Songco, et al. vs.

National Labor Relations Commission

G.R. Nos. 50999-51000
(March 23, 1990)

MEDIALDEA, J.:

FACTS:

Zuellig (M) Inc. filed with the Department of Labor (Regional Office No. 4) a clearance to
terminate the services of petitioners Jose Songco, Romeo Cipres and Amancio Manuel due to
alleged financial losses. However, the petitioners argued that the company is not suffering any
losses and the real reason for their termination was their membership in the union.

At the last hearing of the case, the petitioner manifested that they no longer contesting
their dismissal, however, they argued that they should be granted a separation pay. Each of the
petitioners was receiving a monthly salary of P40, 000.00 plus commissions for every sale they
made.

Under the CBA entered by the Zuellig Inc. and the petitioners, in Article XIV, Section 1(a),
Any employee, who is separated from employment due to old age, sickness, death or permanent
lay-off not due to the fault of said employee shall receive from the company a retirement gratuity
in an amount equivalent to one month’s salary per year of service. One month of salary as used in
this paragraph shall be deemed equivalent to the salary at date of retirement; years of service
shall be deemed equivalent to total service credits, a fraction of at least six months being
considered one year, including probationary employment. Other basis for petitioners’ contention
are Article 284 of the Labor Code with regards to reduction of personnel and Sections 9(b) and 10
of Rule 1, Book VI of the Rules Implementing the Labor Code.

The Labor Arbiter rendered his decision directing the company to pay the complainants
separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.)
for every year of service that they have worked with the company. The petitioners appealed to
the NLRC but it was denied. Petitioner Romeo Cipres filed a Notice of Voluntary Abandonment
and Withdrawal of petition contending that he had received, to his full and complete
satisfaction, his separation pay. Hence, this petition.

Issue:

Whether or not earned sales commissions and allowances should be included in the
monthly salary of petitioners for the purpose of computation of their separation pay.
Held:

The petition is granted, Decision of NLRC is modified.

Article 4 of labor code

"all doubts in the implementation and interpretation of the provisions of the Labor code including
its implementing rules and regulations shall be resolved in favor of labor."

Petitioners’ contention that in arriving at the correct and legal amount of separation pay due to
them, whether under the Labor Code or the CBA, their basic salary, earned sales commissions
and allowances should be added together.

Insofar as whether the allowances should be included in the monthly salary of

petitioners for the purpose of computation of their separation pay is concerned, this has been
settled in the case of Santos vs. NLRC, 76721, in the computation of backwages and separation
pay, account must be taken not only of the basic salary of petitioner but also of her
transportation and emergency living allowances.

In the issue of whether commission should be included in the computation of their

separation pay, it is proper to define first commission. Black’s Law Dictionary defined
commission as the recompensed, compensation or reward of an agent, salesman, executor,
trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal. The nature of the work of a
salesman and the reason for such type of remuneration for services rendered demonstrate
clearly that the commission are part of petitioners’ wage and salary. Some salesmen do not
receive any basic salary but depend on commission and allowances or commissions alone, are
part of petitioners’ wage and salary. Some salesman do not received any basic salary but
depend on commission and allowances or commissions alone, although an employer-employee
relationship exist.

In Soriano v. NLRC, it is ruled then that, the commissions also claimed by petitioner
(override commission plus net deposit incentive) are not properly includible in such base figure
since such commissions must be earned by actual market transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present case were earned by actual
market transactions attributable to petitioners, these should be included in their separation pay.
In the computation thereof, what should be taken into account is the average commissions
earned during their last year of employment.