For purposes of labor standards, managerial employees are “those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff.” (Art. 82, Labor Code)

One is an officer or member of a managerial staff if he performs 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 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 worked described in Nos. (1), (2), and (3). (IMPLEMENTING RULES OF BOOK III OF THE LABOR CODE, Section 2(c), Rule I.)

If a supervisory employee exercises the above-mentioned duties and responsibilities, the law considers him a managerial employee.

No Labor Standards for Managerial Employees

Managerial employees and members of the managerial staff are “exempted from the provisions of the Labor Code on labor standards.” (Pearanda v. Baganga Plywood Corporation, G.R. No. 159577, 03 May 2006)

That is to say, managerial employees are excluded from the rules on  holiday, overtime, rest day, night shift differential, and service incentive leave (Salazar v.  NLRC, H.L. Carlos Construction Co. Inc., G.R. No. 109210, 17 April 1996, cf. Clientlogic Philippines, Inc., v. Castro, G.R. No. 186070). Accordingly, they are not entitled to holiday pay, overtime pay, premium pay, night shift differential pay, and service incentive leave.

“Article 82 of the Labor Code states that the provisions of the Labor Code on working conditions and rest periods shall not apply to managerial employees. The other provisions in the Title include normal hours of work (Article 83), hours worked (Article 84), meal periods (Article 85), night shift differential (Article 86), overtime work (Article 87), undertime not offset by overtime (Article 88), emergency overtime work (Article 89), and computation of additional compensation (Article 90). It is thus clear that, generally, managerial employees such as respondents are not entitled to overtime pay for services rendered in excess of eight hours a day…” (San Miguel Corporation v. Numeriano Layoc, Jr., G.R. No. 149640, 19 October 2007)

Further, similar to managerial employees, officers and members of the managerial staff are not entitled to the provisions on labor standards. For example, a supervisor even holding such title but he exercises independent judgment results in him being considered a member of the managerial staff. (Pearanda v. Baganga Plywood Corporation, supra.)

Previous payment of benefits to managerial employees do not ripen to a legal claim

May the payment of overtime benefits to a managerial employee ripen to a legal claim? No. Despite the previous payment by the employer of the holiday pay, managerial employees cannot have a legal claim to overtime benefits as they are expressly exempted.

“That petitioner was paid overtime benefits does not automatically and necessarily denote that petitioner is entitled to such benefits. Art. 82 of the Labor Code specifically delineates who are entitled to the overtime premiums and service incentive leave pay provided under Art. 87, 93, 94 and 95 of the Labor Code and the exemptions thereto. As previously determined, petitioner falls under the exemptions and therefore has no legal claim to the said benefits. It is well and good that petitioner was compensated for his overtime services. However, this does not translate into a right on the part of petitioner to demand additional payment when, under the law, petitioner is clearly exempted therefrom.” (Salazar v.  NLRC, H.L. Carlos Construction Co. Inc., supra.)

This being the case, the rule on company practice resulting in a vested right does not apply to managerial employees.

Payment of benefits dependent on company policy or agreement

Not being entitled to the above-mentioned benefits, the managerial employee may only be entitled thereto only if there is a company policy on the matter or they were agreed upon, viz:

“McLeod is not entitled to payment of vacation leave and sick leave as well as to holiday pay. Article 82, Title I, Book Three of the Labor Code, on Working Conditions and Rest Periods, provides:

“Coverage. ─ The provisions of this title shall apply to employees in all establishments and undertakings whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.

“As used herein, managerial employees refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff. (Emphasis supplied)

“As Vice President/Plant Manager, McLeod is a managerial employee who is excluded from the coverage of Title I, Book Three of the Labor Code. McLeod is entitled to payment of vacation leave and sick leave only if he and PMI had agreed on it. The payment of vacation leave and sick leave depends on the policy of the employer or the agreement between the employer and employee. In the present case, there is no showing that McLeod and PMI had an agreement concerning payment of these benefits.” (McLeod v. NLRC, Filpinas Synthetic Fiber Corporation, G.R. No. 146667, 23 January 2007)