2015 Labor Law, Q2

LKG Garments Inc. makes baby clothes for export. As part of its measures to meet its orders, LKG requires its employees to work beyond eight (8) hours everyday, from Monday to Saturday. It pays its employees an additional 35% of their regular hourly wage for work rendered in excess of eight (8) hours per day. Because of additional orders, LKG now requires two (2) shifts of workers with both shifts working beyond eight (8) hours but only up to a maximum of four (4) hours. Carding is an employee who used to render up to six (6) hours of overtime work before the change in schedule. He complains that the change adversely affected him because now he can only earn up to a maximum of four (4) hours’ worth of overtime pay. Does Carding have a cause of action against the company? (4%)

Quick check

Under Article 87 of the Labor Code, when is an employee legally entitled to receive overtime compensation?

How does Philippine labor law classify an employer's decision to alter shift schedules and reduce available overtime hours?

Why is overtime work NOT considered a vested right protected under the non-diminution of benefits principle?

What condition must be met for the principle of non-diminution of benefits under Article 100 to apply?

Does an employee have a cause of action against an employer who reduces daily overtime hours due to shift restructuring?

Learn more about these topics

1. Management Prerogative
Management prerogative encompasses the right of an employer to regulate all aspects of employment, including work assignment, shift scheduling, and working hours. Adjusting work schedules or adding shifts to meet business demands is a legitimate exercise of managerial discretion. Absent bad faith, malice, or violation of law, courts will not interfere with an employer's business judgment regarding operational adjustments.

2. Overtime Pay Entitlement
Overtime pay is statutory compensation paid for actual work performed beyond the regular eight hours per day under Article 87 of the Labor Code. Overtime work is not a guaranteed contractual right or permanent benefit that vests in an employee. An employee cannot compel an employer to provide overtime work or claim lost earnings when overtime hours are reduced.

3. Principle of Non-Diminution
The principle of non-diminution of benefits under Article 100 of the Labor Code prohibits employers from unilaterally reducing or eliminating benefits already enjoyed by employees. However, this rule applies only to voluntary company practices or benefits given consistently over time. Opportunities for overtime pay do not fall under non-diminution rules because overtime compensation depends on actual extra work performed.

About these questions and answers
The questions reproduced here are the official texts of the Philippine Bar Examinations, published by the Supreme Court. They are reproduced for study purposes.The suggested answers are the author’s own.

They are not official answers, have no connection with the Supreme Court, the Office of the Bar Confidant, or any bar review institution, and are not endorsed by any of them. Official answer keys, where released, should be preferred over anything here.Nothing on this page is legal advice, and reading it creates no lawyer-client relationship. Do not rely on any suggested answer in an actual legal matter. Consult counsel on your own facts.Suggested answers reflect the law and jurisprudence the author considers applicable as of the date shown.

Where a question comes from an earlier examination, the suggested answer applies the law as it now stands, which may differ from the law in force when the question was given, and may therefore differ from what would have been the correct answer at that time. Where the difference is material, the answer notes it.The practice scoring feature measures wording overlap with the suggested answer. It is not a grade, carries no official weight, and says nothing about whether your reasoning is sound.Errors are possible. If you find one, please tell me and I will correct it.Last reviewed: October 2026