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PHILIPPINE DUPLICATORS v. NLRC

FACTS:

Petitioner Philippine Duplicators, Inc. (Duplicators) was directed by Labor Arbiter Felipe T. Garduque II to pay 13th month pay to its employees based on their fixed wages plus sales commissions. The National Labor Relations Commission (NLRC) affirmed this order, and the Court denied Duplicators' Motion for Reconsideration. Duplicators then filed a Second Motion for Reconsideration, invoking a decision in a separate case (Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano), which declared null and void the second paragraph of Section 5(a) of the Revised Guidelines issued by then Secretary of Labor Drilon. Duplicators argued that the decision in their case should be set aside and the money claims of the employees be dismissed. The Court en banc accepted the case to settle the condition of the relevant case law. The Court, after review of the doctrines in the Duplicators and Boie-Takeda cases, concluded that the motions filed by Duplicators must fail. The Third Division found that the sales commissions earned by Duplicators' salesmen constituted part of their compensation or remuneration paid by the company, and thus should be included in the computation of the 13th month pay. The fixed or guaranteed portion of the wages paid to the salesmen represented only 15%-30% of their total earnings in a year. This information was presented through a tabulation of the salesmen's total earnings and 13th-month pay for the year 1986.

ISSUES:

  1. Whether the sales commissions earned by the salesmen of Philippine Duplicators should be considered as part of their "basic salary" for the computation of their 13th month pay.

  2. Whether the purported "commissions" paid to the medical representatives of Boie-Takeda Company should be included in their "basic salary" for the computation of their 13th month pay.

  3. Whether additional payments made to employees, in the form of profit-sharing payments or bonuses, are properly excluded from the computation of the 13th month pay.

RULING:

  1. Yes, the sales commissions earned by the salesmen of Philippine Duplicators should be considered as part of their "basic salary" for the computation of their 13th month pay. The Third Division held that these commissions were an integral part of the salesmen's basic salary structure and were not overtime payments, profit-sharing payments, or any other fringe benefit.

  2. No, the purported "commissions" paid to the medical representatives of Boie-Takeda Company should not be included in their "basic salary" for the computation of their 13th month pay. The Second Division categorized these payments as productivity bonuses and additional monetary benefits that had no clear direct or necessary relation to the amount of work actually done by each individual employee. These payments were not considered as part of the employees' basic salary.

  3. Additional payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the computation of the 13th month pay. Such additional payments are not considered as commissions under the Revised Guidelines Implementing the 13th Month Pay. Sales commissions, on the other hand, should be included in determining the 13th month pay if they are an integral part of the employee's basic salary structure. The second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay is declared invalid to the extent that it includes additional payments to employees which are, in fact, profit-sharing payments or bonuses.

PRINCIPLES:

  • Sales commissions can be considered as part of the employee's "basic salary" for the computation of their 13th month pay if they are an integral part of the basic salary structure.

  • Productivity bonuses, unlike sales commissions, are not part of the employee's basic salary as they are tied to the productivity or revenue production of the company.

  • A bonus is an amount granted and paid ex gratia to the employee and is not a demandable and enforceable obligation.

  • The granting of a bonus is a management prerogative and employers cannot be compelled to pay bonuses or other benefits aside from the employee's basic salary or wages.

  • Additional payments that partake of the nature of profit-sharing payments are excluded from the computation of the 13th month pay.

  • Sales commissions should be included in determining the 13th month pay if they are an integral part of the employee's basic salary structure.

  • The second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay is invalid as it includes additional payments that are actually profit-sharing payments or bonuses.