Songco vs. NLRC [G.R. No.

L-50999 March 23, 1990]

Post under case digests, labor law at Monday, April 09, 2012 Posted by Schizophrenic Mind
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 months 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 allowancesshould be included in the monthly salary of
petitioners for the purpose of computation of their separation pay.

Held: The petition is granted. 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
livingallowances. In the issue of whether commission should be included in the computation of their
separation pay, it is proper to define first commission. Blacks 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 andallowances 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.

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.

RULING:

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.