Songco v.

NLRC (1990)
G.R. Nos. 50999-51000 | 1990-03-23
Subject: Transportation and emergency living allowances are included in the computation
of separation pay; Earned sales commissions are included in the computation of separation
pay; Judicial Notice: some salesmen do not receive any basic salary but depend on
commissions and allowances or commissions alone; Commissions must be earned by actual
market transactions attributable to the employee; All doubts in the implementation and
interpretation of the provisions of the Labor Code shall be resolved in favor of labor
Facts:
F.E. Zuellig (M), Inc., filed with the Department of Labor an application seeking clearance to
terminate the services of Jose Songco, Romeo Cipres, and Amancio Manuel allegedly on the
ground of retrenchment due to financial losses. This application was seasonably opposed by
the employees alleging that the company is not suffering from any losses.
Songco, Cipres and Manile alleged that they are being dismissed because of their
membership in the union. At the last hearing of the case, they manifested that they are no
longer contesting their dismissal. However, they argued that they should receive separation
pay.
Under the employment contract, each of the dismissed employees receive a monthly salary
of P40,000 plus commissions for every sale they made. On the other hand, the CBA entered
between Zuellig and the union contained the provision that an employee who is permanent
lay-off, should receive an amount equivalent to one month's salary per year of service. On
the other hand, Article 284 of the Labor Code and Implementing Rules provide that the
retrenched employees should receive a separation pay equivalent to one month pay or at
least one-half month pay for every year of service, whichever is higher.
The dismissed employees alleged that their earned sales commission should be included in
their monthly salary for the purpose of computation of their separation pay.
In defense, Zuellig argued that if it were really the intention of the Labor Code to include
commission in the computation of separation pay, it could have explicitly said so in clear and
unequivocal terms. Furthermore, in the definition of the term "wage", "commission" is used
only as one of the features or designations attached to the word remuneration or earnings.
The Labor Arbiter ordered the company to pay the dismissed employees their separation pay
equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every
year of service. The NLRC affirmed the Labor Arbiters decision.
Held:
Transportation and emergency living allowances are included in the computation
of separation pay
1. In the computation of backwages and separation pay, the transportation and emergency

living allowances should also be taken together with the basic salary. (See Santos v. NLRC)
Earned sales commissions are included in the computation of separation pay
2. Article 97(f) of the Labor Code is explicit that commission is included in the definition of
the term "wage". It has been repeatedly declared that where the law speaks in clear and
categorical language, there is no room for interpretation or construction but only for
application.
3. The words salary and wage are generally refer to one and the same meaning, that is,
a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages"
and "salary". Since the words "wages", "pay" and "salary" have the same meaning, and
commission is included in the definition of "wage", it only follows that in the computation of
the separation pay, the salary base should also include the earned sales commissions.
4. Whether the commissions were in the form of incentives or encouragement, still these are
direct remuneration services rendered and contributed to the increase of income of Zuellig .
Judicial Notice: some salesmen do not receive any basic salary but depend on
commissions and allowances or commissions alone
5. Commission is the recompense, 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 commissions are part of their wage or salary.
6. The Supreme Court took 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 relationship exists.
Commissions must be earned by actual market transactions attributable to the
employee
7. The commissions also claimed ('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 employee. (See Soriano v. NLRC)
8. In the instant case, since the commissions were earned by actual market transactions
attributable to the employees, 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.
All doubts in the implementation and interpretation of the provisions of the Labor
Code shall be resolved in favor of labor
9. It should always be the final consideration that in carrying out and interpreting the Labor
Code's provisions and its implementing regulations, the workingman's welfare should be the

primordial and paramount consideration. This kind of interpretation gives meaning and
substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the
Labor Code and Article 1702 of the Civil Code that all doubts in the implementation and
interpretation of the provisions of the Labor Code shall be resolved in favor of labor. (See
Abella v. NLRC)