Title
Iran vs. National Labor Relations Commission
Case
G.R. No. 121927
Decision Date
Apr 22, 1998
Petitioner terminated employees for alleged irregularities; SC ruled commissions count toward minimum wage, procedural lapses in termination, and partial 13th-month pay credit.
soft drinks company
drivers
minimum wage requirements
A

Case Summary (G.R. No. 121927)

Facts and Employment Arrangement

Private respondents were engaged as drivers who also acted as salesmen, and as truck helpers assisting deliveries and sales. Compensation included commissions per case sold: salesmen received P0.10 per case of Regular softdrinks and P0.12 per case of Family Size; truck helpers received P0.08 per case Regular and P0.10 per case Family Size. In June 1991, petitioner discovered cash shortages and alleged irregularities. Pending investigation, petitioner ordered the employees to report for work but not to go on routes; a few days later the employees stopped reporting and petitioner treated this as abandonment and terminated them. Petitioner filed an estafa complaint on November 7, 1991. The employees filed complaints on December 5, 1991 for illegal dismissal, illegal deduction, underpayment of wages, premium pay, holiday pay, service incentive leave pay, 13th month pay, allowances, separation pay, recovery of cash bond, damages, and attorney’s fees. Labor Arbiter dismissed most claims but found wage underpayments and failure to pay 13th month pay, awarding monetary relief on February 18, 1993. Both parties appealed to the NLRC. The NLRC (decision of December 21, 1994; motion for reconsideration denied July 31, 1995) affirmed dismissal for cause but held the termination procedurally defective and awarded P1,000 indemnity each; it also corrected certain wage computations. Petitioner sought relief before the Supreme Court, raising principally (1) whether commissions count toward minimum wage compliance, (2) whether procedural lapses occurred in the dismissals, and (3) whether vouchers submitted on appeal should be credited against 13th month pay claims.

Issues Presented

  1. Whether commissions paid to the drivers/salesmen and truck helpers must be included in computing compliance with the minimum wage requirement.
  2. Whether petitioner committed procedural lapses in terminating respondents, rendering the dismissals legally defective.
  3. Whether vouchers offered by petitioner (submitted for the first time on appeal) should have been credited as 13th month pay and, if so, to what extent.

Governing Legal Definitions and Authorities

  • Labor Code, Art. 97(f): defines “wage” to include remuneration “however designated… capable of being expressed in terms of money… ascertained on a time, task, piece, or commission basis,” explicitly including commissions as part of wages.
  • P.D. No. 851 and its implementing rules (Sec. 3[e]): set the 13th month pay scheme and provide that where an employer pays less than one-twelfth of the basic salary, the employer shall pay the difference; defines what constitutes an equivalent.
  • Omnibus Rules Implementing the Labor Code (Book V, Rule XIV, Sec. 2): prescribes the notice requirement for abandonment (notice to employee’s last known address).
  • Labor Code, Art. 221: technical rules of evidence not binding in labor proceedings; labor tribunals should use every reasonable means to ascertain facts speedily and objectively.
  • Constitutional due process (1987 Constitution): requires notice and hearing in administrative action affecting property or rights; in labor law, the twin requirements of notice and opportunity to be heard must be observed prior to dismissal.

Court’s Analysis on Inclusion of Commissions in Minimum Wage Computation

The Court relied principally on the statutory definition in Article 97(f) of the Labor Code, which explicitly classifies commissions as remuneration or earnings and therefore as wages. The Court rejected the NLRC’s rationale that including commissions would negate the practice of paying commissions only after the minimum wage is met. The opinion reasons that commissions, regardless of their incentive function, are direct remuneration for services rendered and that the law contemplates commissions as part of wages. The Court observed that some salesmen are paid purely on commission, and the existence of such arrangements confirms that commissions constitute wages rather than a separate category excluded from minimum wage computation. The Court further relied on prior jurisprudence (e.g., Philippine Agricultural Commercial and Industrial Workers Union v. NLRC) recognizing that where commissions paid to drivers or conductors fall short of the statutory minimum, the employer must make up the difference; conversely, if commissions equal or exceed the minimum wage, no additional basic minimum pay is required. From these authorities and the statutory text, the Court concluded that commissions must be included in determining compliance with minimum wage requirements.

Court’s Analysis on Procedural Due Process in Termination

The Court reiterated the settled labor law principle that lawful dismissal requires compliance with due process, which in the employment-termination context has a procedural aspect consisting of two written notices: (a) the first notice apprising the employee of the particular acts or omissions for which dismissal is sought, and (b) a subsequent notice informing the employee of the employer’s decision to dismiss after providing an opportunity to be heard. Petitioner contended that his instruction to respondents to report to work and settle accounts served as the first notice. The Court found otherwise: the instruction did not explicitly inform the employees that their dismissal was being sought and did not satisfy the requirement that the first notice put the employee on notice that dismissal was contemplated and that he must explain or defend himself. The Court also addressed petitioner’s assertion that employees abandoned their work. It held that abandonment procedures require compliance with the Omnibus Rules (notice to the worker’s last known address). Petitioner did not comply with that procedural requirement; therefore, the dismissals were procedurally defective. In recognition of the procedural due process violation, the Supreme Court modified the NLRC’s indemnity award, increasing the nominal damages to P5,000.00 per employee (the NLRC had awarded P1,000 each).

Court’s Analysis on 13th Month Pay Vouchers Submitted on Appeal

Petitioner presented vouchers signed by the employees, purporting to evidence 13th month pay paym

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