1. PHILIPPINE DUPLICATORS, INC. vs.

NATIONAL LABOR RELATIONS

COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-
TUPAS, G.R. No. 110068, February 15, 1995, EN BANC

On 11 November 1993, this Court rendered a decision dismissing the

Petition for Certiorari filed by petitioner Philippine Duplicators, Inc.. The
Court upheld the decision of National Labor Relations Commission (NLRC),
which affirmed the order of Labor Arbiter directing petitioner to pay 13th
month pay to private respondent employees computed on the basis of their
fixed wages plus sales commissions. The Third Division also denied with
finality on 15 December 1993 the Motion for Reconsideration filed (on 12
December 1993) by petitioner.

On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to

Admit Second Motion for Reconsideration and (b) a Second Motion for
Reconsideration. This time, petitioner invoked the decision in the two (2)
consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la
Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in
G.R. Nos. 92174 and 102552, on 10 December 1993. Petitioner submits that
the decision in the Duplicators case should now be considered as having
been abandoned or reversed by the Boie-Takeda decision, considering that
the latter went "directly opposite and contrary to" the conclusion reached in
the former. Petitioner prays that the decision rendered in Duplicators be set
aside and another be entered directing the dismissal of the money claims of
private respondent Philippine Duplicators' Employees' Union.

ISSUE:

Whether or not the sales commission earned by the salesmen who make or
close a sale of duplicating machines distributed by petitioner corporation,
constitute part of the compensation or remuneration paid to salesmen for
serving as salesmen, and hence as part of the "wage" or salary of
petitioner's salesmen it shall be included in the computation of 13 th month
pay.

RULING:

Yes.

The court do not agree with petitioner that the decision in Boie-Takeda is
"directly opposite or contrary to" the decision in the present (Philippine
Duplicators). To the contrary, the doctrines enunciated in these two (2)
cases in fact co-exist one with the other. The two (2) cases present quite
different factual situations (although the same word "commissions" was used
or invoked) the legal characterizations of which must accordingly differ.

In this case, the sales commissions received for every duplicating machine
sold constituted part of the basic compensation or remuneration of the
salesmen of Philippine Duplicators for doing their job. The portion of the
salary structure representing commissions simply comprised an automatic
increment to the monetary value initially assigned to each unit of work
rendered by a salesman. Especially significant here also is the fact that the
fixed or guaranteed portion of the wages paid to the Philippine Duplicators'
salesmen represented only 15%-30% of an employee's total earnings in a
year. Thus, the sales commissions were an integral part of the basic salary
structure of Philippine Duplicators' employees salesmen. These commissions
are not overtime payments, nor profit-sharing payments nor any other
fringe benefit. Thus, the salesmen's commissions, comprising a pre-
determined percent of the selling price of the goods sold by each salesman,
were properly included in the term "basic salary" for purposes of computing
their 13th month pay.

AS DISTINGUISH FROM BOIE-TAKEDA CASE:

In Boie-Takeda the so-called commissions "paid to or received by medical

representatives of Boie-Takeda Chemicals or by the rank and file employees
of Philippine Fuji Xerox Co.," were excluded from the term "basic salary"
because these were paid to the medical representatives and rank-and-file
employees as "productivity bonuses."4 The Second Division characterized
these payments as additional monetary benefits not properly included in the
term "basic salary" in computing their 13th month pay. We note that
productivity bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely resemble profit-
sharing payments and have no clear director necessary relation to the
amount of work actually done by each individual employee. More generally,
a bonus is an amount granted and paid ex gratia to the employee; its
payment constitutes an act of enlightened generosity and self-interest on
the part of the employer, rather than as a demandable or enforceable
obligation. If an employer cannot be compelled to pay a productivity bonus
to his employees, it should follow that such productivity bonus, when given,
should not be deemed to fall within the "basic salary" of employees when the
time comes to compute their 13th month pay.

It is also important to note that the purported "commissions" paid by the

Boie-Takeda Company to its medical representatives could not have been
"sales commissions" in the same sense that Philippine Duplicators paid its
salesmen Sales commissions. Medical representatives are not salesmen;
they do not effect any sale of any article at all. In common commercial
practice, in the Philippines and elsewhere, of which we take judicial notice,
medical representatives are employees engaged in the promotion of
pharmaceutical products or medical devices manufactured by their
employer. They promote such products by visiting identified physicians and
inform much physicians, orally and with the aid of printed brochures, of the
existence and chemical composition and virtues of particular products of
their company. They commonly leave medical samples with each physician
visited; but those samples are not "sold" to the physician and the physician
is, as a matter of professional ethics, prohibited from selling such samples to
their patients. Thus, the additional payments made to Boie-Takeda's medical
representatives were not in fact sales commissions but rather partook of the
nature of profit-sharing bonuses.

The doctrine set out in the decision of the Second Division is, accordingly,
that additional payments made to employees, to the extent they partake of
the nature of profit-sharing payments, are properly excluded from the ambit
of the term "basic salary" for purposes of computing the 13th month pay
due to employees. Such additional payments are not "commissions" within
the meaning of the second paragraph of Section 5 (a) of the Revised
Guidelines Implementing 13th Month Pay.

The Supplementary Rules and Regulations Implementing P.D. No. 851

subsequently issued by former Labor Minister Ople sought to clarify the
scope of items excluded in the computation of the 13th month pay; viz.:

Sec. 4. Overtime pay, earnings and other remunerations which

are not part of the basic salary shall not be included in the
computation of the 13th month pay.
We observe that the third item excluded from the term "basic salary" is cast
in open ended and apparently circular terms: "other remunerations which
are not part of the basic salary." However, what particular types of earnings
and remuneration are or are not properly included or integrated in the basic
salary are questions to be resolved on a case to case basis, in the light of
the specific and detailed facts of each case. In principle, where these
earnings and remuneration are closely akin to fringe benefits, overtime pay
or profit-sharing payments, they are properly excluded in computing the
13th month pay. However, sales commissions which are effectively an
integral portion of the basic salary structure of an employee, shall
be included in determining his 13th month pay.

AS DISTINGUISH PRODUCTIVITY BUNOS FROM SALES COMMISSION:

Productivity bonuses are generally tied to the productivity or profit

generation of the employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself. A
productivity bonus is something extra for which no specific additional
services are rendered by any particular employee and hence not legally
demandable, absent a contractual undertaking to pay it. Sales commissions,
on the other hand, such as those paid in Duplicators, are intimately related
to or directly proportional to the extent or energy of an employee's
endeavors. Commissions are paid upon the specific results achieved by a
salesman-employee. It is a percentage of the sales closed by a salesman
and operates as an integral part of such salesman's basic pay.

2. CENTRAL AZUCARERA DE TARLAC vs. CENTRAL AZUCARERA DE

TARLAC LABOR UNION-NLU, G.R. No. 188949, July 26, 2010

Petitioner is a domestic corporation engaged in the business of sugar

manufacturing, while respondent is a legitimate labor organization which
serves as the exclusive bargaining representative of petitioner’s rank-and-
file employees. The controversy stems from the interpretation of the term
"basic pay," essential in the computation of the 13th-month pay.

In compliance with Presidential Decree (P.D.) No. 851, petitioner granted its
employees the mandatory thirteenth (13th) - month pay since 1975. The
formula used by petitioner in computing the 13th-month pay was: Total
Basic Annual Salary divided by twelve (12). Included in petitioner’s
computation of the Total Basic Annual Salary were the following: basic
monthly salary; first eight (8) hours overtime pay on Sunday and
legal/special holiday; night premium pay; and vacation and sick leaves for
each year. Throughout the years, petitioner used this computation until
2006.

On November 6, 2004, respondent staged a strike. During the pendency of

the strike, petitioner declared a temporary cessation of operations. In
December 2006, petitioner gave the employees their 13th-month pay based
on the employee’s total earnings during the year divided by 12.

Respondent objected to this computation. It averred that petitioner did not

adhere to the usual computation of the 13th-month pay. The representative
of petitioner explained that the change in the computation of the 13th-
month pay was intended to rectify an error in the computation, particularly
the concept of basic pay which should have included only the basic monthly
pay of the employees.
Petitioner argues that there was an error in the computation of the 13th-
month pay of its employees as a result of its mistake in implementing P.D.
No. 851, an error that was discovered by the management only when
respondent raised a question concerning the computation of the employees’
13th-month pay for 2006. Admittedly, it was an error that was repeatedly
committed for almost thirty (30) years.

ISSUE:

Whether or not the contention of the petitioner is correct.

RULING:

No.

The 13th-month pay mandated by Presidential Decree (P.D.) No. 851

represents an additional income based on wage but not part of the wage. It
is equivalent to one-twelfth (1/12) of the total basic salary earned by an
employee within a calendar year. All rank-and-file employees, regardless of
their designation or employment status and irrespective of the method by
which their wages are paid, are entitled to this benefit, provided that they
have worked for at least one month during the calendar year. If the
employee worked for only a portion of the year, the 13th-month pay is
computed pro rata.16

Furthermore, the term "basic salary" of an employee for the purpose of

computing the 13th-month pay was interpreted to include all remuneration
or earnings paid by the employer for services rendered, but does not include
allowances and monetary benefits which are not integrated as part of the
regular or basic salary, such as the cash equivalent of unused vacation and
sick leave credits, overtime, premium, night differential and holiday pay, and
cost-of-living allowances. However, these salary-related benefits should be
included as part of the basic salary in the computation of the 13th-month
pay if, by individual or collective agreement, company practice or policy, the
same are treated as part of the basic salary of the employees.

In this case, the practice of petitioner in giving 13th-month pay based on the
employees’ gross annual earnings which included the basic monthly salary,
premium pay for work on rest days and special holidays, night shift
differential pay and holiday pay continued for almost thirty (30) years and
has ripened into a company policy or practice which cannot be
unilaterally withdrawn.

Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule,
mandates that benefits given to employees cannot be taken back or reduced
unilaterally by the employer because the benefit has become part of the
employment contract, written or unwritten. The rule against diminution of
benefits applies if it is shown that the grant of the benefit is based on an
express policy or has ripened into a practice over a long period of time and
that the practice is consistent and deliberate. Nevertheless, the rule will not
apply if the practice is due to error in the construction or application of a
doubtful or difficult question of law. But even in cases of error, it should be
shown that the correction is done soon after discovery of the error.
3. PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL
WORKERS UNION (PACIWU)-TUCP vs. NATIONAL LABOR RELATIONS
COMMISSION AND VALLACAR TRANSIT, INC., G.R. No. 107994,
August 14, 1995

Petitioner Philippine Agricultural Commercial and Agricultural Workers Union

— TUCP is the exclusive bargaining agent of the rank and file employees of
respondent Vallacar Transit, Inc. Petitioner union instituted a complaint with
NLRC for payment of 13th month pay in behalf of the drivers and conductors
of respondent company's Visayan operation on the ground that although said
drivers and conductors are compensated on a "purely commission" basis as
described in their Collective Bargaining Agreement (CBA), they are
automatically entitled to the basic minimum pay mandated by law should
said commission be less than their basic minimum for eight (8) hours work. 1

Respondent Vallacar Transit, Inc. contended that since said drivers and
conductors are compensated on a purely commission basis, they are not
entitled to 13th month pay pursuant to the exempting provisions
enumerated in paragraph 2 of the Revised Guidelines on the Implementation
of the Thirteenth Month Pay Law.2 It further contended that Section 2 of
Article XIV of the Collective Bargaining Agreement (CBA) concluded on
October 17, 1988 expressly provided that "drivers and conductors paid on a
purely commission are not legally entitled to 13th month pay." Said CBA,
being the law between the parties, must be respected, respondent opined.

ISSUE:

Whether or not the bus drivers and conductors of respondent Vallacar

Transit, Inc. are entitled to 13th month pay.

RULING:

Yes.

Every employee receiving a commission in addition to a fixed or guaranteed

wage or salary, is entitled to a 13th month pay. For purposes of entitling
rank and file employees a 13th month pay, it is immaterial whether the
employees concerned are paid a guaranteed wage plus commission or a
commission with guaranteed wage inasmuch as the botton line is that they
receive a guaranteed wage. This is correctly construed in the MOLE
Explanatory Bulletin No. 86-12.

In this case, while the bus drivers and conductors of respondent company
are considered by the latter as being compensated on a commission basis,
they are not paid purely by what they receive as commission. As admitted
by respondent company, the said bus drivers and conductors are
automatically entitled to the basic minimum pay mandated by law in
case the commissions they earned be less than their basic minimum
for eight (8) hours work.6 Evidently therefore, the commissions form part
of the wage or salary of the bus drivers and conductors.

A contrary interpretation would allow an employer to skirt the law and would
result in an absurd situation where an employee who receives a guaranteed
minimum basic pay cannot be entitled to a 13th month pay simply because
he is technically referred to by his employer per the CBA as an employee
compensated on a purely commission basis. Such would be a narrow
interpretation of the law, certainly not in accord with the liberal spirit of our
labor laws.

Moreover, what is controlling is not the label attached to the remuneration

that the employee receives but the nature of the remuneration 7 and the
purpose for which the 13th month pay was given to alleviate the plight of
the working masses who are receiving low wages.

Commission is the recompense, compensation, reward of an employee,

agent, salesman, executor, trustee, receiver, factor, broker or bailee, when
the same is calculated as a percentage on the amount of his transactions or
on the profit of the principal.8 While said commissions may be in the form of
incentives or encouragement to inspire said bus drivers and conductors to
put a little more zeal and industry on their jobs, still, it is safe to say that the
same are direct remunerations for services rendered, given the small
remuneration they receive for the services they render, 9 which is precisely
the reason why private respondent allowed the drivers and conductors a
guaranteed minimum wage. The conclusion is ineluctable that said
commissions are part of their salary.

In sum, the 13th month pay of the bus drivers and conductors who are paid
a fixed or guaranteed minimum wage in case their commissions be less than
the statutory minimum, and commissions only in case where the same is
over and above the statutory minimum, must be equivalent to one-twelfth
(1/12) of their total earnings during the calendar year.

4. JACKSON BUILDING CONDOMINIUM CORPORATION and/or RAZUL

REQUESTO vs. NATIONAL LABOR RELATIONS COMMISSION and
FERDINAND GUMOGDA, G.R. No. 111515 July 14, 1995

On November 22, 1989, private respondent was employed as a janitor by

petitioner with a monthly salary of P2,340.00 or a daily wage of P90.00.

On November 15, 1992, private respondent filed a 45-day leave of absence

from November 15, 1991 to December 29, 1991 to undergo an
appendectomy, which would necessitate complete bed rest for about thirty
days from the date of operation as shown by his medical certificate (Annex
"C-l", Rollo, p. 28). This was granted by petitioner.

On January 3, 1992, private respondent informed petitioner Razul Requesto,

president of petitioner corporation, that he was physically fit to assume his
work. However, petitioners refused to accept him back contending that he
had abandoned his work.

On March 24, 1992, private respondent filed with the Labor Arbiter a
complaint against petitioners for illegal dismissal, underpayment of wages
and non-payment of thirteenth-month pay and service-incentive leave pay
(Annex "C", Rollo, pp. 20-26).

On July 12, 1992, petitioners submitted their position paper wherein they
alleged that private respondent was not dismissed but was merely advised
to rest for health reasons until he could procure a medical certificate
attesting that he was fit to work. They further alleged that private
respondent failed to return to his workplace or to submit the required
medical certificate.

On October 30, 1992, the Labor Arbiter rendered a decision in favor of

private respondent.
Petitioners then appealed to NLRC, alleging that the Labor Arbiter committed
grave abuse of discretion. .However, NLRC affirmed in toto the decision of
the Labor Arbiter. A subsequent motion for reconsideration was denied.

II

The issues for consideration of this Court are whether private respondent
abandoned his work and whether petitioners are liable for the payment of
private respondent's back wages, differential pay, thirteenth-month pay and
service-incentive leave pay for 1991.

III

Petitioners contend that private respondent was still weak when he reported
back for work and they had to ask him to secure a medical clearance. They
claim that he failed to submit one or to report for work; hence they
considered him as having abandoned his work.

Petitioners raise questions of fact which have already been passed upon by
the Labor Arbiter and NLRC. This Court does not disturb the findings of fact
of administrative agencies when supported by substantial evidence (Wyeth-
Suaco Laboratories, Inc. v. National Labor Relations Commission, 219 SCRA
356 [1993]).

For abandonment to be a valid ground for dismissal, two requisites must be

compresent: the intention by an employee to abandon coupled with an overt
act from which it may be inferred that the employee had no more intention
to resume his work (People's Security, Inc. v. National Labor Relations
Commission, 226 SCRA 146 [1993]).

In the instant case, the said requisites are not present.

As found by the Labor Arbiter, private respondent's physician advised him to

rest for 30 days before reporting back for work in order to recuperate.
Private respondent heeded this advise and even exceeded the number of
days recommended by his doctor for his recuperation. In fact, he reported
back for work 50 days after his operation. This would clearly show that
private respondent was ready to assume his responsibilities considering that
he had fully recovered from the operation. Furthermore, the filing of a
complaint for illegal dismissal by private respondent is inconsistent with the
allegation of petitioners that he had abandoned his job. Surely, an
employee's posture will be illogical if he abandons his work and then
immediately files an action for his reinstatement (Remerco Garments
Manufacturing v. Minister of Labor and Employment, 135 SCRA 167 [1985]).

Petitioners also urged that private respondent is not entitled to any

remuneration during the period that he did not report for work under the
principle of "a fair day's work for a fair day's pay."

The law on the matter refutes this legal challenge of petitioners.

Section 31 of R.A. No. 6715 which amended Article 279 of the Labor Code of
the Philippines provides that "an employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and
other privileges without loss of seniority rights and other privileges and to
his full back wages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement."
The award of back wages by NLRC to private respondent was predicated on
the ground that he was illegally dismissed and not on his failure to report for
work (Llosa-Tan v. Silahis International Hotel, 181 SCRA 738 [1990]).

Private respondent is likewise entitled to the thirteenth-month pay.

Presidential Decree No. 851, as amended by Memorandum Order No. 28,
provides that employees are entitled to the thirteenth-month pay benefit
regardless of their designation and irrespective of the method by which their
wages are paid.