PEÑARANDA v.

BAGANGA PLYWOOD CORPORATION

G.R. No. 159577
3 May 2006
C.J. Panganiban

SUBJECT MATTER:
Management Prerogative: Managerial Employees

DOCTRINE(S) AND APPLICABLE CONCEPT(S):

● Managerial employees and members of the managerial staff are exempted from the provisions of the Labor Code
on labor standards. Thus, they are not entitled to overtime pay and premium pay for working on rest days.

LEGAL BASIS AND APPLICABLE CONCEPT(S): (see ratio for the text)
● Definition of managerial employees
○ Art. 82, Labor Code
○ IRR, Book III, Rule I, Sec. 2(b)
● Definition of managerial staff: IRR Book III, Rule I, Sec. 2[c]

ACTION BEFORE THE SUPREME COURT:

PETITION for review on certiorari of the resolutions of the Court of Appeals
Petitioner(s): CHARLITO PENARAÑDA

Respondent(s): BAGANGA PLYWOOD CORPORATION, and HUDSON CHUA

ANTECEDENT FACTS:
● Penaranda was hired as a Foreman/Boiler Head/Shift Engineer of Baganga Plywood Corporation. He took
charge of the operations and maintenance of its steam plant boiler. His duties and responsibilities are as follows:
1. To supply the required and continuous steam to all consuming units at minimum cost
2. To supervise, check and monitor manpower workmanship as well as operation of boiler and
accessories.
3. To evaluate performance of machinery and manpower
4. To follow-up supply of waste and other materials for fuel
5. To train new employees for effective and safety while working
6. Recommend parts and supplies purchase
7. To recommend personnel actions such as: promotion or disciplinary action
8. To check water from the boiler, feedwater and softetner, regenerate softener if beyond hardness limite
9. Implement Chemical Dosing
10. Perform other task as required by the superior from time to time.
● Later on, the company temporarily closed due to repair and general maintenance. The company applied for
clearance with the DOLE Regional office to shut down and dismiss employees.
○ The company said that due to the insistence of Penaranda, he was paid his separation benefits.
○ The company further said that, when it partially reopened, Penaranda failed to reapply.
● Penaranda filed a complaint for illegal dismissal in the NLRC. (Please see the arguments below).
● Labor Arbiter
○ There was no illegal dismissal and the complaint was premature because he was still employed. The
temporary closure did not terminate his employment. Hence, he need not reapply.
○ The petitioner is entitled to overtime pay, premium pay for workings on rest days, and attorney’s fees.
(Notwithstanding that Penaranda’s money claims for illegal dismissal was weakened by his quitclaim and
admission during clarificatory conference that he accepted separation benefits, sick and vacation leave,
and 13th month pay).

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 ● NLRC: Deleted the award of overtime pay and premium pay for working on rest days because he was a
managerial employee.
● CA: Dismissed the petition purely on technical grounds, particularly with regard to failure to submit supporting
documents. NLRC ruling stands.

PARTIES’ ARGUMENTS IN THE PRESENT CASE (if applicable):

PETITIONER/PLAINTIFF RESPONDENT/DEFENDANT

1. He was illegally terminated without the benefit of
due process and valid grounds in accordance
with law.
2. He was not paid his
a. Overtime pay
b. Premium pay for working during
holidays/ rest days
c. Night shift differentials
3. He claims for payment of damages and
attorney’s fees having been forced to litigate the
present complaint
4. He is not a managerial employee and thus is
entitled to award granted by the labor arbiter
(i.e. overtime pay, premium pay for working
on rest days, and attorney’s fees)
1. Penaranda’s separation from service was done
pursuant to Art. 283 of the Labor Code
2. When the company temporarily closed, it was due
to the insistence of Penaranda that he was paid his
separation benefits. When the company partially
reopened, Penaranda failed to reapply. THUS, he
was not terminated from employment much less
illegally. He opted to severe employment when he
insisted payment of his separation benefits.
3. Being a managerial employee, he is not entitled
to overtime pay. If ever he rendered services
beyond the normal hours of work, there was no
office order/ authorization for him to do so.
4. His claim for damages has no legal and factual
basis.

ISSUE(S), HOLDING, AND RATIO:

1. W/N Penaranda is a managerial employee who is thus not entitled to overtime pay and premium pay for working
on rest days--YES
RULING RATIO

1. YES, xxxx ● Rules

1. Art. 82 Labor Code exempts managerial employees from
the coverage of labor standards (Labor standards provide
the working conditions of employees, including entitlement
to overtime pay and premium pay for working on rest
days).
2. Like managerial employees, officers and members of
the managerial staff are not entitled to the provisions of
law on labor standards.
● Definition of managerial employees:
1. Art. 82, Labor Code: Managerial employees are those
whose primary duty consists of the management of the
establishment in which they are employers or of a
department or subdivision, and to other officers or
members of the managerial staff.
2. IRR, Book III, Rule I, Sec. 2(b): Managerial employees
are those who meet the ff. Conditions:
a. Their primary duty consists of the management of the
establishment in which they are employed or of a
department or subdivision thereof;
b. They customarily and regularly direct the work of 2 or
more employees therein
c. They have the authority to hire or fire other employees
of lower rank; or their suggestions and

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 recommendations as to the hiring and firing and as to
the promotion or any other change of status of other
employees are given particular weight.
● Definition of members of managerial staff (IRR Book III,
Rule I, Sec. 2[c]). Those with the ff. duties and
responsibilities:
1. The primary duty consists of the performance of work
directly related to management policies of the employer
2. Customarily and regularly exercise discretion and
independent judgment
3. 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 execute under general
supervision work along specialised or technical lines
requiring special training, experience or knowledge; or
execute under general supervision special assignments
and tasks; and
4. Who do not devote more than 20 percent of their hours
worked in a workweek to activities which are not directly
and closely related to the performance of the work
described in paragraphs (1), (2), and (3) above.
● The duties and responsibilities of Penaranda indicate that he
is a member of the managerial staff (See items 1, 2, 3, 5, and
7 in the facts).
○ He supervised the engineering section of steam plant
boiler. He oversaw the operation of machines and
performance of workers in theat section. His work
required the use of discretion and independent
judgment to ensure the proper functioning of the plant.
○ As supervisor, he is deemed a member of managerial
staff.
○ Penaranda himself admitted that he was a supervisor.
The term foreman employees that he was the
representative of management over the workers and
operation of his department.
○ Evidence shows that he is classified as supervisor.
This is evident from the manner his salary was paid.
He belonged to the 10% of the company’s 354
employees who were paid on a monthly basis; while
others were paid only on a daily basis.

DISPOSITIVE: WHEREFORE, the Petition is denied. Costs against petitioner. SO ORDERED. (As a member of
managerial staff, Penaranda is not entitled to overtime pay and premium pay for working on rest days. The NLRC ruling
stands.)

MAIN DISSENTING OPINION: NA

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