G.R. No. L-28464 September 25, 1985
Mindanao Federation of Labor, petitioner, vs. University of the Philippines, as owners of the U.P. Land Grant, respondent.

FACTS

The Mindanao Federation of Labor, the collective bargaining agent for employees of the University of the Philippines (UP) Land Grant in Basilan City, filed an action for declaratory relief. The petition sought a judicial declaration that the agricultural workers of the UP Land Grant are covered by Republic Act No. 1880 , the 40-hour week law, and are thus entitled to overtime pay for work exceeding the statutory minimum. Prior to the law’s effectivity, the Land Grant operated on a 6-day workweek with overtime compensation. Upon RA 1880’s enactment, the Land Grant Manager unilaterally reduced the workweek to five days, believing it complied with the new law. This action was later disapproved by the UP Board of Regents.
The Court of First Instance of Zamboanga del Sur dismissed the complaint, reasoning that the UP Land Grant, as part of the state university, was not a profit-earning institution and that the “exigencies of service” exception in the law applied due to the continuous nature of agricultural work. The Court of Appeals affirmed this decision. The petitioner elevated the case to the Supreme Court via certiorari.

ISSUE

Are the workers and employees of the University of the Philippines Land Grant covered by the provisions of Republic Act No. 1880 and therefore entitled to overtime compensation for work rendered beyond the 40-hour, 5-day work week?

RULING

Yes. The Supreme Court reversed the decisions of the lower courts. The legal logic hinges on distinguishing the dual functions of the University of the Philippines. While UP performs a governmental function as an institution of higher learning, it performs a proprietary or corporate function as the administrator of the UP Land Grant. The Land Grant was created under Public Act No. 3608 , which mandates that all incomes and profits from its administration form part of the university’s general fund. This establishes the Land Grant as a business concern operated for profit.
Consequently, in operating the Land Grant, UP acts as a government-owned or controlled corporation. Executive Order No. 251, which implemented RA 1880, explicitly includes such corporations within the law’s coverage. The Court rejected the application of the “exigencies of service” exception as a blanket exemption from the duty to pay overtime. The nature of agricultural work may indeed necessitate labor beyond 40 hours, but the law recognizes the employer’s right to demand such overtime only with the concomitant obligation to provide additional compensation as mandated by Commonwealth Act No. 444 (The Eight-Hour Labor Law). The Court cited the precedent in Prisco v. CIR, stating that when the government engages in business, it subjects itself to the laws governing labor relations. Therefore, the employees of the UP Land Grant are entitled to overtime pay under RA 1880.