Question: The Supreme Court categorically declared that separation pay shall be allowed as a measure

of social justice only in those instances where the employees is validly dismissed for cause other than a:
a. Serious Misconduct
b. Gross and Habitual Neglect of duties
c. Willful Disobedience to Lawful Orders
d. Fraud and Willful Breach of Trust

Answer: A. Seriousl Misconduct

Question: Daisy, the branch manager of Tropical Footwear Inc. Was dismissed for serious misconduct.
She filed a compliant for illegal dismissal and damages. The Labor Arbiter sustained Daisy’s dismissal but
awarded her separation pay based on social justice with the company.
Was the award of the separation pay proper? Explain.

Answer: No. The award of separation pay is not proper because the employee was terminated for
serious misconduct and payment of separation pay will be to reward an employee for a wrongdoing.
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly the employee dismissed for causes other than serious
misconduct or those reflecting his moral character.
The policy of social justice is not intended to countenance wrongdoing. Compassion for the poor is an
imperative of every human society but only when the recipient is not a rascal claiming an undeserved
privilege. Those who invoke social justice may do so only if their hands are clean and their motives
blameless.
A contrary rule would have the effect of rewarding rather than punishing the erring employee for his
offense.

Question: An employee is NOT entitled to financial assistance in cases of legal dismissal when the
dismissal
a. is based on an offense reflecting the depraved character of the employee
b. is based on serious misconduct or breach of the employer’s trust
c. is ground on any of the causes provided by the Labor Code
d. when the employee has less than 10 years of service

Answer: C. Is a geound on any of the causes provided by the Labor Code

Question: Lizzy Lu is a sales associate for Luna Properties. The latter is looking to retrench Lizzy and five
other sales associates due to financial loses. Aside from a basic monthly salary, Lizzy and her colleagues
receive commissions on the sales they make as well as the cost of living and representation allowances.
In computing Lizzy’s separation pay, Luna Properties should consider her:
a. monthly salary only
b. monthly salary plus sales commission
c. monthly salary plus sales commission, plus cost of living allowance
d. monthly salary plus sales commission, plus sales commissions, plus cost of living allowance and
representation allowance

Answer: D. monthly salary plus sales commission, plus sales commission, plus cost of livng allowance
and representation allowance
Question: Robert Suarez is a salesman for Star Pharmaceuticals. Star Pharmaceuticals has applied with
the Department of Labor and Employment for clearance to terminate (by way of retrenchment) the
services of Suarez due to financial loses. Robert Suarez, aside from his monthly salary receives
commissions on the sales he makes. He also receives allowances. The existing CBA between Star
Pharmaceuticals and the union, of which Robert Suarez is a member, states that any employee
separated from employment for causes not due to the fault of the employee shall receive from the
company a retirement gratuity in an amount equivalent to one month’s salary per year of service.
Robert Suarez contends that in computing his separation pay, his sales commission and his allowances
should be included in the monthly salary. Do you agree?

Answer: I agree, with some conditions.

In computing separation pay, the monthly salary should include commissions because commission
received by a salesman is part of his salary.
But for allowance to be included as part of salary, they should be for services rendered or to be
rendered like cost of living allowance. But transportation and representation allowances are not
considered part of the salary because they are to meet expenses for transportation and representation.
Thus, cost of living allowances, but not transportation or representation allowances, shall be included as
part in the computation of separation pay.

Question: Pedro Tiongco was a salesman for ten years of Lakas Appliance Company (LAC). Due to
business reverses, the Company laid off. Tiongco and three other salesman and offered them separation
pay based on their monthly basic salary of P57,700.00 The three salesmen accepted their separation pay
and signed individual quitclaims stating, among others that they have no more claims or causes of action
whatsoever against LAC. The quitclaims were duly notarized. Tiongco refused to accept his separation
pay and instead, demanded that the said pay should be computed on the basis of his monthly basis
salary and his sales commissions. Upon LAC’s rejection of Tiongco’s demand, Tiongco filed the
appropriate complaint with the Labor Arbiter:

a. As Labor Arbiter, how will you resolve Tiongco’s complaint? Reasons.

Answer: As Labor Arbiter, I will grant the demand that Tiongco be paid his separation pay computed on
the basis of his monthly basic salary and his sales commissions. The sales commissions under the Labor
Code is part of the “wage” that the salesmen are entitled to receive for services rendered. Wages may
be fixed or ascertained on time, task, piece or commission basis.

b. If Tiongco obtains a favorable decision will the three other salesmen be entitled to separation pay
differential? Reasons.

 Answer: No. If the acceptance of their separation pay by the three other salesmen and their
signing individual quitclaims that stated that they have no more claims or causes of actions
whatsoever against LAC (where the quitclaims were even duly notarized) is voluntarily, they can
no longer ask for a recomputation of their separation pay according to the favorable decision
secured by Tiongco.
The salesmen signed quitclaim are not contrary to law, morals or public policy. Not all quitclaims are
invalid against public policy if they are voluntarily entered into and represents a reasonable settlement.