39 Serrano v.
Severino Santos Transit
G.R. No. 187698 | 9 August 2010 | Carpio Morales | Santos
PETITIONER: Rodolfo Serrano
RESPONDENTS: Severino Santos Transit, Severino Santos
RECIT-READY*doctrine in bold*: Petitioner Rodolfo Serrano was hired as a bus
conductor by respondent Severino Santos Transait, a bus company owned and
operated by its co-respondent Severino Santos. After 14 years of service,
petitioner applied for optional retirement from the company whose representative
advised him that he must first sign the already prepared Quitclaim before his
retirement pay could be released. Petitioner requested that he first go over the
computation of his retirement pay. However, such request was denied. He still
received 75k as his retirement pay, but signed the Quitclaim under protest.
Petitioner lodged a complaint before the LA. He claims that the company erred in
its computation since under RA 7641/Retirement Pay Law, his retirement pay
should have have been accorded the following: computed at 22.5 days per year
of service; to include the cash equivalent of the 5-day SIL; 1/12 of the 13 th month
pay. The LA ruled in favor of petitioner. NLRC reversed. The NLRC cited R&E
Transport, Inc v. Latag, and that since petitioner was paid on a purely
commission basis, he was excluded from the coverage of the laws on 13th month
pay and SIL pay. Under RA 7641, otherwise known as the Retirement Pay Law,
in the absence of a retirement plan or applicable agreement, an employee
who retires shall be entitled to retirement pay equivalent to at least one-half
month salary for every year of service, a fraction of at least 6 months being
considered as one whole year.
The components of one-half month salary shall include all of the following:
a) 15 days salary of the employee based on his latest salary rate;
b) The cash equivalent of not more than 5 days of service incentive leave;
c) 1/12 of the 13th month pay due to the employee;
d) All other benefits that the employer and the employee may agree upon
that should be included in the computation of the employee’s
retirement pay.
In this case, petitioner worked for 14 years for the bus company which did not
adopt any retirement scheme. Even if petitioner as bus conductor was paid on a
commission basis, he still falls within the coverage of RA 7641 and its
implementing rules. Thus, petitioner’s retirement pay should include the cash
equivalent of the 5-day SIL and 1/12 of the 13th month pay. Furthermore, the SC
held there is a difference between drivers paid under the boundary system and
conductors who are paid on a commission basis. Employees engaged on a task
or contract basis or paid purely on commission basis are not automatically
exempted from the grant of service incentive leave unless, they fall under
the classificarion of field personnel. In practice, taxi drivers do not receive
fixed wages. They retain only those sums in excess of the boundary or free they
pay to the owners or operators of the vehicles. Conductors, on the other hand,
are paid a certain percentage of the bus earnings for the day. Conductors cannot
be considered as field personnel because they are required to be at specific
places at specific times, despite the fact that they are performing work away from
the principal office of the employee.
FACTS:
1. Petitioner Rodolfo Serrano was hired as a bus conductor around 1992 by
respondent Severino Santos Transait, a bus company owned and operated
by its co-respondent Severino Santos.
- After 14 years of service, petitioner applied for optional retirement from
the company whose representative advised him that he must first sign
the already prepared Quitclaim before his retirement pay could be
released.
- Petitioner requested that he first go over the computation of his
retirement pay. However, such request was denied.
- He signed the Quitclaim on which he wrote “U.P” (under protest) after
his signature, indiciating his protest to the amount of 75,277.45php he
received, computed by the company at 15 days per year of service.
2. Petitioner lodged a complaint before the LA. He claims that the company
erred in its computation since under RA 7641/Retirement Pay Law, his
retirement pay should have have been accorded the following:
a) Computed at 22.5 days per year of service;
b) To include the cash equivalent of the 5-day SIL;
c) 1/12 of the 13th month pay.
3. Respondent company counters that the Quitclaim signed by petitioner
barred his claim and it was in correct in computing his retirement pay.
4. LA: Ruled in favor of petitioner, awarding him 116,135.54php as retirement
pay differential.
NLRC: Reversed LA and dismissed petitioner’s complaint. However, it
ordered respondent company to pay petitioner the amound of 2,365.35 as
retirement pay differential. The NLRC cited R&E Transport, Inc v. Latag, and
that since petitioner was paid on a purely commission basis, he was
excluded from the coverage of the laws on 13 th month pay and SIL pay.
Hence, the 1/12 of the 13th month pay and the 5-day SIL should not be
factored in the computation fo his retirement pay.
ISSUES: 1. W/N the NLRC erred in disallowing the claims of petitioner for his
retirement pay? YES

RULING:
1. RA 7641, otherwise known as the Retirement Pay Law, amended Art. 287 of the
Labor Code by providing for retirement pay to qualified private sector employees in
the absence of any retirement plan in the establishment. The pertinent provision of
said law provides:
Sec. 1. In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment, an employee upon
reaching the age of sixty (60) years or more, but not beyond sixty-five (65)
years which is hereby declared the compulsory retirement age, who has served
at least five (5) years in the said establishment, may retire and shall be entitled
to retirement pay equivalent to at least one-half (1/2) month salary for every year
of service, a fraction of at least six (6) months being considered as one whole
year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month
salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay
and the cash equivalent of not more than five (5) days of service incentive
leaves.
Retail, service and agricultural establishments or operations employing not
more than (10) employees or workers are exempted from the coverage of this
provision.
3. The SC held that the reliance of NLRC on R&E Transport, Inc v. Latag is
erroneous. In said case, the Court held that a taxi driver paid accocrding to the
boundary system is not entitled to the 13th month pay and SIL pay, hence, his
retirement pay should be computed on the sole basis of his salary.
There is a difference between drivers paid under the boundary system and
conductors who are paid on a commission basis.
Under PD 851/SIL Law, the exclusion from its coverage of workers who are paid on a
purely commission basis is only with respect to field personnel. Equally important is
the ruling in Auto Bus Transport System case, where the Court held that employees
engaged on a task or contract basis or paid purely on commission basis are not
automatically exempted from the grant of service incentive leave unless, they
fall under the classificarion of field personnel.
In practice, taxi drivers do not receive fixed wages. They retain only those sums in
excess of the boundary or free they pay to the owners or operators of the vehicles.
Conductors, on the other hand, are paid a certain percentage of the bus earnings for
the day. Conductors cannot be considered as field personnel because they are
required to be at specific places at specific times, despite the fact that they are
performing work away from the principal office of the employee. Clearly, their hours
and days of work can be determined with reasonable certainty – an element of a field
personnel which is lacking.

Under Sec. 5 of the above act, it likewise provided for the components of the one-half
month salary shall include all the following:

e) 15 days salary of the employee based on his latest salary rate;

f) The cash equivalent of not more than 5 days of service incentive leave;
g) 1/12 of the 13th month pay due to the employee;
h) All other benefits that the employer and the employee may agree upon that
should be included in the computation of the employee’s retirement pay.

2. In this case, petitioner worked for 14 years for the bus company which did not
adopt any retirement scheme. Even if petitioner as bus conductor was paid on a
commission basis, he still falls within the coverage of RA 7641 and its implementing
rules. Thus, petitioner’s retirement pay should include the cash equivalent of the 5-
day SIL and 1/12 of the 13th month pay.