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Legal I ssues Arising From Varying Compressed Workweek Arrangements

Date Posted: February 04, 2009by: Atty. Emerico O De Guzman - Senior Partner, ACCRALAW

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A compressed workweek scheme (CWW scheme), as described under Department Advisory No. 02 of the Departmentof Labor and Employment (DOLE), series of 2004 (DA 02), dated 2 December 2005, is an alternative arrangementwhereby the normal workweek is reduced to less than six days but the total number of normal work hours per weekremains the same, i.e. 40 or 48 hours.

Prior to DA 02, the implementation of a CWW scheme was the subject of Department Order No. 021-90 (DO 21)entitled Guidelines On The Implementation Of Compressed Workweek which was issued on 31 August 1990. Therationale then for the implementation of a compressed workweek (CWW) was to avert further damage to the economy

brought about by the oil crisis at that time.

However, fifteen years after DO 21 and notwithstanding the issuance of DA 02, there are still legal issues surroundingthe implementation of a CWW scheme.

Foremost of these issues is the application or interpretation of the constitutional right of employees against involuntaryservitude. Recognizing this basic right of employees, DO 21 provided as a condition for implementation of the CWWscheme that the employees must voluntarily agree to work more than eight hours a day and the total work hours in aweek should not exceed their normal weekly hours of work prior to adoption of the compressed workweekarrangement.

Under DA 02, probably realizing the administrative difficulties in securing the individual assent of the employees,Labor Secretary Patricia O. Sto. Tomas decreed that the CWW scheme may be implemented with the express and

voluntary agreement of a mere majori ty of the covered employees or their duly authorized representatives. Thisagreement may be expressed through collective bargaining or other legitimate workplace mechanisms of participationsuch as labor-management counci ls, employee assemblies or referenda.

The requirement of DA 02 mandating majority consent might not altogether foreclose all legal issues arising from theimplementation of a compressed workweek arrangement. In any case, since administrative regulations, such as DA02,are presumed to be valid until annulled, employers can continue to rely on the favorable provisions of DA02 until theyare set side by competent authority.

The next logical question is: Can employees, who agree with the implementation of the CWW scheme, lawfullywaive their right to overtime pay?

One of the conditi ons under DO 21 for the implementation of the CWW scheme is that If an employee is permitted orrequired to work in excess of his normal weekly hours of work prior to the adoption of the compressed workweekscheme, all such excess hours shall be considered overtime work and shall be compensated in accordance with theprovisions of the Labor Code or applicable Collective Bargaining Agreement (CBA). However, DO 21 also allowsemployees to waive their overtime premium pay for work performed in excess of the usual eight hours of work a day.

Evidently, DO 21 recognized the right of employees to overtime pay for services rendered beyond eight hours a day.In fact, in a letter-advice issued by the DOLE on 20 May 1996 to a semiconductor company which sought DOLEsapproval on a new workshift pattern for its new manufacturing facility (without paying overtime pay), it was expresslystated there that the proposed workshift pattern may be implemented subject to the condition, among others, that thetwelve-hour shiftwork with four (4) hours overtime shall be compensated at least in accordance with law, meaningwith overtime pay. Subsequent requests filed by other employers with the DOLE for the adoption of the CWWscheme have consistently been subjected to the above condition set by then Undersecretary Trajano.

However, in DA 02, it is expressly declared that unless there is a more favorable practice in the firm, work beyondeight (8) hours will not be compensable by overtime premium provided the total number of hours worked per day shallnot exceed twelve (12) hours. In effect, DA 02 did away with the waiver requirement under DO 21.

There is a view that the right to overtime pay as well as other labor standards, since they directly affect the livelihoodof the workers, cannot be legally waived under existing provisions of the Labor Code. As stated in the Labor Code, theemployees may be asked to work in excess of eight hours but compliance must be voluntary in the absence ofexceptional or emergency situations. They should be paid the required overtime compensation.

The Supreme Court, however, in one case involving MERALCO ruled that waiver of overtime pay must not be

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assumed to be contrary to law. This is so especially when it appears that such waiver was made in consideration ofcertain valuable privileges enjoyed by the worker, and there is no proof that the value of those privileges does notadequately compensate for such work.

Another issue that arises from the implementation of a CWW scheme is its effect on what is considered practiceunder Article 100.

DA 02 provides that unless there is a more favorable practice existing in a firm, work beyond eight (8) hours will not

be compensable by overtime premium provided the total number of hours worked per day shall not exceed twelve (12)hours. In any case, any work performed beyond twelve (12) hours a day or forty-eight (48) hours a week shall besubject to overtime premium.

In a company that does not, as yet, implement a CWW scheme, the main question is what constitutes a morefavorable practice?

As to companies that already implement a CWW scheme by virtue of DO 21, or for that matter pursuant to the DOLEpolicy set by Usec. Trajano in his letter advisory dated 20 May 1996, will the implementation of a new CWW schemeunder DA 02 affect employees already working under the old CWW scheme? How should DA 02 be implemented if acompany already has a more favorable CWW scheme being implemented, especially so if it has been constrained togrant overtime pay for more than eight hours work by reason of the then prevailing DOLE policy?

The Supreme Court held in the case of Globe Mackay Cable v. NLRC (G.R. 74156, 29 June 1988) that for the ruleagainst diminution of supplements or benefits to apply, it must be shown that the grant of the benefit has ripened into apractice over a long period of time, that the practice is consistent and deliberate, and that the practice is not due to errorin the construction or application of a doubtful or difficult question of law. Thus, where the benefits are notdeliberately given but are instead given by force of policy issuances of the DOLE, as in the case of overtime pay undera CWW scheme, then, arguably, the grant of said benefits cannot possibly ripen into a company practice.

For instance, in a company where there is an existing CWW scheme and one of its features is to grant overtime pay forwork performed beyond eight hours a day, assuming that the said company is implementing the CWW scheme inaccordance with an advisory opinion sought f rom the DOLE, the relevant question is, Can the employer insist onimplementing the new CWW scheme as provided in DA 02 by replacing the existing CWW scheme which is favorableto the employees?

It may be argued that the employer can implement DA 02 because the present CWW scheme has not ripened into apractice that may not be peremptori ly wi thdrawn by the employer. The present CWW scheme is being implementedby force of the DOLE letter-advice and may not be considered a unilateral grant by the employer, for which reason itmay not be considered as a practice.

In any case, if only to avoid the issue of diminution of benefits, an enterprising employer may adopt two CWWschemes: one for existing employees following the old scheme, and another for new hires after a cut-off date, strictlyadopting DA02. Assuming that there is already a CWW scheme in place prior to DA 02, it may very well happen thatthere will be one set of employees in the company working under the DO 21 CWW scheme, and another one workingunder the DA 02 CWW scheme.

To illustrate, let us assume that the DO 21 CWW scheme has more favorable features. As such, the employees wi lltend to oppose the replacement of such a scheme wi th that provided under DA 02. To avoid problems, the employermay decide to implement the latter scheme only with respect to new employees, hired after a designated cut-off date.Arguably, the two groups of employees are not similarly situated, since new hires may not invoke the benefi t of asupposedly favorable practice or policy with respect to the payment of overtime pay between the 8th and 12th hoursin a day.

As may be gleaned from the foregoing discussion, there are many unanswered questions under the present state of thelaw and rules. An invocation of DA 02 has no talismanic effect on the avoidance of legal risks; some thorny legalissues may still raise serious concerns. What matters, however, is that business managers are fully cognizant of thelegal issues and based on a careful assessment of the risks involved can make well-informed decisions that would leastaffect their companies bottom lines.

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(The author is a Senior Partner of Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW). He may becontacted at Tel. #: 830-8000; Fax #: 894-4697; or e-mail: [email protected].)

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