G.R. No. 173268 - Fajardo vs. Office of the Ombudsman

Petitioner Rodolfo J. Serrano was hired on September 28, 1992 as a bus conductor by respondent Severino Santos Transit, a company owned and operated by co-respondent Severino Santos.
After 14 years of service, on July 14, 2006, Serrano applied for optional retirement.
Prior to the release of his retirement pay, the company’s representative required Serrano to sign a pre-prepared Quitclaim form.
Petitioner, dissatisfied with the computation of his retirement pay, requested to review the computation but was denied; he then signed the Quitclaim under protest, noting “U.P.” after his signature.

The company computed Serrano’s retirement benefits at 15 days per year of service, amounting to P75,277.45 already received by the petitioner.
Petitioner contended that under Republic Act No. 7641 (the Retirement Pay Law) his retirement pay should be computed at 22.5 days per year – which includes:

The company argued that as a bus conductor paid on a commission basis, Serrano was not entitled to the 5-day service incentive leave and the pro-rated 13th month pay.
Respondents explained that minor errors – such as the inadvertent omission of five months’ records – contributed to a slight differential of P1,431.15 in the computation.

The Labor Arbiter, in a Decision dated February 15, 2007, ruled in favor of petitioner, awarding him a retirement pay differential of P116,135.45 plus attorney’s fees amounting to 10% of the award.
In computing the differential:

The Labor Arbiter recognized that the Retirement Pay Law expands the concept of “one-half month salary” to include 15 days salary, 1/12 of the 13th month pay, and the cash equivalent of 5 days of service incentive leave.
Due to fluctuations in petitioner’s commission-based earnings, the arbiter determined that the appropriate method was to use the summary of Serrano’s monthly income provided by the respondent, which was undisputed by petitioner.
From the summary, the average monthly earning was computed (P189,591.30 divided by 12 equals approximately P15,799.28), and dividing by 26 yielded an average daily income of P607.66.
Multiplying the daily income (P607.66) by 22.5 days, and then by 14 years of service, arrived at a complete retirement pay of P191,412.90; the differential due was then determined by subtracting the P75,277.45 already received.

The National Labor Relations Commission (NLRC), on April 23, 2008, reversed the Labor Arbiter’s decision, dismissing petitioner’s claim with only an order to pay a minimal retirement differential of P2,365.35.
The NLRC based its ruling on the contention that, since Serrano was paid solely on commission, he was excluded from the benefits related to the 13th month pay and service incentive leave.
The Court of Appeals, in its Decision dated February 11, 2009, affirmed the NLRC ruling on the ground of substantial evidence.
Petitioner then filed a petition for review on certiorari with the Supreme Court challenging the NLRC and Court of Appeals rulings.

Republic Act No. 7641 (enacted on December 9, 1992) amends Article 287 of the Labor Code, providing that in the absence of a retirement plan:

An employee who retires after serving at least five years, and upon reaching the compulsory retirement age (60 to 65 years), is entitled to retirement pay equivalent to at least one-half month salary per year of service (with fractions of at least six months being treated as a whole year).

The Implementing Rules of the law clarify its coverage and exemptions, including that the law applies to employees regardless of whether they are paid on a fixed salary or commission, except for those specifically exempted (such as field personnel).

Whether petitioner, despite being paid on a commission basis, is covered by RA 7641 and entitled to an expanded computation of retirement benefits (i.e., at 22.5 days per year instead of the customary 15 days).
Whether the computation should include not only 15 days salary but also the cash equivalent of the 5-day service incentive leave and one-twelfth of the 13th month pay as required by the law.

What constitutes a fair and rational basis for determining the petitioner’s average daily earning, given the variability intrinsic to commission-based remuneration.
The admissibility and reliability of the evidence (i.e., the summary of monthly income provided by the respondents versus petitioner’s representative documents) to compute his average earnings accurately.

Whether the exclusion applied in a previous case involving taxi drivers (paid under the “boundary system”) is applicable to a bus conductor paid on commission.
How the definitions in the Implementing Rules regarding “field personnel” and those engaged on a purely commission basis should be interpreted in the context of retirement and service incentive leave benefits.