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Reyes vs. NLRC

[G.R. No. 160233.
August 8, 2007]

Facts: Reyes was a salesman at Universal Robinas Grocery Division in Davao City. He became unit manager of
Sales Department - South Mindanao and remained such until his retirement. Reyes disagreed with the manner the
company computed his separation pay. Insisting that his retirement benefits and 13
th
month pay must be based on
the average monthly salary, which consists of basic salary and average monthly commission, he refused to accept
payment. Instead he filed a case for recovery of these monetary claims.

Issue:
Should the overriding commission be included in the computation of the retirement benefits and 13
th
month pay?

Held: Any seeming inconsistencies between Philippine Duplicators and Boie Takeda had been clarified by the
Court in the Resolution dated February 15, 1995 in the Philippine Duplicators case.

The Court thus clarified that in Philippine Duplicators, the salesmens commissions, comprising a pre-determined
percentage of the selling price of the goods sold by each salesman, were properly included in the term basic salary
for purposes of computing the 13th month pay. The salesmens commissions are not overtime payments, nor profit-
sharing payments nor any other fringe benefit, but a portion of the salary structure which represents an automatic
increment to the monetary value initially assigned to each unit of work rendered by a salesman.

Contrarily, in Boie-Takeda, the so-called commissions paid to or received by medical representatives of Boie-Takeda
Chemicals or by the rank and file employees of Philippine Fuji Xerox Co., were excluded from the term basic salary
because these were paid to the medical representatives and rank-and-file employees as productivity bonuses, which
are generally tied to the productivity, or capacity for revenue production, of a corporation and such bonuses closely
resemble profit-sharing payments and have no clear direct or necessary relation to the amount of work actually done
by each individual employee. Further, commissions paid by the Boie-Takeda Company to its medical representatives
could not have been sales commissions in the same sense that Philippine Duplicators paid the salesmen their sales
commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all.

In this case, SC ruled that commissions should be excluded.

Section 5 of Rule II of the Rules Implementing the New Retirement Law, provides:
The term [salary] does not include cost of living allowance, profit-sharing payments and other monetary benefits
which are not considered as part of or integrated into the regular salary of the employees.

Article 287, as amended by RA 7641, provides for two types of retirement:
(a) Compulsory upon reaching 65 years old
(b) optional primarily determined by CBA or other employment contract or employers retirement plan. In the
absence of any provision on optional retirement in a collective bargaining agreement, other employment
contract, or employers retirement plan, an employee may optionally retire upon reaching the age of 60
years or more, but not beyond 65 years, provided he has served at least five years in the establishment
concerned.

For the purpose of computing retirement pay, one-half month salary shall include all of the following:
1) 15 days salary based on the latest salary rate;
2) cash equivalent of 5 days of service incentive leave (or vacation leave);
3) 1/12 of the 13
th
month pay;
4) other benefits as may be agreed upon by employer and employee for inclusion.

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But, it shall not include the following:
1) cost of living allowance;
2) profit-sharing payments; and
3) other monetary benefits which are not considered as part of or integrated into the regular salary of the
employees

Petitioner filed for optional retirement upon reaching the age of 60. However, the basis in computing his retirement
benefits is his latest salary rate of P10,919.22 as the commissions he received are in the form of profit-sharing
payments specifically excluded by the foregoing rules.

Aside from the fact that as unit manager petitioner did not enter into actual sale transactions, but merely supervised
the salesmen under his control, the disputed commissions were not regularly received by him. Only when the
salesmen were able to collect from the sale transactions can petitioner receive the commissions. Conversely, if no
collections were made by the salesmen, then petitioner would receive no commissions at all.

In fine, the commissions which petitioner received were not part of his salary structure but were profit-sharing
payments and had no clear, direct or necessary relation to the amount of work he actually performed. The collection
made by the salesmen from the sale transactions was the profit of private respondent from which petitioner had a
share in the form of a commission.

It may be argued that petitioner may have exerted efforts in pushing the salesmen to close more sale transactions;
however, it is not the criterion which would entitle him to a commission, but the actual sale transactions brought about
by the individual efforts of the salesmen.