Case Digest (G.R. No. 110068)
Facts:
Philippine Duplicators, Inc. employed salesmen paid a fixed or guaranteed wage plus sales commissions computed on the selling price of duplicating machines sold. P.D. No. 851 required payment of a 13th month pay, with the implementing rules defining “13th month pay” as one-twelfth of “basic salary,” and “basic salary” as including remunerations or earnings for services rendered, but excluding certain fringe benefits. In Memorandum Order No. 28, President Aquino modified P.D. No. 851 to cover all rank-and-file employees receiving not more than PHP 1,000 basic salary as stated in P.D. No. 851. The MOLE Explanatory Bulletin No. 86-12 (Item No. 5[a]) and a MOLE Director’s opinion treated fixed wage plus commission salesmen as entitled to 13th month pay based on total earnings, including commissions, and required dividing total commissions by twelve for computation.
The union demanded 13th month pay computed using both fixed wages and commissions. The Labor Arbiter ordered payment as requested, and the NLRC affirmed, holding it was not for the commission to invalidate the administrative issuances absent a Supreme Court ruling. Philippine Duplicators, Inc. petitioned for certiorari, arguing that commissions were excluded from “basic salary,” that the administrative bulletins exceeded authority, and that other revised guidelines allegedly excluded commissions.
Issues:
- Whether the 13th month pay of employees receiving a fixed or guaranteed wage plus sales commissions must be computed based on both fixed wage and commissions.
- Whether MOLE Explanatory Bulletin No. 86-12 and the related administrative opinion were void for expanding the statutory concept of “basic salary.”
Ruling:
The petition was dismissed for lack of merit. The Court held that commissions earned by salesmen constitute part of their wage or salary and that “basic salary,” as used in P.D. No. 851 and Memorandum Order No. 28, includes commissions when they are remunerations for services rendered.
The Court further sustained the administrative construction. It found that the bulletins and the Director’s opinion represented a contemporaneous and consistent interpretation adopted and reiterated in the Revised Guidelines on the Implementation of the 13th Month Pay Law, and that Philippine Duplicators, Inc. remained liable for deficiency when it excluded commissions from the computation.
Ratio:
Under Art. 97(f) of the Labor Code, “wage” includes remuneration or earnings payable to an employee under a contract of employment whether on a time, task, piece, or commission basis. Since petitioner’s salesmen earned commissions as direct remuneration for services in selling petitioner’s machines, those commissions formed part of their compensation and thus part of their wage or salary for 13th month pay computation.
The Court rejected the contention that commissions were excluded from “basic salary” for being outside “basic salary.” It distinguished “basic salary” from fringe benefits or allowances contemplated by the implementing rules and jurisprudence, and held that commissions are not of the nature of excluded allowances or monetary benefits. It also accorded weight to the contemporaneous administrative construction by MOLE officials, noting that Secretary Franklin M. Drilon reiterated that fixed or guaranteed wage plus commission employees are entitled to 13th month pay based on total earnings, including commission.
Doctrine:
- Commissions earned by salesmen as compensation for services are part of their wage or salary under Art. 97(f) of the Labor Code, even when paid on a commission basis.
- The exclusions from “basic salary” for 13th month pay purposes refer to fringe benefits and similar allowances not integrated as basic salary, not to commissions that are earned remuneration for services rendered.
- Contemporaneous administrative construction by executive officers charged with implementing a statute is entitled to great respect, and courts generally follow it absent a showing of invalidity.
- Under the Revised Guidelines, employees paid a fixed or guaranteed wage plus commission are entitled to 13th month pay based on total earnings during the calendar year, including both fixed wage and commission.