Case Summary (G.R. No. 211525)
Pertinent Dates and Procedural Posture
Labor Arbiter decision rendered June 26, 1978. Petitioners appealed to the NLRC; NLRC dismissed the appeal. Romeo Cipres filed a verified Notice of Voluntary Abandonment and Withdrawal dated April 7, 1980, and the Court dismissed the petition as to him on June 2, 1980. The Supreme Court resolved the petition as to the remaining petitioners and modified the NLRC decision to include allowances and commissions in the separation pay base, remanding computation to the Labor Arbiter.
Issue Presented
Whether earned sales commissions and allowances must be included in the monthly salary base for computing separation pay due to termination by retrenchment (retirement gratuity/permanent lay-off) under the Collective Bargaining Agreement (CBA), Article 284 of the Labor Code (then prevailing), and implementing rules.
Relevant Facts
- Petitioners were members of the sales force receiving a monthly basic salary of at least P400 and commissions for sales.
- An application for clearance to terminate their services on grounds of retrenchment was filed by Zuellig and opposed by petitioners, who ultimately ceased contesting the dismissal and agreed only on the proper basis for separation pay.
- The CBA (Article XIV, Section 1(a)) provided a retirement gratuity equivalent to one month’s salary per year of service for separation due to permanent lay-off not due to fault of the employee.
- Statutory provisions at issue included Article 284 of the Labor Code and Sections 9(b) and 10, Rule I, Book VI of the Implementing Rules, which used terms like “pay” and “salary” in prescribing separation pay.
Collective Bargaining Agreement Provision
Article XIV, Section 1(a) of the CBA provided that an employee separated due to old age, sickness, death, or permanent lay-off not due to fault shall receive a retirement gratuity equivalent to one month’s salary per year of service, with “one month of salary” deemed equivalent to the salary at date of retirement.
Statutory and Regulatory Provisions Cited
- Article 284 (then prevailing) of the Labor Code: separation pay entitlements for redundancy, retrenchment, installation of labor-saving devices, etc., with different formulas (one month pay or at least one month per year for redundancy; one month pay or at least one-half month per year for retrenchment, whichever is higher).
- Article 97(f) of the Labor Code: defines “wage” to include remuneration or earnings payable under contract of employment and expressly includes commission as a form of wage.
- Sections 9(b) and 10, Rule I, Book VI of the Implementing Rules: specify minimum termination pay for retrenchment and that computation should be based on the latest salary rate unless the reduction was made to defeat the Code.
Labor Arbiter’s Ruling
The Labor Arbiter ordered respondent to pay separation pay equivalent to petitioners’ one month salary (exclusive of commissions, allowances, etc.) per year of service. The Arbiter reasoned that “salary” as used in the termination pay provisions referred specifically to basic salary and that general definitions of “wage” did not mean commissions or allowances necessarily formed part of salary for termination pay purposes.
NLRC Ruling
The NLRC dismissed petitioners’ appeal and affirmed the Labor Arbiter. The NLRC held that although “wage” may be used in a generic sense, it did not mean that commissions, allowances, or analogous income necessarily form part of “salary” for computation of separation pay, warning that including all fringe benefits would produce anomalous results contrary to legislative intent.
Petitioners’ Arguments
Petitioners argued that separation pay should be based on their total earnings including basic salary, earned sales commissions, and allowances. They relied on Article 97(f)’s definition of “wage,” which expressly includes commissions as part of wages, and on jurisprudence holding that certain allowances must be taken into account in computing backwages and separation pay.
Respondent’s Arguments
Zuellig maintained that the Labor Code and implementing rules, if intended to include commissions in separation pay, would have said so explicitly. It argued that the use of terms like “salary” and “monthly pay” in the specific termination pay provisions reflected an intent to limit the base to basic salary and not to include commissions or other fringe benefits.
Supreme Court’s Analysis: Statutory Definitions and Textual Harmony
The Court recognized an apparent tension between the broad definition of “wage” in Article 97(f), which includes commissions, and the use of “salary” or “pay” in the termination pay provisions and the CBA. It observed that “wages,” “salary,” and “pay” are essentially synonymous in meaning; with “commission” expressly included in the statutory definition of “wage,” logical reconciliation requires inclusion of commissions in the salary base for separation pay. The Court emphasized that where statutory language is clear and categorical, it must be applied rather than narrowly construed.
Inclusion of Allowances: Precedent
The Court relied on prior decisions (Santos v. NLRC; Soriano v. NLRC; Planters Products, Inc. v. NLRC) holding that transportation and emergency living allowances, among other similar allowances, must be considered in computing backwages and separation pay. These precedents supported treating allowances as part of the compensation base.
Inclusion of Commissions: Nature of Commission and Practical Considerations
The Court held that commissions are direct remuneration for services rendered that increase the employer’s income. It defined commission in l
...continue readingCase Syllabus (G.R. No. 211525)
Citation and Court
- Reported at 262 Phil. 667.
- First Division of the Supreme Court of the Philippines.
- G.R. Nos. 50999-51000.
- Decision promulgated March 23, 1990.
- Decision authored by Justice Medialdea.
Nature of the Proceeding
- Petition for certiorari seeking modification of the National Labor Relations Commission (NLRC) decision in:
- NLRC Case No. RB‑IV‑20840‑78‑T: "Jose Songco and Romeo Cipres, Complainants‑Appellants, v. F.E. Zuellig (M), Inc., Respondent‑Appellee"
- NLRC Case No. RN‑IV‑20855‑78‑T: "Amancio Manuel, Complainant‑Appellant, v. F.E. Zuellig (M), Inc., Respondent‑Appellee"
- Petitioners sought judicial review of NLRC affirmation of Labor Arbiter decision on separation pay computation.
Parties
- Petitioners: Jose Songco, Romeo Cipres, and Amancio Manuel (members of F.E. Zuellig Employees Association).
- Private Respondent / Employer: F.E. Zuellig (M), Inc. (referred to as "Zuellig").
- Other Respondents: National Labor Relations Commission (First Division) and Labor Arbiter Flavio Aguas.
Antecedent Facts
- Zuellig filed with the Department of Labor (Regional Office No. 4) an application seeking clearance to terminate petitioners allegedly for retrenchment due to financial losses.
- Petitioners opposed the application, alleging: (a) the company was not suffering losses; and (b) dismissal was due to their union membership.
- At the last hearing petitioners manifested they were no longer contesting the dismissal; parties agreed the sole issue was the basis for separation pay.
- Petitioners were sales personnel who received monthly salaries of at least P400.00 plus commissions for every sale.
- The Collective Bargaining Agreement (CBA) between Zuellig and the union contained Article XIV, Section 1(a) (Retirement Gratuity) providing that an employee separated due to permanent lay‑off not due to fault shall receive a retirement gratuity "equivalent to one (1) months salary per year of service," with "one month of salary ... deemed equivalent to the salary at date of retirement."
- Labor Code Article 284 (then prevailing) provided separation pay rules for reduction of personnel, distinguishing redundancy/labor‑saving devices (one month pay or one month per year, whichever higher) from retrenchment to prevent losses (one month pay or one‑half month pay per year, whichever higher).
- Implementing Rules, Rule I, Book VI, Sections 9(b) and 10 set out termination pay for retrenchment and the basis of computation as latest salary rate unless reduced to defeat the Code.
- Labor Arbiter rendered decision on June 26, 1978 ordering respondent to pay separation pay "equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service."
- Petitioners appealed to the NLRC; the NLRC dismissed the appeal for lack of merit, essentially affirming the Labor Arbiter.
- Petitioners filed the present certiorari petition with the Supreme Court.
- On June 2, 1980 the Court dismissed the petition as to petitioner Romeo Cipres following his verified "Notice of Voluntary Abandonment and Withdrawal" stating he received his separation pay to his full and complete satisfaction.
Principal Issue Presented
- Whether earned sales commissions and allowances should be included in petitioners' monthly salary for the purpose of computing separation pay.
Petitioners' Argument
- The correct legal computation of separation pay must include basic salary, earned sales commissions, and allowances.
- Article 97(f) of the Labor Code defines "wage" to include remuneration "ascertained on a ... commission basis," which petitioners contend brings commissions within the salary/wage base for separation pay purposes.
Employer's (Zuellig) Argument
- If the Labor Code and implementing rules intended to include commissions in the separation pay computation, they would have said so explicitly.
- In the definition of "wage," "commission" is one of the forms or designations of remuneration but does not necessarily mean commission is part of "salary" as used in separation pay provisions.
Labor Arbiter's Rationale
- The Labor Arbiter treated the statutory definition of "wage" as a general definition and concluded that it does not show any indication that commission is part of "salary."
- Acknowledged that "commission by itself may be considered a wage," but distinguished this from "salary" as used in the separation pay provisions.
- Relied on the specific language of the Implementing Rules and cited Articles 273 and 274 (sic) [as referenced in the Arbiter's reasoning], noting they use "monthly pay" or "monthly salary" and concluding these terms were intentionally used to refer to salary alone for separation pay purposes.
- Applied