Shell Oil Workers Union vs. Shell Company of the Philippines

The NAWASA ruling on the inclusion of fringe benefits in the regular wage for overtime computation applies only where the benefits are regularly and continuously enjoyed by employees for at least three months; absent that condition, the collective bargaining agreement governs the computation of overtime pay.

Shell Oil Workers Union and Shell & Affiliates Supervisors Union are labor unions whose members are employed by Shell Company of the Philippines. Their collective bargaining agreement, effective from August 1966 until December 31, 1969, included Appendix B, which set premium rates and allowances for overtime at rates higher than the statutory minimum under Commonwealth Act No. 444. The unions' position relied on National Waterworks & Sewerage Authority vs. NAWASA Consolidated Unions, et al., which addressed how the regular rate for overtime should be computed. The dispute therefore turned on whether that ruling could displace the overtime computation fixed in the parties' CBA.

Shell Oil Workers Union and Shell & Affiliates Supervisors Union represented employees of Shell Company of the Philippines. Their collective bargaining agreement, marked as Exhibit A-Petitioner and Exhibit 1-Respondent, was in force for three years and five months from August 1966 until December 31, 1969, and its Appendix B, covering premium rates and allowances, formed part of the agreement. The manner of computing overtime compensation under the prior contracts had been the same. The CBA's premium rate for overtime was as high as 150% on regular working days up to 250% on Sundays and recognized national holidays.

In May 1967, the unions filed separate cases before the Court of Industrial Relations. On May 12, 1967, Shell Oil Workers Union filed CIR Case No. 2410-V against Shell Company and its Managers; on May 13, 1967, Shell and Affiliates Supervisors' Union filed CIR Case No. 2411-V against Shell Company and its General Managers. Both unions claimed that their members were not being paid overtime pay in accordance with the NAWASA ruling and sought recomputation by adding the money value of fringe benefits to the basic rate before computing overtime. Shell moved to dismiss on May 23, 1967, but withdrew the motion on July 19, 1967, and filed an Answer on July 27, 1967. In its Answer, Shell claimed that employees rendering overtime were paid in accordance with law and the CBA, that the NAWASA decision was not applicable to the factual situation, and that claims for overtime pay filed beyond the three-year period allowed by law had prescribed.

The parties agreed to submit the cases for decision on the basis alone of the testimony of B. Figueroa, Industrial Relations Manager of Shell, with stipulated facts. Among the stipulations were that the CBA and its Appendix B governed premium rates and allowances; that the prior contracts used the same manner of computing overtime; that the court could take judicial notice of the records of the NAWASA case; and that SOWU marked Exhibit B, a description of fringe benefits not provided in the CBA. The stipulations further stated that the Tin Factory Incentive pay had ceased because the factory closed in May 1966; that the fringe benefits were occasionally not regularly enjoyed; that not all employees were entitled to them; and that there were conditions precedent before one could claim the benefits.

The CIR Trial Court denied both petitions on January 29, 1968 for lack of basis. On February 2, 1968, the petitioners elevated the cases to the CIR en banc and moved for reconsideration, reiterating their claim for recomputation of overtime pay by taking into account the fringe benefits and adding their value to the basic rate. The CIR en banc denied reconsideration. The factual findings material to the Supreme Court's analysis were that the fringe benefits were not regularly enjoyed, were not available to all employees, were subject to conditions precedent, and that the Tin Factory Incentive pay had ceased; the CBA, meanwhile, provided overtime premium rates higher than the statutory minimum.

• Applicability of NAWASA: Petitioners argued that the NAWASA ruling required their overtime pay to be recomputed by including the money value of fringe benefits in the basic rate, notwithstanding the terms and conditions of their existing collective bargaining agreement.
• Regular Rate: Petitioners invoked NAWASA's statement that the regular wage for overtime computation includes all payments the parties agreed would be received during the work week, including differential payments, board and lodging customarily furnished, and incentive bonuses.
• CBA Not Controlling: Petitioners maintained that despite their CBA, the NAWASA ruling should be followed in computing overtime compensation.

• CBA as Law Between Parties: Shell maintained that the NAWASA case should not be used to alter the mode of computing overtime rate of pay set forth in the CBA, which should be the law between the parties.
• Compliance with Law and CBA: Shell claimed that employees rendering overtime were paid in accordance with law and the CBA.
• Inapplicability of NAWASA: Shell averred that the NAWASA decision, insofar as computation of overtime pay was concerned, was not applicable to the factual situation of the case.
• Prescription: Shell asserted that claims for overtime pay filed beyond the three-year period allowed by law had already prescribed.

• Applicability of NAWASA: Whether the NAWASA ruling on the computation of overtime pay, particularly the inclusion of fringe benefits in the regular wage, applies to the petitioners notwithstanding their collective bargaining agreement.

• Applicability of NAWASA: No. The NAWASA ruling is inapplicable because it requires regularity and continuity of the benefits for at least three months as a condition precedent; the stipulated facts show the fringe benefits were not regularly enjoyed, not all employees were entitled to them, and conditions precedent existed. The collective bargaining agreement governs.

• Applicability of NAWASA: The NAWASA ruling states that for purposes of computing overtime compensation, a regular wage includes all payments the parties have agreed shall be received during the work week, including piece work wages, differential payments for working at undesirable times, and the cost of board and lodging customarily furnished; it also includes incentive bonuses or profit-sharing payments and higher rates for night, Sunday, and holiday work. The paragraph immediately following that ruling, however, states that the respondent court correctly included such differential pay in computing the weekly wages of employees who worked seven days a week and were continuously receiving a 25% Sunday differential for a period of three months immediately preceding the implementation of Republic Act 1880. From this, the Court concluded that NAWASA contemplates the regularity and continuity of the benefits enjoyed by employees for at least three months as a condition precedent before such additional payments or benefits are taken into account. The authorities cited in the decision reinforce this: Walling vs. Garlock Packing Co. states that the "regular rate" must reflect all payments the parties agreed would be received regularly during the work week, exclusive of overtime payments; 56 C.J.S. 704 states that regular compensation is the compensation which regularly and actually reaches the employee; and Section 2(g) of Republic Act No. 602 defines "wage" to include facilities customarily furnished by the employer. The stipulated facts showed that the Tin Factory Incentive pay had ceased because the factory closed in May 1966, that the fringe benefits were occasionally not regularly enjoyed, that not all employees were entitled to them, and that there were conditions precedent before claiming them. Petitioners therefore failed to meet the NAWASA test. The CBA, entered into in accordance with Republic Act No. 875 and providing overtime pay beyond the premium rate in Sections 4 and 5 of Commonwealth Act No. 444, should govern the parties' relationship; contracts not tainted with infirmity, irregularity, or illegality must be strictly complied with. Commonwealth Act No. 444 prescribes only a minimum of at least 25% in addition to regular pay, while the CBA's premium rate was as high as 150% on regular working days up to 250% on Sundays and recognized national holidays. Thus, NAWASA was not in point.

• Regular Rate and Regularity of Benefits — For overtime computation, the regular wage includes all payments the parties agreed would be received during the work week, including piece work wages, differential payments for undesirable times, board and lodging customarily furnished, incentive bonuses or profit-sharing, and higher rates for night, Sunday, and holiday work. Under NAWASA, however, such additional payments or benefits are included only if they are regularly and continuously enjoyed by the employees for at least three months. The Court applied this by excluding the fringe benefits because they were occasionally not regularly enjoyed, not all employees were entitled to them, conditions precedent existed, and the Tin Factory Incentive pay had ceased.
• Collective Bargaining Agreement as Law Between Parties — A collective bargaining agreement entered into pursuant to bargaining negotiations under existing laws, and not tainted with infirmity, irregularity, or illegality, must be strictly complied with by the parties. The Court applied this by holding that the CBA's overtime premium provisions, which exceeded the minimum under Commonwealth Act No. 444, governed the computation of overtime pay instead of the NAWASA formula.
• Condition Precedent for Inclusion of Fringe Benefits — The regularity and continuity of benefits for at least three months is a condition precedent before additional payments or benefits are taken into account in computing overtime compensation. The Court applied this by finding that petitioners failed to satisfy the condition because the stipulated facts showed the benefits were not regular, continuous, or available to all employees.

• "The ruling of this Court in the NAWASA case contemplates the regularity and continuity of the benefits enjoyed by the employees or workers (for at least three (3) months) as the condition precedent before such additional payments or benefits are taken into account." — This is the ratio decidendi: it establishes the condition precedent that defeated petitioners' claim.
• "Having been stipulated by the parties that "... the Tin Factory Incentive Pay has ceased in view of the closure of the factory in May 1966 the fringe benefits as described show that they are occasionally not regularly enjoyed and that not all employees are entitled to them", herein petitioners failed to meet the test laid down by this Court in the NAWASA case." — This applies the condition precedent to the stipulated facts and explains why the fringe benefits were excluded from the overtime computation.
• "The "regular rate" of pay on the basis of which overtime must be computed must reflect all payments which parties have agreed shall be received regularly during the work week, exclusive of overtime payments." — This defines the "regular rate" and emphasizes the regularity requirement relied upon by the Court.
• "It is the duty of this Court to see to it that contracts between parties, not tainted with infirmity or irregularity or illegality, be strictly complied with by the parties themselves." — This supports the holding that the CBA governed the parties' overtime computation.

• National Waterworks & Sewerage Authority vs. NAWASA Consolidated Unions, et al., G.R. No. L-18988 (also referred to in the text as G.R. No. L-18938), August 31, 1964; 11 SCRA 766 — The central precedent invoked by petitioners; the Court distinguished and held it inapplicable because its ruling contemplated regularity and continuity of benefits for at least three months as a condition precedent.
• Walling vs. Garlock Packing Co., C.C.A.N.Y., 159 F.2d 44, 45 — Cited for the rule that the "regular rate" for overtime must reflect all payments the parties agreed would be received regularly during the work week, exclusive of overtime payments.
• Walling vs. Yangermah-Reynolds Harwood Co., 325 U.S. 427 — Cited in the NAWASA excerpt for the proposition that regular wage includes certain payments such as board and lodging customarily furnished.

• Sections 4 and 5, Commonwealth Act No. 444 — Prescribes a minimum overtime premium of at least 25% in addition to regular pay. The CBA's premium rates were higher, so the CBA governed.
• Section 2(g), Republic Act No. 602 — Defines "wage" to include the fair and reasonable value of board, lodging, or other facilities customarily furnished by the employer. The Court used the word "customarily furnished" to reinforce that benefits must be regular and continuous.
• Republic Act No. 875 — The Court noted that the CBA was entered into pursuant to bargaining negotiations under existing laws and was in accordance with R.A. 875; this supported enforcing the CBA as the governing contract.

Teehankee (Chairman), Makasiar, Muñoz Palma, and Martin, JJ.