G.R. No. L-18353 - San Miguel Brewery Inc. vs. Democratic Labor Organization

On January 27, 1953, the Democratic Labor Association filed a complaint against San Miguel Brewery, Inc. containing 12 demands aimed at improving employment conditions.
The company answered by specifically denying material averments and by contesting the demands point by point, subsequently seeking dismissal of the complaint.

At a hearing in September 1955, the union limited its claim to overtime, night-shift differential pay, and attorney’s fees, though evidence was also presented regarding service on Sundays and holidays as well as claims for additional separation pay, sick leave, and vacation leave compensation.
Presiding Judge Jose S. Bautista, who was commissioned to receive the evidence, rendered a decision addressing the points on which evidence was submitted.

The judge ruled that the Eight-Hour Labor Law applies to employees working in the field or engaged in outside sales, requiring them to receive extra compensation for work beyond eight hours, notwithstanding the meal allowance.
The award for overtime was ordered based on the legal entitlement under this statute.

For employees working at night, the decision decreed night salary differentials payable retroactively for work done prior to January 1, 1949.
The differential was specified as 25% of the salary for work between 6:00 to 12:00 p.m. and 75% for work from 12:01 to 6:00 a.m.

The industrial court ordered that employees working on Sundays and legal holidays should receive an additional 25% compensation as mandated by Commonwealth Act No. 444, regardless of their usual monthly salary arrangement.

Claims regarding the application of the Minimum Wage Law for "pakiao" basis payment, pay for accumulated vacation and sick leave, attorney’s fees, and additional separation pay were dismissed, denied, or set aside.

Begin work after a morning roll call and depart the plant to cover designated sales routes starting at 7:00 a.m. or 8:00 a.m.
Do not maintain daily time records, and the company does not require an earlier start than the specified schedule.

Sales routes are arranged so that they can be completed within eight hours, though actual work hours may vary (sometimes less, sometimes more).
The employees earn a fixed monthly salary along with sales commissions that vary according to individual performance, with commission amounts ranging from modest sums (e.g., P30, P40) to higher amounts (e.g., P100, P109) based on sales volume.

The company contended that since these employees receive commissions for work rendered beyond their fixed eight-hour period, such commissions constitute compensatory payment in lieu of overtime pay under the Eight-Hour Labor Law.
The company likened the arrangement to piece-work or “pakiao” compensation, which is expressly excluded from the application of the Eight-Hour Labor Law.

The Court highlighted that the Eight-Hour Labor Law is intended for employees remunerated on a daily or monthly basis.
It was noted that outside sales personnel receiving commission sales do so on a piece-work basis which, by design, compensates extra effort through commission earnings rather than additional overtime pay.
The Department of Labor’s ruling (December 9, 1957) was referenced, clarifying that field sales personnel on a regular salary plus commission are not subject to the overtime provisions of the Eight-Hour Labor Law.

Whether employees being paid partly by commission, which may cover extra hours worked, are entitled to additional overtime compensation under the Eight-Hour Labor Law.
Whether the commission paid in lieu of overtime effectively excludes these employees from the benefits provided under the law.

Whether night-shift differentials should be applied retroactively for work performed before January 1, 1949 despite the company’s claim that such an award cannot have retroactive effect.
The proper computation of night differential rates relative to the hours worked during specified night periods (6:00–12:00 p.m. and 12:01–6:00 a.m.).

Whether employees such as watchmen and security guards, who are on monthly salaries and provided a compensatory day off, are nonetheless entitled to the statutory 25% extra compensation for work performed on Sundays and legal holidays mandated by Commonwealth Act No. 444.
How the nature of the fixed monthly compensation interacts with the statutory requirement for additional pay on these days.