R. No. L-2776, 1981)

NOTE: When the overtime work is performed on the employee’s rest day or on special days or regular holidays (Labor Code, Arts. 93-94), the premium pay must be included in the computation of overtime pay (Bureau of Working Conditions, Handbook on Worker’s Statutory Monetary Benefits, p. 19, 2006)

Conditions to be entitled to OT pay

• Actual rendition of OT work
• Submission of sufficient proof that said work was actually performed (Cagampan v. NLRC, G.R. No. 85122-24)
• OT work is with the knowledge and consent of the employer (Azucena, 254)

NOTE: On rest days and holidays, written authority after office hours is not an invariable requirement for entitlement to compensation (Global Incorporated v. Atienza); OT work must be actually performed with the knowledge and consent of the employer.

Emergency OT Work

General Rule: Employees cannot be compelled to render overtime work against their will.

Exceptions: (P2W2 IM)

• When the country is at war or when any other national or local emergency has been declared by Congress or the Chief Executive;
• When overtime work is necessary to prevent loss of life or property, or in case of imminent danger to public safety due to actual or impending emergency in the locality caused by serious accident, fire, floods, typhoons, earthquake, epidemic or other disaster or calamities;
• When there is urgent work to be performed on machines, installations, or equipment, in order to avoid serious loss or damage to the employer or some other causes of similar nature;
• When the work is necessary to prevent loss or damage to perishable goods;
• When the completion or continuation of work started before the 8th hour is necessary to prevent serious obstruction or prejudice to the business or operations of the employer; or
• When overtime work is necessary to avail of favorable weather or environmental conditions where performance or quality of work is dependent thereon (IRR Labor Code, Book III, Rule I, Sec. 10)
• Note: This is an exclusive list. (IRR Labor Code, Book III, Rule I, Sec. 10)

Waiver of overtime pay

Right to OT pay cannot be waived. But when the alleged waiver of OT pay is in consideration of benefits and privileges, which may even exceed the OT pay, the waiver may be permitted. (Bisig Manggagawa sa Tryco v. NLRC, G.R. No. 151309, 2008)

In Intertranz Container Lines, Inc. v. Bautista, (G.R. No. 187693, 2010), the Court held that an employee may not sweepingly claim that overtime work was performed and consequent payment for such work is compensable absent any evidence that overtime work was indeed performed considering that a preapproved overtime schedule and daily time record is required before overtime pay can be claimed.

While as a general rule, the parties may enter into any kind of stipulation in a contract and the same shall be considered as the law between them, however, it must be emphasized that a labor contract is not an ordinary contract since it is impressed with public interest. Thus, the parties are prohibited to enter into any stipulation which may result in the reduction of any employee benefits. (Labor Code, Art. 100; Republic Planters Bank v. NLRC, G.R. 117460, 1997)

The employer and the employee are not prohibited under the law to enter into an agreement for the increase of whatever benefit being mandated by law for the simple reason that any such increase certainly redounds to the benefit of the employee. Thus, the employer and the employee may legally and validly agree to increase the minimum percentage provided for night differential pay, overtime pay, and premium pay. (Republic Planters Bank v. NLRC, G.R. 117460, 1997)

Note: Compressed work week is an exception to OT (DOLE Advisory No. 2-04)

Synthesis: Overtime Rules

• An employer cannot compel an employee to work overtime

Exception: Emergency overtime work (Labor Code, Art. 89)

• Additional compensation is demandable only if the employer had knowledge and consented to the overtime work rendered by the employee

Exception: Express approval by a superior NOT a requisite to make overtime compensable:

• If the work performed is necessary, or that it benefited the company; or
• That the employee could not abandon his work at the end of his eight-hour work because there was no substitute ready to take his place (Manila Railroad Co. v. CIR, G.R. No. L-4614, 1952)

NOTE: A claim for overtime requires proof of work performed with the employer’s knowledge or consent; absence of written authority may matter to the evidence in a particular case but does not automatically defeat the claim (Global Incorporate v. Atienza, G.R. No. L-51612, 1986)

• Compensation for work rendered in excess of the 8 normal working hours a day
• For ordinary days, additional 25% of the basic hourly rate
• For overtime on a rest day, special nonworking day, or regular holiday, additional at least 30% of the applicable hourly rate for that day
• A given day is considered an ordinary day, unless it is a rest day
• Undertime does not offset overtime (Labor Code, Art. 88)