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Sunday, July 19, 2009

Songco, et al. vs. National Labor Relations Commission

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

FACTS:  Zuelig filed an application for clearance to terminate the services of Songco, and others, on the ground of retrenchment due to financial losses.  During the hearing, the parties agreed that the sole issue to be resolved was the basis of the separation pay due.  The salesmen received monthly salaries of at least P400.00 and commission for every sale they made.

The Collective Bargaining Agreements between Zuelig and the union of which Songco, et al. were members contained the following provision:  "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."

The Labor Arbiter ordered Zuelig to pay Songco et al., separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service with the company.

The National Labor Relations Commission sustained the Arbiter.

ISSUE:  Whether or not earned sales commissions and allowances should be included in the monthly salary of Songco, et al. for the purpose of computing their separation pay.


In the computation of backwages and separation pay, account must be taken not only of the basic salary of the employee, but also of the transportation and emergency living allowances.

Even if the commissions were in the form of incentives or encouragement, so that the salesman would be inspired to put a little more industry on jobs particularly assigned to them, still these commissions are direct remunerations for services rendered which contributed to the increase of income of the employee.  Commission is the recompense compensation or reward of an 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 to the principal.  The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate that commissions are part of Songco, et al's wage or salary.

The Court takes judicial notice of the fact that some salesmen do not receive any basic salary, but depend on commissions and allowances or commissions alone, although an employer-employee relationships exists.

If the opposite view is adopted, i.e., that commissions do not form part of the wage or salary, then in effect, we will be saying that this kind of salesmen do not receive any salary and, therefore, not entitled to separation pay in the event of discharge from employment.  This narrow interpretation is not in accord with the liberal spirit of the labor laws, and considering the purpose of separation pay which is, to alleviate the difficulties which confront a dismissed employee thrown to the streets to face the harsh necessities of life.

In Soriano vs. NLRC (155 SCRA 124), we held that the commissions also claimed by the employee (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 the petitioner [salesman].  Since the commissions in the present case were earned by actual transactions attributable to Song, et al., these should be included in their separation pay.  In the computation thereof, what should be taken into account is the average commission earned during their last year of employment.

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