Songco v.

NLRC
G.R. No. L-50999 | March 23, 1990
J. Medialdea

Topic: Wages - Cash Wage/Commission

Petitioners: JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL

Respondents: NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER
FLAVIO AGUAS, and F.E. ZUELLIG (M), INC.,

Summary: Songco et al asked their employer, F. Zuellig, to include in the computation of their separation pay (1)
the average commissions they earned during their last year of employment, and (2) their allowances. F.
Zuellig refused. The LA and the NLRC ruled in favor of F. Zuellig, but the SC sided with Songco et al.

FACTS:

 F.E. Zuellig filed an application with DOLE – Regional Office No. 4 for the valid termination of employees - Jose
Songco, Romeo Cipres, and Amancio Manuel (petitioners) – because of retrenchment due to financial losses.
Petitioners opposed said application and they averred that the company was not suffering from any losses and that
they were actually being dismissed due to their union membership.
 However, during the application’s hearing, petitioners withdrew their opposition to the dismissal, and instead
demanded that they be entitled to separation pay whose computation must not just include their monthly salary (P
40,000) but also an average of their earned sales commissions and allowances. They cited Article 97(f)1 of the
Labor Code which includes “commissions” as part of one’s salary
 Zuellig (and, later on, the OSG) interposed that Article XIV of the CBA2 between Zuellig and it’s employees, and
Article 284 of the Labor Code3 exclusively make use of the words “salary” and “pay” to the exclusion of
“commissions”. Further, the Labor Code’s definition of wage in Article 97 (f) makes use of the word “commission”
as a mere feature of “remuneration/earnings”. Lastly, both contend that commissions are not salaries for they are in
the form of incentives so employees are inspired to work harder.
 June 26, 1978 – The LA and the NLRC ruled in favor of Zuellig by granting separation pay equivalent to the
petitioners’ one month salary (exclusive of commissions, allowances, etc.) for every year of service that they have
worked with the company. They stated that:
o In this case, the general provision found in Article 97(f) of the Labor Code on the definition of wage
must yield to the specific provisions on separation pay found in Articles 283 and 284
o To rule that commissions, allowances or other analogous incomes form part of an employee’s salary
would lead to anomalies. What will prevent the employee from insisting that emergency living
allowance, 13th month pay, overtime, and premium pay, and other fringe benefits should be added to
the computation of their separation pay.
 June 2, 1980 – Romeo Cipres filed Notice of Voluntary Abandonment and Withdrawal of Petition because he already
received, to his full satisfaction, his separation pay.

1 (f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee. 'Fair reasonable value' shall not include any profit to the employer or to any person affiliated with the
employer.
2 ARTICLE XIV — Retirement Gratuity

Section l(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 (1) 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.
3 Art. 284. Reduction of personnel. — The termination of employment of any employee due to the installation of labor saving-devices,

redundancy, retrenchment to prevent losses, and other similar causes, shall entitle the employee affected thereby to separation pay. In case of
termination due to the installation of labor-saving devices or redundancy, the separation pay shall be equivalent to one (1) month pay_______ or
to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and other similar causes, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.
ISSUE + HOLDING:

W/N allowances should be included in the monthly salary of petitioners for the computation of their separation pay

YES

 Citing Santos v. NLRC (1987), Soriano v. NLRC (1987) and Planters Products Inc. v. NLRC (1989), the Court
ruled that in the computation of back wages and separation pay, account must be taken not only of the basic
salary of an employee but also of his/her transportation and emergency living allowances.

W/N earned sales commission should be included in the monthly salary of petitioner for the purpose of computation of
their separation pay.

YES

 The words “wage4”, “salary5”, and “pay” generally refer to one and the same, that is, reward/ recompense
for services performed. Following Article 97(f) of the Labor Code, the inclusion of “commissions” in “wage”
would mean that the computation of one’s separation pay based on one’s “salary”/”pay” should include earned
sales commissions.
o Even if commissions are classified as incentives, they’re still a form of direct remuneration for services
rendered which in turn increased Zuellig’s income.
 The Court took notice of the fact that some salespersons, though considered employees, do not receive any
basic salary but rather depend on commissions and allowances or commissions alone. It would be absurd if
these employees are denied separation pay in the event of discharge from employment.
 Citing Soriano v. NLRC, the commissions of herein petitioners should be included in the base figure for the
computation of separation pay since such commissions were earned by the salespersons via actual market
transactions. In the computation thereof, what should be taken into account is the average commissions earned
during their last year of employment.
 Following Article 4 of the Labor Code6 and NCC 17027, doubts as to the interpretation of labor laws and contracts
must be construed in favor of an employee’s welfare

RULING: WHEREFORE, we DENY PSI’s motion for reconsideration with finality. SO ORDERED

4 The etymology of which is the Middle English word "wagen"

5
The etymology of which is the Latin word "salarium"
6 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"

7 "in case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer”