PACIWU-TUCP vs. NLRC and Vallacar Transit, Inc.

Employees who receive a guaranteed minimum wage in addition to commissions are entitled to 13th month pay, regardless of whether their compensation is labeled "purely commission" basis. The controlling consideration is the nature of the remuneration, not the label attached to it by the employer, and commissions that form part of the employee's wage or salary must be included in computing the 13th month pay.

Petitioner Philippine Agricultural Commercial and Industrial Workers Union (PACIWU)-TUCP is the exclusive bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc., a transportation company operating in the Visayas. The drivers and conductors of respondent company were compensated on a commission basis under their Collective Bargaining Agreement (CBA) concluded on October 17, 1988. The legal backdrop includes P.D. 851, the "13th Month Pay" Law, promulgated on December 16, 1975, which was later modified by Memorandum Order No. 28 issued by President Corazon C. Aquino on August 13, 1986, extending 13th month pay coverage to all rank-and-file employees.

Petitioner Philippine Agricultural Commercial and Industrial Workers Union (PACIWU)-TUCP, the exclusive bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc., instituted a complaint with the NLRC Regional Arbitration Branch No. VI in Bacolod City for payment of 13th month pay on behalf of the drivers and conductors of respondent company's Visayan operation. The union grounded its claim on the assertion that although the drivers and conductors were compensated on a "purely commission" basis as described in their Collective Bargaining Agreement (CBA), they were automatically entitled to the basic minimum pay mandated by law should their commission be less than their basic minimum for eight (8) hours of work.

In its position paper, respondent Vallacar Transit, Inc. contended that since the drivers and conductors were compensated on a purely commission basis, they were not entitled to 13th month pay pursuant to the exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the Implementation of the Thirteenth Month Pay Law. Respondent further contended that Section 2 of Article XIV of the CBA concluded on October 17, 1988 expressly provided that "drivers and conductors paid on a purely commission are not legally entitled to 13th month pay," and that the CBA, being the law between the parties, must be respected.

The drivers and conductors received 7% and 5% of the net fare collection for the driver and conductor respectively, sometimes even below the minimum wage. Respondent company admitted that the bus drivers and conductors were automatically entitled to the basic minimum pay mandated by law in case the commissions they earned were less than their basic minimum for eight (8) hours of work. The Labor Arbiter dismissed the complaint on May 22, 1992, and the NLRC affirmed the dismissal on appeal, as did the denial of the motion for reconsideration, prompting the instant petition for certiorari.

• Entitlement to 13th Month Pay: Petitioner argued that although the drivers and conductors were compensated on a "purely commission" basis as described in their CBA, they were automatically entitled to the basic minimum pay mandated by law should their commission be less than their basic minimum for eight (8) hours of work, and therefore they were entitled to 13th month pay.

• Exemption Under the Guidelines: Respondent contended that since the drivers and conductors were compensated on a purely commission basis, they were not entitled to 13th month pay pursuant to the exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the Implementation of the Thirteenth Month Pay Law, which exempted employers of those paid on purely commission, boundary, or task basis.
• CBA as Law Between the Parties: Respondent further contended that Section 2 of Article XIV of the CBA expressly provided that "drivers and conductors paid on a purely commission are not legally entitled to 13th month pay," and that the CBA, being the law between the parties, must be respected.

• Entitlement to 13th Month Pay: Whether the bus drivers and conductors of respondent Vallacar Transit, Inc. are entitled to 13th month pay notwithstanding their compensation being denominated as "purely commission" basis.

• Entitlement to 13th Month Pay: Yes. The bus drivers and conductors are entitled to 13th month pay because they receive a guaranteed minimum wage in addition to commissions, and the controlling consideration is the nature of the remuneration, not the label attached to it. The 13th month pay must be equivalent to one-twelfth (1/12) of their total earnings during the calendar year.

• Entitlement to 13th Month Pay: The Court traced the legal framework governing 13th month pay, beginning with P.D. 851, which required all employers to pay all employees receiving a basic salary of not more than P1,000.00 a month a 13th month pay. The Rules and Regulations Implementing P.D. No. 851 defined "basic salary" to include all remunerations or earnings paid by an employer to an employee for services rendered. Memorandum Order No. 28 modified Section 1 of P.D. 851 to require all employers to pay all their rank-and-file employees a 13th month pay. MOLE Explanatory Bulletin No. 86-12 clarified that employees paid a fixed or guaranteed wage plus commission are entitled to the mandated 13th month pay based on their total earnings during the calendar year, on both their fixed and guaranteed wage and commission.

The Court reasoned that from this legal milieu, every employee receiving a commission in addition to a fixed or guaranteed wage or salary is entitled to a 13th month pay. For purposes of entitling rank and file employees to 13th month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a commission with guaranteed wage, inasmuch as the bottom line is that they receive a guaranteed wage. In the case at bench, while the bus drivers and conductors were considered by respondent as being compensated on a commission basis, they were not paid purely by what they received as commission, as respondent admitted that they were automatically entitled to the basic minimum pay mandated by law in case the commissions they earned were less than their basic minimum for eight (8) hours of work.

The Court held that a contrary interpretation would allow an employer to skirt the law and would result in an absurd situation where an employee who receives a guaranteed minimum basic pay cannot be entitled to a 13th month pay simply because he is technically referred to by his employer per the CBA as an employee compensated on a purely commission basis. What is controlling is not the label attached to the remuneration that the employee receives but the nature of the remuneration and the purpose for which the 13th month pay was given to alleviate the plight of the working masses who are receiving low wages. The Court cited the "WHEREASES" of P.D. 851, which stated the necessity to further protect the level of real wages from the ravage of world-wide inflation, the absence of any increase in the legal minimum wage since 1970, and the Christmas season as an opportune time for society to show its concern for the plight of the working masses.

The Court defined commission as the recompense, compensation, or reward of an employee, agent, salesman, executor, trustee, receiver, factor, broker, or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit of the principal. While said commissions may be in the form of incentives or encouragement to inspire the bus drivers and conductors to put a little more zeal and industry on their jobs, they are direct remunerations for services rendered, given the small remuneration they receive for the services they render, which is precisely the reason why private respondent allowed the drivers and conductors a guaranteed minimum wage. The Court cited Philippine Duplicators, Inc. vs. National Labor Relations Commission, which held that Article 97(f) of the Labor Code defines "wage" as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered. The Court concluded that the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed minimum wage in case their commissions be less than the statutory minimum, and commissions only in case where the same is over and above the statutory minimum, must be equivalent to one-twelfth (1/12) of their total earnings during the calendar year.

• Nature of Remuneration Controls Over Label — What is controlling is not the label attached to the remuneration that the employee receives but the nature of the remuneration and the purpose for which the 13th month pay was given. The Court applied this doctrine to hold that employees who receive a guaranteed minimum wage plus commissions are entitled to 13th month pay notwithstanding the employer's characterization of their compensation as "purely commission" basis, citing Government Service Insurance System vs. Civil Service Commission and Dr. Manuel Baradero and Matilde Belo, G.R. No. 98395 and 102449, June 19, 1995.

• Commission as Part of Wage or Salary — Commission is the recompense, compensation, or reward of an employee, agent, salesman, executor, trustee, receiver, factor, broker, or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit of the principal. Commissions that are direct remunerations for services rendered form part of the employee's wage or salary for purposes of computing 13th month pay, as defined in Article 97(f) of the Labor Code, which includes remuneration or earnings "however designated" and whether fixed or ascertained on a time, task, piece, or commission basis.

• "For purposes of entitling rank and file employees a 13th month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the botton line is that they receive a guaranteed wage." — This passage articulates the core ratio decidendi: the guaranteed wage component, not the label, determines entitlement to 13th month pay.

• "Moreover, what is controlling is not the label attached to the remuneration that the employee receives but the nature of the remuneration and the purpose for which the 13th month pay was given to alleviate the plight of the working masses who are receiving low wages." — This states the controlling doctrine that the substance of the compensation arrangement governs over the employer's characterization, and is frequently cited in subsequent labor jurisprudence.

• "Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due to them under the law." — This passage expresses the Court's rejection of narrow, technical interpretations of labor laws that would defeat the purpose of the 13th month pay law.

• Philippine Duplicators, Inc. vs. National Labor Relations Commission, 227 SCRA 747 [1993] — Controlling precedent cited for the definition of "wage" under Article 97(f) of the Labor Code, which includes remuneration or earnings "however designated" and whether fixed or ascertained on a commission basis, and for the holding that sales commissions constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, hence part of their "wage" or "salary."

• Government Service Insurance System vs. Civil Service Commission and Dr. Manuel Baradero and Matilde Belo, G.R. No. 98395 and 102449, June 19, 1995 — Cited for the pronouncement that what ought to be controlling should be the nature of the remuneration, not the label attached to it.

• Songco vs. National Labor Relations Commission, 183 SCRA 610, 618 [1992] — Cited in support of the definition of commission as the recompense, compensation, or reward of an employee calculated as a percentage on the amount of his transactions or on the profit of the principal.

• Section 1, P.D. 851 — The "13th Month Pay" Law, which required all employers to pay all their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than December 24 of every year. The Court applied this provision as the foundational legal basis for the 13th month pay entitlement.

• Section 2, P.D. 851 — Provided that employers already paying their employees a 13th month pay or its equivalent are not covered by the Decree. The Court considered this in the context of the overall statutory scheme.

• Memorandum Order No. 28 (August 13, 1986) — Issued by President Corazon C. Aquino, modifying Section 1 of P.D. 851 to require all employers to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year. The Court applied this to extend 13th month pay coverage to all rank-and-file employees regardless of salary level.

• MOLE Explanatory Bulletin No. 86-12, Item No. 5(a) (November 24, 1986) — Provided that employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay, based on their total earnings during the calendar year, on both their fixed and guaranteed wage and commission. The Court relied on this as the correct construction of the entitlement.

• Article 97(f), Labor Code — Defines "wage" as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered. The Court applied this definition to conclude that commissions form part of the wage or salary of the bus drivers and conductors.

Padilla, Davide, Jr., Bellosillo, and Hermosisima, Jr., JJ., concurred.