G.R. No. 110068 - Philippine Duplicators, Inc. vs. National Labor Relations Commission

Philippine Duplicators, Inc. (petitioner) is a domestic corporation engaged in the distribution of foreign-made copying machines and related consumables.
The petitioner employs salesmen who receive a compensation package consisting of a fixed or guaranteed wage plus commissions based on the selling price of duplicating machines.

Presidential Decree No. 851 (promulgated on December 16, 1975) mandates the payment of the 13th month pay for employees earning a basic salary of not more than P1,000.00 per month.
The Rules and Regulations Implementing P.D. No. 851 define “13th month pay” as one-twelfth (1/12) of the “basic salary” earned within a calendar year, with “basic salary” explicitly excluding certain allowances and monetary benefits not integrated into the regular earnings.
On August 13, 1986, Memorandum Order No. 28 issued by President Corazon C. Aquino modified P.D. No. 851 by requiring the payment of the 13th month pay to all rank-and-file employees.
The Ministry of Labor and Employment (MOLE) issued an Explanatory Bulletin No. 86-12 on November 24, 1986, clarifying that employees paid a fixed or guaranteed wage plus commission are entitled to 13th month pay computed on the total earnings for the calendar year (both the fixed wage and commissions).

The Philippine Duplication Employees Union-Tupas, representing the salesmen, demanded that the 13th month pay be computed on the combined earnings (fixed wage plus commissions).
Petitioner Philippine Duplicators, Inc. refused the union’s request, contending that commissions are not part of the “basic salary” as defined in P.D. No. 851 and its implementing rules.
An opinion dated November 17, 1987, rendered by Director Augusto G. Sanchez of the Bureau of Working Conditions affirmed that salesmen working under a salary-plus-commission scheme were entitled to a 13th month pay computed by dividing the total commissions for the year by 12, along with the fixed wage portion.
The Labor Arbiter, in a decision dated October 24, 1989, ordered petitioner to pay the 13th month pay based on the total earnings, including commissions.
The National Labor Relations Commission (NLRC) affirmed the Labor Arbiter’s award on November 17, 1992, noting that it was not within its power to pass on the validity of the administrative issuances (such as the Explanatory Bulletin).

The term “basic salary” should only refer to a fixed or guaranteed wage and, therefore, exclude sales commissions.
The expansion of the term “basic salary” to include commissions exceeded the authority of the Department of Labor and Employment (DOLE) and required explicit legislative action.
The Revised Guidelines on the Implementation of the 13th Month Pay Law (issued on November 16, 1987) did not incorporate sales commissions, reading the “basic salary” narrowly.

In contrast, the respondent union and supporting administrative opinions maintained that:

Commissions, as a form of remuneration paid for services rendered, inherently form part of the employee’s wage or salary.
Both the Explanatory Bulletin No. 86-12 and the opinion of Director Sanchez correctly interpreted the term “basic salary” to include commissions.
The historical and administrative construction of the law supports including commissions in the computation of the 13th month pay.

Whether the computation of the 13th month pay for employees receiving both a fixed or guaranteed wage plus sales commissions should be based on the total earnings (i.e., both the fixed wage and the sales commissions) during the calendar year.

Whether sales commissions, being a substantial and integral part of the wage, qualify as remuneration for services rendered and thus should be integrated into the “basic salary” for purposes of calculating the 13th month pay.
Whether the administrative issuances (Explanatory Bulletin No. 86-12 and the opinion of Director Sanchez) validly expanded the coverage of “basic salary” under P.D. No. 851 to include commissions.