G.R. No. L-18559. June 30, 1964.
PHILIPPINE AIR LINES EMPLOYEES’ ASSOCIATION (PALEA), plaintiff-appellant, vs. PHILIPPINE AIR LINES, INC. (PAL), defendant-appellant.

FACTS

The Philippine Airlines Employees’ Association (PALEA) and Philippine Air Lines, Inc. (PAL) entered into a collective bargaining agreement effective until 1959, stipulating a 48-hour work week for employees. Following the enactment of Republic Act No. 1880 on June 22, 1957, which established a 40-hour work week for government employees and those in government-owned or controlled corporations, PALEA sought to extend these benefits to its members. PALEA contended that PAL was a government-controlled corporation because over 54% of its capital stock was owned by the National Development Company, a government entity. PAL refused, arguing it was not a government-controlled corporation and that the collective bargaining agreement governed.
PALEA filed suit to compel PAL to implement the 40-hour work week and pay corresponding overtime. PAL raised affirmative defenses, including the unconstitutionality of R.A. No. 1880 , the validity of the subsequent collective bargaining agreement maintaining a 48-hour week, and questioning PALEA’s legal standing due to an assignment of claims from its members. The trial court ruled in favor of PALEA, declaring PAL a government-controlled corporation subject to R.A. No. 1880 , ordering compliance with the 40-hour week, and directing payment for Saturday work rendered since the law’s effectivity. Both parties appealed.

ISSUE

The primary issues were: (1) whether PAL is a government-controlled corporation subject to R.A. No. 1880 ; (2) whether R.A. No. 1880 constitutionally applies to PAL; (3) the proper overtime compensation rate for work on Saturdays exceeding 40 hours; and (4) the validity of the assignment of claims to PALEA.

RULING

The Supreme Court affirmed the trial court’s decision. On the first issue, the Court held that PAL is a government-controlled corporation. The government, through the National Development Company, owned the majority of PAL’s stock and effectively controlled its board of directors and management. This control subjected PAL to R.A. No. 1880 . On constitutionality, the Court ruled that R.A. No. 1880 was a valid exercise of police power to promote worker health and efficiency, and its application to PAL was neither arbitrary nor confiscatory.
Regarding compensation, the Court modified the rate for Saturday work exceeding 40 hours. It held that employees were entitled only to their basic rate for such work, not to overtime pay under Commonwealth Act No. 444 . This was because PAL, as a public utility providing transportation, was authorized under Section 4 of C.A. No. 444 to require work on weekends without overtime rates, provided the total weekly hours did not exceed the legal limit. The assignment of claims by members to PALEA was deemed valid, conferring standing to sue. The award of attorney’s fees was sustained.