Netlink Computer Incorporated vs. Eric Delmo

Sales commissions may be paid in a foreign currency, even without a written stipulation, once payment in that currency has become an established company practice; the applicable conversion rate is the exchange rate at the time of payment, not at the time of the sales. The non-diminution rule under Article 100 of the Labor Code prevents an employer from unilaterally reducing or eliminating the practice.

Netlink Computer, Inc. Products and Services employed Eric S. Delmo as an account manager beginning on November 3, 1991. Delmo’s responsibility was to canvass and source clients and persuade them to purchase Netlink’s products and services. He worked in the field most of the time and, like his fellow account managers, was not required to accomplish time cards. Some of Delmo’s sales transactions were denominated in US dollars, and the compensation arrangement gave rise to the disputed US-dollar commissions.

On November 3, 1991, Netlink Computer, Inc. Products and Services hired Eric S. Delmo as an account manager tasked to canvass and source clients and convince them to purchase Netlink’s products and services. Delmo worked in the field most of the time. He and his fellow account managers were not required to accomplish time cards to record their personal presence in the office.

Delmo generated sales worth about ₱35,000,000.00, earning commissions amounting to ₱993,558.89 and US$7,588.30. When he requested payment of those commissions, Netlink refused and gave only partial cash advances chargeable to the commissions. Netlink later began to nitpick and fault find, stressing supposed absences and tardiness, and issued several memoranda detailing infractions of the company’s attendance policy in an effort to force Delmo to resign. Delmo nonetheless continued to generate substantial sales for Netlink.

On November 28, 1996, Delmo was refused entry into the company premises by the security guard pursuant to a memorandum. His personal belongings remained inside the premises. The incident prompted Delmo to file a complaint for illegal dismissal.

In its answer, Netlink alleged that company guidelines required all personnel, except company officers and authorized personnel in field project assignments, to use the bundy clock to punch in and out in the morning and afternoon. Netlink claimed it would lose on the business transactions closed by Delmo because of high equipment costs and because his biggest client had not yet paid. Netlink asserted that Delmo had become lax in his obligations, that other account managers had outperformed him, and that the warning, reprimand, and suspension memoranda were necessary management tools to instil discipline.

The records reflected that ALCATEL, Delmo’s biggest client, had not fully paid its account as of March 10, 1998. Netlink did not refute that it had paid Delmo and other sales agents commissions in US dollars on US-dollar-denominated sales; it argued only that the conversion should use the exchange rate at the time of sale. Netlink had paid ₱216,799.45 as advances against Delmo’s commissions and admitted ₱4,066.19 as net accrued commission payable. The Labor Arbiter credited Delmo with ₱993,558.89 and US$7,588.30 in unpaid commissions.

• Applicable Exchange Rate: Netlink argued that the Court of Appeals committed a palpable and reversible error by not holding that the applicable exchange rate for computing Delmo’s US-dollar commissions should be the rate prevailing when the sales were actually generated, not when payment was made.
• Commission Basis: Netlink maintained that commissions should be based only on sales generated, actually paid by, and collected from customers, and that the US-dollar commissions must be converted to Philippine pesos at the time of sale.
• Attorney’s Fees: Netlink contended that no cogent and justifiable reason existed for the award of attorney’s fees.

• Currency of Earnings: Delmo countered that because he had earned in US dollars, it was only fair that his commissions be paid in US dollars.
• Established Practice: Delmo argued that Netlink should not be allowed to flip-flop after it had paid commissions in US dollars on the sales generated by its sales agents on US-dollar-denominated transactions.
• Attorney’s Fees: Delmo argued that attorney’s fees were warranted because there was a unanimous finding that procedural due process had been violated.

• Payment in Foreign Currency: Whether Delmo’s commissions should be paid in US dollars despite the absence of a written agreement between the parties.
• Applicable Exchange Rate: Whether the applicable exchange rate for computing the US-dollar commissions is the rate at the time of sale or the rate at the time of payment.
• Attorney’s Fees: Whether the award of attorney’s fees was warranted.

• Payment in Foreign Currency: Yes. Payment in US dollars was required because the practice had ripened into a company policy protected from unilateral diminution under Article 100 of the Labor Code.
• Applicable Exchange Rate: The exchange rate at the time of payment controls, not the rate at the time of sale. The real value of the foreign exchange-incurred obligation must be preserved up to the date of payment.
• Attorney’s Fees: Yes. The 10% attorney’s fee award was warranted because Delmo incurred expenses to protect and enforce his right to his commissions.

• Payment in Foreign Currency: Under Republic Act No. 8183, Section 1, all monetary obligations must be settled in Philippine currency, but parties may agree that an obligation or transaction shall be settled in any other currency at the time of payment. The repeal of Republic Act No. 529 removed the prohibition on currency stipulation. Here, there was no written contract requiring US-dollar commissions, but Netlink did not refute the allegation that Delmo and its other sales agents had been paid in US dollars for US-dollar-denominated sales; instead, Netlink sought only a declaration that those commissions should be converted at the time of sale. This conduct was an implied admission that the practice had become company policy. Under Article 100 of the Labor Code, the phrase “supplements, or other employee benefits” includes compensation and privileges received aside from regular salary or wages, and Netlink could not unilaterally reduce, discontinue, or eliminate the practice. The Court noted that jurisprudence has not laid down any rule requiring a specific minimum number of years to establish a voluntary employer practice; cited cases involved practices lasting from two to six years. Payment of US-dollar commissions therefore ripened into a protected company practice.

• Applicable Exchange Rate: Neither Republic Act No. 529 nor Republic Act No. 8183 prescribed the applicable exchange rate for converting foreign currency-incurred obligations. The jurisprudence under Republic Act No. 529 remained applicable. In C.F. Sharp & Co. vs. Northwest Airlines, Inc., citing Asia World Recruitment, Inc. vs. NLRC, the Court held that the real value of the foreign exchange-incurred obligation up to the date of payment should be preserved. Because paying US-dollar commissions had ripened into a company practice, the commissions could not be converted to Philippine currency at the time of sale; otherwise, Delmo’s accrued commissions would be unjustly diminished.

• Attorney’s Fees: The Court affirmed the Court of Appeals’ reliance on Consolidated Rural Bank (Cagayan Valley), Inc. vs. NLRC, which recognized that in actions for recovery of wages or where an employee is forced to litigate and incur expenses to protect rights and interests, attorney’s fees of 10% of the total award are legally and morally justifiable even if not specifically claimed. Delmo had incurred expenses to protect and enforce his right to his commissions, making the award proper.

• Payment in foreign currency under Republic Act No. 8183 — All monetary obligations must be settled in Philippine currency, but the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment. The repeal of Republic Act No. 529 removed the prohibition on stipulating foreign currency. A foreign-currency payment may be required even without written agreement if it has become an established company practice.

• Non-diminution of benefits under Article 100 of the Labor Code — “Supplements, or other employee benefits being enjoyed at the time of promulgation of this Code” cannot be eliminated or diminished; the phrase “supplements, or other employee benefits” includes compensation and privileges received by an employee aside from regular salaries or wages. A company practice of paying US-dollar commissions is protected, and no specific minimum duration is required; practices lasting two, three, or six years have been recognized.

• Conversion rate for foreign currency obligations — Because neither Republic Act No. 529 nor Republic Act No. 8183 supplied the applicable exchange rate, the earlier jurisprudence under Republic Act No. 529 governs. The real value of a foreign exchange-incurred obligation up to the date of payment must be preserved; thus the rate at the time of payment, not the time of sale, controls.

• Attorney’s fees in recovery of wages — In actions for recovery of wages or where an employee is forced to litigate and incur expenses to protect rights and interests, attorney’s fees of 10% of the total award may be awarded even if not claimed.

• "In the absence of a written agreement between the employer and the employee that sales commissions shall be paid in a foreign currency, the latter has the right to be paid in such foreign currency once the same has become an established practice of the former. The rate of exchange at the time of payment, not the rate of exchange at the time of the sales, controls." — This states the decision’s controlling rule and resolves both the currency and conversion-rate questions.

• "The principle of non-diminution of benefits, which has been incorporated in Article 100 of the Labor Code, forbade Netlink from unilaterally reducing, diminishing, discontinuing or eliminating the practice. Verily, the phrase 'supplements, or other employee benefits' in Article 100 is construed to mean the compensation and privileges received by an employee aside from regular salaries or wages." — This excerpt supplies the doctrinal basis for treating the US-dollar commission practice as a protected benefit.

• "With the payment of US dollar commissions having ripened into a company practice, there is no way that the commissions due to Delmo were to be paid in US dollars or their equivalent in Philippine currency determined at the time of the sales. To rule otherwise would be to cause an unjust diminution of the commissions due and owing to Delmo." — This excerpt links the company-practice holding to the conclusion that the time-of-payment exchange rate governs.

• "The award of attorney's fees must, likewise, be upheld in line of (sic) the decision of the Supreme Court in the case of Consolidated Rural Bank (Cagayan Valley), Inc. vs. National Labor Relations Commission, 301 SCRA 223, 235, where it was held that 'in actions for recovery of wages or where an employee was forced to litigate and thus incur expenses to protect her rights and interests, even if not so claimed, an award of attorney's fees equivalent to ten percent (10%) of the total award is legally and morally justifiable. There is no doubt that in the present case, the private respondent has incurred expenses for the protection and enforcement of his right to his commissions." — This excerpt states the adopted basis for the attorney’s fee award.

• C.F. Sharp & Co. vs. Northwest Airlines, Inc., G.R. No. 133498, April 18, 2002, 381 SCRA 314 — Followed; explained that the repeal of Republic Act No. 529 by Republic Act No. 8183 removed the prohibition on foreign currency stipulations, but neither law specified an exchange rate, so the jurisprudence under Republic Act No. 529 remained applicable.

• Asia World Recruitment, Inc. vs. NLRC, G.R. No. 113363, August 24, 1999, 313 SCRA 1 — Followed through C.F. Sharp; required preservation of the real value of the foreign exchange-incurred obligation up to the date of payment.

• Davao Fruits Corporation vs. Associated Labor Unions, G.R. No. 85073, August 24, 1993, 225 SCRA 562 — Cited as an example of a company practice lasting six years that could not be unilaterally withdrawn.

• Davao Integrated Port Stevedoring Services vs. Abarquez, G.R. No. 102132, March 19, 1993, 220 SCRA 197 — Cited for recognizing a company practice of three years and nine months.

• Tiangco vs. Leogardo, Jr., No. L-57636, May 16, 1983, 122 SCRA 267 — Cited for recognizing a company practice of three years and four months.

• Sevilla Trading Company vs. Semana, G.R. No. 152456, April 28, 2004, 428 SCRA 239 — Cited for recognizing a company practice of at least two years.

• Consolidated Rural Bank (Cagayan Valley), Inc. vs. NLRC, 301 SCRA 223, 235 — Followed; held that in wage recovery actions, attorney’s fees of 10% of the total award may be awarded even if not claimed.

• Republic Act No. 8183, Section 1 — Provides that all monetary obligations shall be settled in Philippine currency, but the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment. Applied to permit US-dollar payment once the practice was established.

• Article 100, Labor Code — Prohibits elimination or diminution of supplements or other employee benefits being enjoyed at the time of promulgation of the Code. Applied to protect the company practice of paying US-dollar commissions.

• Republic Act No. 529, as amended — Repealed by Republic Act No. 8183; its repeal removed the prohibition on stipulating payment in a foreign currency. Its absence of a conversion-rate provision left earlier jurisprudence governing the applicable exchange rate.

No separate concurring opinion was issued. The decision was concurred in by:

• Chief Justice Maria Lourdes P. A. Sereno
• Associate Justice Teresita J. Leonardo-De Castro
• Associate Justice Martin S. Villarama, Jr.
• Associate Justice Bienvenido L. Reyes