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JOSE SONGCO v. NLRC

FACTS:

F.E. Zuellig (M), Inc., filed an application with the Department of Labor seeking clearance to terminate the services of Jose Songco, Romeo Cipres, and Amancio Manuel allegedly due to financial losses. Songco, Cipres, and Manuel opposed the application, claiming that the company was not suffering from losses and that they were being dismissed because of their membership in the union. However, they later manifested that they would no longer contest their dismissal. The sole issue to be resolved was the basis of the separation pay due to the employees. The Collective Bargaining Agreement between Zuellig and F.E. Zuellig Employees Association provided for retirement gratuity equivalent to one month's salary per year of service. On the other hand, Article 284 of the Labor Code provided for separation pay equivalent to one month's pay or at least one-half month's pay for every year of service. The Labor Arbiter ordered Zuellig to pay the employees separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service. The NLRC dismissed the employees' appeal, prompting them to file a petition for certiorari seeking to modify the NLRC decision. The issue was whether earned sales commissions and allowances should be included in the computation of the employees' separation pay.

ISSUES:

  1. Whether commissions should be included in the definition of wages for the purpose of computation of separation pay.

  2. Whether allowances should be included in the monthly salary of petitioners for the purpose of computation of separation pay.

  3. Whether commissions should be included in the salary base for the computation of separation pay.

  4. Whether the commissions earned by the petitioners are part of their wage or salary.

RULING:

  1. Commissions should be included in the definition of wages for the purpose of computation of separation pay. Article 97(f) explicitly includes commission in the definition of wages. The court emphasized that when the law speaks in clear and categorical language, there is no room for interpretation or construction, only room for application. The ambiguity between Article 97(f) and other provisions is more apparent than real, as the term "salary" is often used interchangeably with "wage" and "pay" and refers to a reward or recompense for services performed.

  2. Allowances should be included in the monthly salary of petitioners for the purpose of computation of separation pay. This issue was settled in previous case law, which ruled that in the computation of backwages and separation pay, not only the basic salary but also transportation and emergency living allowances should be taken into account.

  3. The Supreme Court held that commissions should be included in the salary base for the computation of separation pay. Commissions are considered part of the wage or salary of an employee. The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate that commissions are direct remunerations for services rendered. If commissions are excluded from the salary base, it would mean that salesmen who rely solely on commissions or allowances would not be entitled to separation pay, which would be absurd. The Court also considered that the commissions were earned through actual market transactions attributable to the petitioners, and thus should be included in their separation pay. Lastly, the Court applied the rule that in the implementation and interpretation of labor laws, the welfare of the workingman should be the primary consideration. Therefore, all doubts in the interpretation of labor laws should be resolved in favor of the laborer.

PRINCIPLES:

  • When the law speaks in clear and categorical language, there is no room for interpretation or construction, only room for application.

  • The term "salary" is often used interchangeably with "wage" and "pay" and refers to a reward or recompense for services performed.

  • In the computation of backwages and separation pay, allowances should be taken into account along with the basic salary.

  • Commissions are considered part of the wage or salary of an employee.

  • In computing separation pay, commissions earned through actual market transactions should be included, taking into account the average commissions earned during the last year of employment.

  • In the implementation and interpretation of labor laws, the welfare of the workingman should be the primordial and paramount consideration. All doubts in the interpretation of labor laws should be resolved in favor of the laborer.