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PHILIPPINE DUPLICATORS v. NLRC

FACTS:

The case involves a dispute over the appropriate mode of computation for the 13th month pay of employees who receive a fixed or guaranteed salary plus sales commissions. Philippine Duplicators, Inc., a domestic corporation engaged in the distribution of copying machines, employs salesmen who receive a fixed salary and commissions based on their sales. P.D. No. 851, issued on December 16, 1975, mandates the payment of the 13th month pay to employees. The law defines the 13th month pay as one-twelfth of the employee's basic salary within a calendar year. The Rules and Regulations Implementing P.D. No. 851, issued on December 22, 1975, define the terms "13th month pay" and "basic salary."

On August 13, 1986, President Corazon C. Aquino issued Memorandum Order No. 28, modifying P.D. No. 851 to require all employers to pay a 13th month pay to their rank-and-file employees. Minister Augusto S. Sanchez of the Ministry of Labor and Employment issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986, stating that employees who receive a fixed wage plus commission are entitled to the 13th month pay based on their total earnings during the calendar year, including their fixed wage and commission.

The private respondent union, on behalf of its member-salesmen, requested petitioner corporation to pay the 13th month pay based on both the fixed wage and sales commissions. Despite an opinion from the MOLE stating that the salesmen are entitled to the 13th month pay based on their total commissions divided by twelve, petitioner refused to comply. Respondent union filed a complaint against petitioner for payment of the 13th month pay according to MOLE's interpretation.

The Labor Arbiter ruled in favor of the union, directing petitioner to pay the 13th month pay to its salesmen according to MOLE's requirements. Petitioner appealed to the NLRC, arguing that it is not liable to give its salesmen a separate 13th month pay on commissions and that MOLE's interpretation is void for expanding the scope of "basic salary" beyond what is provided by the law. The NLRC affirmed the Labor Arbiter's decision, stating that it does not have the authority to invalidate MOLE's interpretation. Petitioner then filed a petition before the Supreme Court, challenging the validity of MOLE's bulletin and interpretation.

ISSUES:

  1. Whether sales commissions should be included in the computation of the 13th month pay.

  2. Whether Explanatory Bulletin No. 86-12 is a valid expansion of the scope of P.D. No. 851 and Memorandum Order No. 28.

  3. Whether the earned sales commissions should be included in the computation of the separation pay of the petitioners.

  4. Whether P.D. No. 851 excludes sales commissions from the definition of "basic salary."

  5. Whether the contemporaneous administrative construction of the term "basic salary" by Director Augusto G. Sanchez, Secretary August S. Sanchez, and Secretary Franklin M. Drilon should be given weight.

RULING:

  1. Sales commissions should be included in the computation of the 13th month pay. The term "wage" or "salary" as used in P.D. No. 851 and Memorandum Order No. 28 includes all remunerations or earnings paid by the employer for services rendered, whether fixed or ascertained on a commission basis. Sales commissions earned by salesmen form part of their compensation or remuneration for serving as salesmen and are considered part of their wage or salary.

  2. Explanatory Bulletin No. 86-12 is a valid expansion of the scope of P.D. No. 851 and Memorandum Order No. 28. The term "basic salary" used in these laws should not be confused with fixed or guaranteed wage. "Basic salary" refers to wage or salary, while fixed or guaranteed wage refers to a specific amount paid regardless of sales commissions. Sales commissions are not considered allowances or additional fringe benefits but are part of the wage or salary of salesmen.

  3. Yes, the earned sales commissions should be included in the computation of the separation pay of the petitioners. Commissions are part of the employees' wage or salary as they are direct remunerations for services rendered that contributed to the increase of the company's income.

  4. No, P.D. No. 851 does not exclude sales commissions from the definition of "basic salary." It only excludes profit-sharing payments, allowances, and monetary benefits that are not considered or integrated as part of the regular or basic salary.

  5. Yes, the contemporaneous administrative construction of the term "basic salary" by Director Augusto G. Sanchez, Secretary August S. Sanchez, and Secretary Franklin M. Drilon should be given weight as it is entitled to great respect and should ordinarily control the construction of the statute by the courts.

PRINCIPLES:

  • The term "wage" or "salary" includes all remunerations or earnings paid for services rendered, whether fixed or ascertained on a commission basis.

  • Sales commissions earned by salesmen form part of their wage or salary.

  • The term "basic salary" used in P.D. No. 851 and Memorandum Order No. 28 refers to wage or salary and should not be confused with fixed or guaranteed wage.

  • Explanatory Bulletin No. 86-12 is a valid expansion of the scope of P.D. No. 851 and Memorandum Order No. 28.

  • Commissions are part of an employee's wage or salary as they are direct remunerations for services rendered.

  • P.D. No. 851 excludes profit-sharing payments, allowances, and monetary benefits that are not considered or integrated as part of the regular or basic salary from the definition of "basic salary."

  • Contemporaneous administrative construction of a statute by executive officers of the government is entitled to great respect and should ordinarily control the construction of the statute by the courts.