G.R. No. 166501 - Francisco, Jr. vs. Ferdo

Petitioner Rogelio Reyes was employed by the private respondent’s Grocery Division in Davao City, beginning on August 12, 1977.
He was initially hired as a salesman and was eventually promoted to unit manager of the Sales Department-South Mindanao District.
He retired on November 30, 1997, after a long tenure with the company.

After retirement, petitioner received a letter dated September 10, 1998, from the Group Human Resources Director, which computed his separation pay.
The letter detailed various components including:

Retirement benefit computed as 50% of pay for every year of service (with a fraction of at least six months considered as one year).
Cash conversions for VL and SL.
A financial assistance payment.
A tax refund and adjustments for withheld commission, salary overpayment, and other deductions.

The total computed amount was Php 200,322.21.
The letter explicitly stated that the computation was in accordance with company policy and asserted that the petitioner’s suggested basis of including additional commissions was without legal basis.

Petitioner objected to the computation, insisting that his benefits should be based on an average monthly salary of Php 42,766.19, which included:

Consequently, petitioner refused to accept the check issued for the computed amount and instead filed a complaint before the arbitration branch of the National Labor Relations Commission (NLRC).
In his complaint, he sought awards for retirement benefits, 13th month pay, tax refund, earned sick and vacation leaves, service incentive leave pay, financial assistance, damages, and attorney’s fees.

On March 15, 1999, Labor Arbiter Miriam A. Libron-Barroso issued a decision that:

Held that the sales commission was part of the basic salary for a unit manager.
Awarded petitioner's claims including retirement benefits and 13th month pay along with other computed compensations plus attorney’s fees.

Excluding the overriding commission from the computation of retirement benefits and 13th month pay.
Deleting the award of attorney’s fees.

Both parties later filed motions for reconsideration with the NLRC, which were denied for lack of merit.
Petitioner’s petition for review on certiorari before the Court of Appeals was dismissed.

Petitioner’s sole issue on appeal was whether his average monthly sales commission of Php 31,846.97 should be included in the computation of his retirement benefits and 13th month pay.
He supported his position by citing Philippine Duplicators, Inc. v. National Labor Relations Commission, arguing that commissions earned by salesmen are to be considered part of their basic salary.
The respondent and prior cases (e.g., Boie-Takeda Chemicals, Inc. v. De la Serna, and Soriano v. NLRC) countered, emphasizing that overriding commissions, particularly in the capacity of a unit manager who does not engage directly in sales, are not considered part of the basic salary.

Whether the average monthly sales commission of Php 31,846.97 should be included in the computation of petitioner’s retirement benefits and 13th month pay.
Whether overriding commissions, received by a unit manager who does not directly effect sales transactions, can be considered as part of the basic salary.
Determination of the proper compensation structure under the provisions of Article 287 of the Labor Code (as amended by Republic Act No. 7641) and Rule II of the Rules Implementing the New Retirement Law.