A construction engineer received a monthly salary of P4,500 in the 1990s. In addition to the engineer’s salary, his employer orally agreed to give him a share in the profits after the project’s completion. The employer also agreed that the construction engineer would be entitled to an overtime rate of P27.85 per hour for any work rendered in excess of the eight hours of work per day, or during the weekends and legal holidays.
After one year, the employer informed the construction engineer of his termination “due to the impending completion of the aforementioned project and the lack of upcoming contracted works for our company in the immediate future” without any prejudice to his re-employment for local and overseas projects if the need for his services would arise in the future. Outraged, the construction engineer filed a complaint against his employer for illegal dismissal and, among others, overtime pay, premium pay for holidays, rest days, and service incentive leave pay with the National Labor Relations Commission (NLRC). The Labor Arbiter (LA), however, dismissed the complaint for lack of merit. In his decision, the LA ruled that the construction engineer was a managerial employee. As such, he was “exempt from payment of benefits such as overtime pay, service incentive leave pay, and premium pay for holidays and rest days” under the law. On appeal, the NLRC affirmed the LA’s decision.
The Supreme Court (SC) likewise affirmed the decision that the construction engineer was not entitled to overtime pay, service incentive leave pay, and premium pay for holidays and rest days. The reason, however, was not because he was a managerial employee but because he was considered a member of the the managerial staff. The nature of his job was to supervise the laborers in the construction project.
Citing National Sugar Refineries Corporation v. NLRC, the Court ruled that supervisory employees should be considered as officers or members of the managerial staff. As officers or members of the managerial staff, they are not entitled to overtime, rest day, and holiday pay.
To clarify, the SC explained that although the construction engineer could not be strictly classified as a managerial employee under Art. 82 of the Labor Code, Sec. 2(c), Rule 1, Book III of the Omnibus Rules Implementing the Labor Code provides that “officers or members of a managerial staff” as likewise exempted from the rules granting overtime, rest day, and holiday pay –
Sec. 2. Exemption. – The provisions of this Rule shall not apply to the following persons if they qualify for exemption under the condition set forth herein x x x x
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; (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 (Salazar v. NLRC, G.R. No. 109210, 17 April 1996, J. Kapunan).