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01 Dentech vs.

NLRC AUTHOR: Tan


[G.R. No. 81477 April 19, 1989] NOTES:

TOPIC: 13th Month Pay; History of the Law


PONENTE: GANCAYCO, J.
CASE LAW/ DOCTRINE:
Under the original provisions of PD 851, all employers are required to pay all their employees receiving a basic salary of not more
than Pl,000.00 a month, regardless of the nature of their employment, a 13th month pay. Under the rules and regulations
implementing said Presidential Decree, financially distressed employers are exempt from payment of 13 th month pay IF they have
prior authorization of the Secretary of Labor and Employment.

In 1986, PD 851 was amended and the ceiling of P1,000 basic salary per month was removed. Hence, all employers are now required
to pay all their rank-and-file employees 13th month pay.
FACTS:
Private respondents Marbella, et al. were employed as welders, upholsterers and painters by Dentech Manufacturing
Corporation, a firm engaged in the manufacture and sale of dental equipment and supplies. They were dismissed from the firm
beginning February 14, 1985 due to their alleged abandonment of work without informing the company about their reasons for
doing so.

Marbella et al filed a complaint with the arbitration branch of the NLRC for illegal dismissal and violation of Presidential Decree
No. 851, seeking reinstatement as well as the payment of their 13th month pay and service incentive leave pay, and separation
pay in the event that they are not reinstated.

Petitioners:
o Private respondents are not entitled to a 13th month pay.
o Each of the private respondents receive a total monthly compensation of more that Pl,000.00 and under Section 1 of
Presidential Decree No. 851, such employees are not entitled to receive a 13th month pay.
o The company is in bad financial shape and pursuant to Section 3 of the Decree, the firm is exempted from complying
with the provisions of the Decree.

LA: Marbella, et. al won

We also find respondent's contention for exemption in the payment of (the) 13th month pay as without validity
(sic). The ceiling of P1,000.00 a month in the matter of 13th month pay has been removed and complainants are
entitled to receive from respondents at least the unprescribed 13th month pay for the last three years based on
their uncontroverted pleadings.

Petitioners appealed to the NLRC, contending that no provision of law was cited in the Decision of the labor arbiter to support
the view therein that the 13th month pay ceiling of P1,000.00 had been duly eliminated.

NLRC: Marbella, et. al won. Decision of the LA affirmed.

For the record, Memorandum Order No. 28 issued by President Corazon C. Aquino modified Presidential Decree
No. 851 to the extent that all employers are ... (now) required to pay all their rank-and-file employees 13th month
pay, thus in effect removing from exclusion from entitlement to the (sic) 13th month pay those employees who
were receiving a basic salary of more than P1,000.00 a month.

At any rate the simple assertion of the respondent that it is in financial distress and thus exempt (sic) from
payment of 13th month pay (sic) to the complainants is not in itself sufficient to evade payment of the 13th month
pay to which complainants were entitled prior to the commencement of the respondent's financial problems.

The petitioners elevated the case to the SC, contending that Memorandum Order No. 28 cited by the NLRC cannot apply to the
case at bar. They point out that the said Memorandum Order was signed into law only in 1986, long after the case was
instituted with the NLRC and, accordingly, the same cannot be given a retroactive effect.

In seeking the dismissal of the Petition, the Solicitor General argues:


o That each of the private respondents is actually paid less than Pl,000.00 a month and that, accordingly, they
are entitled to a 13th month pay pursuant to Presidential Decree No. 851.
o That under the rules and regulations implementing the said Decree, a distressed employer shall qualify for
exemption from the requirements of the Decree only upon prior authorization from the Secretary of Labor
and Employment.
o That no such prior authorization had been obtained by the petitioner firm.
o That the Pl,000.00 ceiling recited in Presidential Decree No. 851 has been eliminated by Presidential Decree
No. 1364, promulgated on May 1, 1978.
ISSUE(S): Whether the private respondents are entitled as a matter of right to a 13th month pay.

HELD: YES. The P1,000 ceiling refers to basic salary, NOT monthly compensation. Since private respondents basic salary is less than
P1,000, they are entitled to 13th month pay. Moreover, petitioner cannot claim exemption as a financially distressed employer since
it failed to obtain the prior authorization from the SOLE.
RATIO:
Presidential Decree No. 851 was signed into law in 1975 by then President Ferdinand Marcos. Under the original provisions of
Section 1 thereof, all employers are required to pay all their employees receiving a basic salary of not more than Pl,000.00 a
month, regardless of the nature of their employment, a 13th month pay not later than December 24 of every year. Under
Section 3 of the rules and regulations implementing said Presidential Decree, financially distressed employers, i., e., those
currently incurring substantial losses, are not covered by the Decree. Section 7 thereof requires, however, that such distressed
employers must obtain the prior authorization of the Secretary of Labor and Employment before they may qualify for such
exemption.

On May 1, 1978, Presidential Decree No. 1364 was signed into law. The Decree enjoined the Department of Labor and
Employment to stop accepting applications for exemption under, inter alia, Presidential Decree No. 851.

On August 13, 1986, President Corazon C. Aquino issued Memorandum Order No. 28 which modified Section 1 of Presidential
Decree No. 851. The said issuance eliminated the Pl,000.00 salary ceiling.

From the foregoing, it clearly appears that the petitioners have no basis to claim that the company is exempted from complying
with the pertinent provisions of the law relating to the payment of 13th month compensation.

The Pl,000.00 salary ceiling provided in Presidential Decree No. 851 pertains to basic salary, not total monthly compensation.
The petitioners admit that the private respondents work only five days a week and that they each receive a basic daily wage of
P40.00 only. A simple computation of the basic daily wage multiplied by the number of working days in a month results in an
amount of less than Pl,000.00. Thus, there is no basis for the contention that the company is exempted from the provision of
Presidential Decree No. 851 which mandated the payment of 13th month compensation to employees receiving less than
P1,000.00 a month.

Even assuming, arguendo, that the private respondents are each paid a monthly salary of over Pl,000.00, the company is still not
in a position to claim exemption. The rules and regulations implementing Presidential Decree No. 851 provide that a distressed
employer shall qualify for exemption from the requirements of the Decree only upon prior authorization from the Secretary of
Labor and Employment. As correctly pointed out by the Solicitor General, no such prior authorization had been obtained by the
petitioner firm.

2. Archilles Manufacturing Corporation v. AUTHOR: TIGLAO


NLRC Q: Why are the respondents entitled to 13th month pay?
[G.R. No. 107225 | 02 June 1995] A: Even if you worked even just for a month during one calendar year, you are entitled
TOPIC: 13 Month Pay | PONENTE: J. to 13th month pay.
th

Bellosillo
CASE LAW/ DOCTRINE:
Although the reinstatement aspect of the decision is immediately executory, it does not follow that it is self executory. There must
be a writ of execution issued in order to allow the employer to exercise his option to merely reinstate the employee in the payroll
under Article 223 of the Labor Code.
FACTS:
Private respondents were employed by Archilles to work in its steel factory. They receive a daily wage of Php 96.00.
Within the steel factory, there is a bunkhouse where employees, such as responents, may rest.
In 1988, a mauling incident occurred involving a relative of an employee. This resulted to Archilles ordering its employees to
desist from bringing their relatives into the bunkhouse. Respondents ignored this directive.
In May 1990, Archilles ordered the respondents to remove their families from the bunkhouse. They complied; however,
respondents failed to report this to the management, as required.
Instead, they chose to absent themselves from work. Hence, on 18 May 1990, they were terminated in violation of the
bunkhouse order.
Respondents filed for illegal dismissal against Archilles.
LA: In favor of respondents. Ordered their reinstatement and payment of backwages and 13 th month pay for 1990.
NLRC: Respondents filed a motion for execution pending appeal. Petitioners opposed.
NLRC ruled in favor of Archilles, stating that the dismissal was valid because of the violation of the bunkhouse order.
IMPORTANT: While the NLRC ruled in favor of Archilles, the latter filed a motion for partial reconsideration insofar as this
part of the decision is concerned
NLRC ordered ARCHILLES to pay private respondents their "withheld" salaries from 19 September 1991 when it
filed its opposition to the motion for issuance of a writ of execution until the promulgation of the NLRC Decision
(11 August 1992) on the ground that the order of reinstatement of the Labor Arbiter was immediately executory,
even pending appeal. And since ARCHILLES in its opposition alleged that actual reinstatement was no longer
possible as it would affect the peace and order situation in the steel factory, clearly, ARCHILLES had opted for
payroll reinstatement of private respondents. NLRC also ordered ARCHILLES to pay their proportionate 13th month
pay for 1990 and P12,351.30 representing 10% of the total judgment award of P123,513.00 as attorney's fees
Archilles now prays for the Court to partially annul the decision insofar as the above quoted portion is concerned.
ISSUE(S):
1. W/N a writ of execution is necessary despite pending appeal.
2. W/N the award of 13th month pay was proper.

HELD: In both cases, the ruling is on the affirmative.


RATIO:
Although the reinstatement aspect of the decision is immediately executory, it does not follow that it is self-executory. There must
be a writ of execution which may be issued motu proprio or on motion of an interested party. (Maranaw Hotel Resort Corporation v.
NLRC)

It is important to note that the motions of private respondents for the issuance of a writ of execution were not acted upon by NLRC.
It was not shown that respondent exerted efforts to have their motions resolved. They are deemed to have abandoned their
motions for execution pending appeal. They cannot now ask that the writ of execution be issued since their dismissal was found to
be for cause.

On the second issue, which refers to the propriety of the award of a 13th month pay, paragraph 6 of the Revised Guidelines on the
Implementation of the 13th Month Pay Law (P. D. 851) provides that "(a)n employee who has resigned or whose services were
terminated at any time before the payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of
time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his
resignation or termination from the
service . . . The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee
relationship. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all
liabilities and property accountability, so can the employee demand the payment of all benefits due him upon the termination of the
relationship."

Furthermore, Sec. 4 of the original Implementing Rules of P.D. 851 mandates employers to pay their employees a 13th month pay
not later than the 24th of December every year provided that they have worked for at least one (1) month during a calendar year. In
effect, this statutory benefit is automatically vested in the employee who has at least worked for one month during the calendar
year. As correctly stated by the Solicitor General, such benefit may not be lost or forfeited even in the event of the employee's
subsequent dismissal for cause without violating his property rights.
RELEVANT PROVISION:
Article 223(3), Labor Code:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is
concerned, shall be immediately executory, even pending appeal. The employee shall either be admitted back to work under the
same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the
payroll. The posting of the bond by the employer shall not stay the execution for reinstatement provided herein.

3. Central Azucarera De Tarlac vs. Central Azucarera De Tarlac AUTHOR: Valera


Labor Union NOTES:
G.R. No. 188949 July 26, 2010
Amount and Date of Payment(13th month Pay): Nachura:
CASE LAW/ DOCTRINE:
The supplemental rules of PD 851 which clarifies that overtime pay, earning and other remuneration that are not part of
the basic salary shall not be included in the computation of the 13th month pay.
Under the Revised Guidelines on the implementation of the 13th month pay, it was specifically stated that the minimum
13th month pay shall not be less than 1/12 of the total basic salary earned by an employee within a calendar year.
Further, the term basic salary of an employee for the purpose of computing 13th month pay was interpreted to include all
remuneration or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which
are not integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday pay, and cost of living allowances. However, these salary related benefits should
be included as part of the basic salary in the computation of the 13thmonth pay if, by individual or collective agreement, company
practice or policy, the same are treated as part of the basic salary of the employees
FACTS:
Petitioner is a sugar manufacturer while respondent is a legitimate labor organization which is the exclusive bargaining
representative of p
etitioner rank and file employees.
In compliance with PD 851, petitioner granted its employees 13 th month pay since 1975. The formula used was the Total
Basic Annual Salary divided by 12. Included in petitioners computation of the Total Basic Annual Salary were the basic
monthly pay, first 8 hours of overtime pay on Sundays and Legal/special holiday; night premium pay, and vacation of sick
leaves for each year. This computation was used by petitioner until 2006.
On Nov 6, 2004, respondents staged a strike which led to petitioners declaring a temporary cessation of operations.
On December 2005, all the striking union members were allowed to return to work., but petitioner declared on April and
May another temporary cessation of operations which was lifted on June 2006, the rank and file employees were allowed
to work on 15 days per month rotation basis which lasted til Sept 2006,
in Dec 2006, petitioner gave the employees their 13th month pay based on the employees total earning during the year
divided by 12
Respondents objected the computation and averred that petitioner did not adhere to the usual computation of the 13 th
month pay. They claim that the divisor should have been 8 months and not 12 because the employees worked only for 8
months n 2006. And they also asserted that petitioner did not observe the company practice of giving its employees the
guaranteed amount equivalent to their one month pay, in instances where the computed 13 th month pay was less than
their basic monthly pay.
Parties tried to thresh out their differences in accordance with the grievance procedure, and during a grievance meeting,
the petitioner explained that the change in the computation was intended to rectify and error in the computation,
particularly the concept of basic pay which should have included only the basic monthly pay.
For failure of the parties to arrive at a settlement, the respondents applied for preventive mediation in the NCMB(National
Conciliation and Mediation Board) despite 4 conciliatory meetings the parties still fail to settle.
On March 29, 2007, respondents filed a complaint against petitioner for money claims based on the alleged diminution of
benefits. Erroneous computation of 13th month pay before the Regional Arbitration Branch of the NLRC.
The LA dismissed the complaint and held that the petitioner had the right to rectify the error in the computation of the 13 th
month pay.
The NLRC reversed the LA decision and ordered to adhere to its established computation of the 13th month pay.
The CA dismissed Petitioners appeal and affirmed the NLRC decision.
ISSUE(S):
WON petitioners have a right to rectify the supposed error in its computation of the 13 th month pay?
HELD:
NO.
RATIO:
The 13th month pay mandated by PD 851 represents an additional income based on wage but not part of the wage. It is
equivalent to 1/12th of the total basic salary earned by an employee within a calendar year. All rank and file
employees, regardless of their designation or employment status and irrespective of the method by which their wages are
paid, are entitled to this benefit, provided that they have worked for at least one month during the calendar year. If the
employee worked for only a portion of the year, the 13thmonth pay is computed pro rata.
Petitioner argues that there was an error in its computation of the 13 th month pay, as a result of its interpretation of PD
851, the error was only discovered only after 30 years only when respondents raised such issue.
Petitioners admit that it was an error that was repeatedly committed for almost 30 years, they insist that the length of
time during which an employer has performed a certain act beneficial to the employees, does not prove that such an
act was not done in error. It maintains that the for the claim for mistake to be negated, there must be a clear showing
that the employer had freely, voluntarily and continuously performed the act, knowing that he is no obligation to do so.
Petitioner asserts that such voluntariness was absent.
The IRR of PD 851 provides the definition of 13month pay and basic salary
Sec. 2. Definition of certain terms. As used in this issuance:
(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year
(b) "Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services rendered
but may not include cost of living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions
No. 174, profit sharing payments, and all allowances and monetary benefits which are not considered or integrated as
part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16,
1975.
The supplemental rules of PD 851 which clarifies that overtime pay, earning and other remuneration that are not part
of the basic salary shall not be included in the computation of the 13 th month pay.
Under the Revised Guidelines on the implementation of the 13 th month pay, it was specifically stated that the minimum
13th month pay shall not be less than 1/12 of the total basic salary earned by an employee within a calendar year.
Further, the term basic salary of an employee for the purpose of computing 13 th month pay was interpreted to include
all remuneration or earnings paid by the employer for services rendered, but does not include allowances and
monetary benefits which are not integrated as part of the regular or basic salary, such as the cash equivalent of unused
vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost of living allowances.
However, these salary related benefits should be included as part of the basic salary in the computation of the
13thmonth pay if, by individual or collective agreement, company practice or policy, the same are treated as part of the
basic salary of the employees..
It is clear that there could have no erroneous interpretation of what is included in the term basic salary for purposes of
computing the 13th month pay of employees, since from the inception of PD 851, clear cut administrative guidelines
have been issued to insure uniformity in the interpretation, application and enforcement of PD 851.
The SC agrees with the CA in holding that the practice of petitioner in giving 13 th month pay based on the employees gross
annual earning which included the basic monthly salary, premium pay for work on rest days and special holidays , night shift
differential pay and holiday pay continued for almost 30 years has ripened into a company policy or practice which cannot
be unilaterally withdrawn.
Art. 100 of the LC, the Non-diminution rule, mandates that the benefits given to employees cannot be taken back or
reduced unilaterally by the employer because the benefit has become part of the employment contract, written or
unwritten since it applies if its shown that the grant is based on an express policy or has ripened into a practice over a
long time and that practice is consistent and deliberate. Nevertheless, the rule will not apply if the practice is due to
error.
Petitioners argument that the gran of benefit was not voluntary and was due to error is untenable. No doubtful or
difficult question of law is involved in this case. The guidelines set are not difficult to decipher, and the voluntariness of
the grant was manifested by the number of years the employer had paid such benefit. Petitioners only changed the
formula only after the dispute between the parties erupted, such act indicates a badge of bad faith.
Petitioners argument that it is suffering from financial losses to claim exemption from the coverage of the law on 13th
month pay, Under sec 7. Of the IRR of PD 851, distressed employers shall qualify for exemption from the requirement
is only upon the prior authorization by the Sec. of Labor.
DISSENTING/CONCURRING OPINION(S):

4. JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL v. AUTHOR: ACIDO (edited MENDOZAs digest)
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), NOTES: Parang wala namang about 13th month pay haha
LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC
G.R. No. 50999-51000. March 23, 1990
TOPIC: 13th Month Pay Basic Wage/Commissions PONENTE:
Medialdea

CASE LAW/ DOCTRINE:


Commission is the recompense, compensation or reward of an 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 to the principal.
FACTS:
Private respondent F.E. Zuellig Inc. filed with the DOLE Regional Office No. 4 an application seeking clearance to terminate the
services of petitioners allegedly on the ground of retrenchment due to financial losses. At first the petitioners opposed the
application alleging that the company is not suffering from any losses and that they are being dismissed because of their
membership in the union.
However, at the last hearing of the case, petitioners manifested that they are no longer contesting their dismissal. The parties
then agreed that the sole issue to be resolved is the basis of the separation pay due to petitioners. Petitioners, who were in
the sales force of Zuellig, received monthly salaries of at least P400.00. In addition, they received commissions for every sale
they made.
According to Article XIV - Retirement Gratuity of their CBA: Any employee, who is separated from employment due to old age,
sickness, death or permanent lay-off not due to the fault of said employee shall receive from the company a retirement gratuity
in an amount equivalent to 1 months salary per year of service.
On the other hand, Article 284 of the Labor Code states that: In case of termination due to the installation of labor-saving
devices or redundancy, the separation pay shall be equivalent to 1 month pay or to at least 1 month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and other similar causes, the separation pay shall be
equivalent to 1 month pay or at least 1/2 month pay for every year of service, whichever is higher.
LA: The petitioners separation pay should be computed similar to what was stated in the CBA or equivalent to their one month
salary (exclusive of commissions, allowances, etc.) for every year of service that they have worked.
NLRC: dismissed the petitioners appeal. Hence, this petition for certiorari in the SC.
ISSUE: Whether or not earned sales commission should be included in the monthly salary of petitioner for the purpose of
computation of their separation pay.

HELD: Yes. Petition granted.


RATIO:
Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has been repeatedly declared
by the courts that where the law speaks in clear and categorical language, there is no room for interpretation or construction;
there is only room for application.
Salary," the etymology of which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of which
is the Middle English word "wagen". Both words 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".
Inasmuch as the words "wages", "pay" and "salary" have the same meaning, and commission is included in the definition of
"wage", the logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should
include also their earned sales commissions.
Granting, in gratia argumenti, that the commissions were in the form of incentives or encouragement, so that the petitioners
would be inspired to put a little more industry on the jobs particularly assigned to them, still these commissions are direct
remuneration services rendered which contributed to the increase of income of Zuellig. 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.
Since the commissions in the present case were earned by actual market transactions attributable to petitioners, these should
be included in their separation pay.

05. Boie Takeda v. dela Serna AUTHOR: Adre


[228 SCRA 329 (1993)] NOTES: same case as Paus. under cash/wage commission.
TOPIC: Basic wage/commissions 2 consolidated cases.
PONENTE: NARVASA, C.J
CASE LAW/ DOCTRINE: Commissions do not form part of the basic salary. In remunerative schemes consisting of a fixed or
guaranteed wage plus commission, the fixed or guaranteed wage is patently the basic salary for this is what the employee receives
for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions.
They are, as such, additional pay, which this Court has made clear do not form part of the basic salary.
FACTS:
state of the law when the controversies at bar arose:
P.D. No. 851: Thirteen-Month Pay Law.
Sec. 1:, all employers are required to pay all their employees receiving basic salary of not more than P 1,000.00 a month,
regardless of the nature of the employment, and such should be paid on December 24 of every year.
The Rules and Regulations Implementing P.D. 851:
o Defined 13-month pay and basic salary and the employers exempted from giving it and to whom it is made
applicable.
Supplementary Rules and Regulations Implementing P.D. 851 were subsequently issued by Minister Ople which set items of
compensation not included in the computation of 13-month pay. (overtime pay, earnings and other remunerations which
are not part of basic salary shall not be included in the computation of 13-month pay).
Pres. Corazon Aquino promulgated on August 13, 1985 M.O. No. 28, containing a single provision that modifies P.D. 851 by
removing the salary ceiling of P 1,000.00 a month.
More than a year later, Revised Guidelines on the Implementation of the 13-month pay law was promulgated by the then
Labor Secretary Franklin Drilon, among other things, defined particularly what remunerative items were and were not
included in the concept of 13-month pay, and specifically dealt with employees who are paid a fixed or guaranteed wage
plus commission or commissions were included in the computation of 13th month pay)
1st case: Boie-Takeda Chemicals, Inc. v. Dela Serna
A routine inspection was conducted in the premises of Boie-Takeda by Labor and Development Officer Reynaldo B. Ramos.
He found that in computing the medical representatives 1-month pay, the commissions were not included. A Notice of
Inspection Result was served on petitioner to effect restitution or correction of the underpayment of 13-month pay for the
years, 1986 to 1988 of medical representatives.
Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and expressing the view that the
commission paid to its medical representatives are not to be included in the computation of the 13-moth pay since the law
and its implementing rules speak of REGULAR or BASIC salary and therefore exclude all remunerations which are not part of
the REGULAR salary.
Regional Dir. Luna Piezas issued an order for the payment of underpaid 13-month pay for the years 1986, 1987 and 1988.
A motion for reconsideration was filed and the then Acting labor Secretary Dionisio de la Serna affirmed the order with
modification that the sales commission earned of medical representatives before August 13, 1989 (effectivity date of MO
28 and its implementing guidelines) shall be excluded in the computation of the 13-month pay.
2nd Case: Philippine Fuji Xerox Corp. v. Trajano: routine inspection was likewise conducted and there was underpayment (62
employees) of 13th month pay since commissions were not included. They were directed to pay within 5 days but Fuji took no
action. R.D. Piezas issued order for payment and an appeal was made by Fuji but was denied.
ISSUE(S): WON COMMISSIONS ARE INCLUDED IN THE COMPUTATION OF 13TH MONTH PAY.
HELD: NO.
WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section 5 (a) of the Revised Guidelines on
the Implementation of the 13th Month Pay Law issued on November 126, 1987 by then Labor Secretary Franklin M. Drilon is
declared null and void as being violative of the law said Guidelines were issued to implement, hence issued with grave abuse of
discretion correctible by the writ of prohibition and certiorari. The assailed Orders of January 17, 1990 and October 10, 1991 based
thereon are SET ASIDE.
RATIO:
Contrary to respondents contention, M.O No. 28 did not repeal, supersede or abrogate P.D. 851:
From the language of MO No. 28, it merely modified Section 1 of the decree by removing the P 1,000.00 salary ceiling.
The concept of 13th Month pay as envisioned, defined and implemented under P.D. 851 remained unaltered, and while
entitlement to said benefit was no longer limited to employees receiving a monthly basic salary of not more than P 1,000.00
said benefit was, and still is, to be computed on the basic salary of the employee-recipient as provided under P.D. 851.
Thus, the interpretation given to the term basic salary was defined in PD 851 applies equally to basic salary under M.O.
No. 28. The term basic salary is to be understood in its common, generally accepted meaning, i.e., as a rate of pay for a
standard work period exclusive of such additional payments as bonuses and overtime.
Remunerative schemes consists of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently
the basic salary for this is what the employee receives for a standard work period. Commissions are given for extra efforts
exerted in consummating sales of other related transactions. They are, as such, additional pay, which the SC has made clear
do not from part of the basic salary.

Supreme Court said that, including commissions in the computation of the 13th month pay, the second paragraph of Section 5(a) of
the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded the concept of "basic salary" as defined
in P.D. 851. It is a fundamental rule that implementing rules cannot add to or detract from the provisions of the law it is designed to
implement. Administrative regulations adopted under legislative authority by a department must be in harmony with the provisions
of the law they are intended to carry into effect. They cannot widen its scope. An administrative agency cannot amend an act of
Congress.
Just In Case: Present case distinguished from Songco v. National Labor Relations Commission.Respondents would do well to
distinguish this case from Songco vs. National Labor Relations Commission upon which they rely so heavily. What was involved
therein was the term salary without the restrictive adjective basic. Thus, in said case, we construed the term in its generic sense
to refer to all types of direct remunerations for services rendered, including commissions. In the same case, we also 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, which statement is quite significant in that it speaks of a basic salary
apart and distinct from commissions and allowances. Instead of supporting respondents stand, it would appear that Songco
itself recognizes that commissions are not part of basic salary.

6. PHILIPPINE DUPLICATORS, INC. v. NLRC, PHILIPPINE DUPLICATORS AUTHOR: Castro


EMPLOYEES UNION-TUPAS NOTES: Supra case. Copied from Dan the Mans
[G.R. 110068. Feb 15, 1995] digest. Only reworded the issue and omitted
TOPIC: Basic wage/commissions some details.
PONENTE: Feliciano, J.
CASE LAW/ DOCTRINE: Sales commissions, which are effectively an integral portion of the basic salary structure of an employee,
shall be included in determining his 13th month pay.
FACTS:
Previously (1993), the Court rendered a decision through its 3 rd division directing Phil. Duplicators to pay 13th month pay to its
employees computed on the basis of their fixed wages plus sales commissions.
Phil. Duplicators now contend that the decision in Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna should be used as
precedent for this case under the doctrine of stare decisis.
o Via (a) a Motion for Leave to Admit 2nd Motion for Reconsideration and (b) a 2nd MR
o Petitioner: decision in the Duplicators case should now be considered as abandoned or reversed by the Boie-Takeda
decision, considering that the latter went "directly opposite and contrary to" the conclusion reached in the former
Boie-Takeda case
o NOTE: the similar issue in this case and in Boie-Takeda is the commission of the employees in form of bonuses and
WON they should be deemed part of the basic salary in the computation of the 13 th month pay.
o nullified the Sec 5(a), 2nd par. of the Revised Guidelines on the implementation of the 13 th month pay law issued by
Secretary of Labor Drilon
ISSUE(S): Whether sales commissions shall be included in the term basic salary for the purpose of computing the 13 th month pay
HELD: Yes

SALES COMMISSIONS PRODUCTIVITY BONUSES (Boie-Takeda)


intimately related to or directly proportional to the extent or Generally tied to the productivity or profit generation of the
energy of an employee's endeavors employer corporation.
Paid upon the specific results achieved by a salesman-employee. Not directly dependent on the extent an individual employee
exerts himself
Percentage of the sales closed by a salesman and operates as an Is an extra - no specific additional services are rendered by
integral part of such salesman's basic pay any particular employee and hence not legally demandable,
absent a contractual undertaking to pay it.

The case of Phil. Duplicators is that of a sales commission and should thus be included in the "basic salary" for the computation
of their 13th month pay.
o Sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen.
o These commissions are NOT overtime payments, nor profit-sharing payments nor any other fringe benefit.
o Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the goods sold by each
salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay.
Supplementary Rules and Regulations Implementing P.D. No. 851 (later issued by former Labor Minister Ople) sought to clarify
the scope of items excluded in the computation of the 13th month pay: Sec. 4. Overtime pay, earnings and other
remunerations which are NOT part of the basic salary shall not be included in the computation of the 13th month pay.
o 3rd item excluded from "basic salary" is cast in open ended and circular terms (other remunerations which are not part
of the basic salary)
o However, what particular types of earnings and remuneration are or are not properly included or integrated in the
basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each
case.
o In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing
payments, they are properly EXCLUDED in computing the 13th month pay.
o Sales commissions (an integral portion of the basic salary structure of an employee), shall be included in determining
his 13th month pay.

FACTS OF PHIL. DUPLICATORS FACTS OF BOIE-TAKEDA


Employees were salesmen Employees were medical representatives (NOT salesmen
they do not effect sales at all)
Make or close a sale of duplicating machines Engaged in the promotion of pharmaceutical products or
medical devices manufactured by their employer.
They commonly leave medical samples with each physician
visited but those samples are not sold" to the physician
and the physician is as a matter of professional ethics,
prohibited from selling such samples to their patients
Phil. Duplicators pays its salesmen a small fixed or They had a guaranteed wage
guaranteed wage
Sales commissions received for every duplicating machine Commissions paid to or received by medical
sold constituted part of the basic compensation or representatives were productivity bonuses
remuneration of the salesmen of Philippine Duplicators for
doing their job
Portion of the salary structure representing commissions
simply comprised an automatic increment to the
monetary value initially assigned to each unit of work
rendered by a salesman
The greater part of the salesmen's wages or salaries being
composed of the sales or incentive commissions (sales
commissions) earned on actual sales closed by them (70-
85% of their wage)

07. Iran v. NLRC AUTHOR: Concepcion/Pineda


[G.R. No. 121927; 22 April 1998] NOTES:
TOPIC: 13th month pay
CASE LAW/ DOCTRINE:
PD 851, which provides for the payment of 13th month pay, intends to grant additional income (in the form of the 13 th
month pay) to employees NOT YET receiving the same. It does not intend for a double burden to be imposed on the
employer. Hence, if the employer already pays the equivalent of 1/12 of the employees basic salary (i.e. 13th month pay)
on his own initiative, he is already deemed complying with PD 851.

FACTS:
Iran is engaged in softdrinks merchandising and distribution. Respondent-Employees serve as drivers, salesmen, field
personnel, etc.
Due to cash shortages discovered by Iran, the Respondents were terminated.
Respondents filed for illegal dismissal and underpayment of 13th month pay.
In response, Iran presented vouchers denominated as 13 th month pay signed by Respondents as proof that the latter has
already received the 13th month pay.
LA, NLRC: valid dismissal, but Iran must pay 13th month pay
ISSUE(S): W/N the vouchers prove due payment was made by Iran

HELD: Yes. However, the amount covered by the vouchers does not meet the value of the 13th month pay. Iran must pay difference
between amount due and voucher amount. Also, the vouchers do not cover the entire period of employment, hence, for the years
Iran failed to pay, he must pay. (In sum, 13th month pay is still due. But Iran can credit the amount paid as reflected in vouchers.)

Not-related: Dismissal for just cause, but there was failure to follow procedural due process, hence damages must be awarded.

RATIO:
Amount of 13th month pay = 1/12 of the employees basic salary (annual)
PD 851, which provides for the payment of 13th month pay, intends to grant additional income (in the form of the 13 th
month pay) to employees NOT YET receiving the same. It does not intend for a double burden to be imposed on the
employer. Hence, if the employer already pays the equivalent of 1/12 of the employees basic salary (i.e. 13 th month pay)
on his own initiative, he is already deemed complying with PD 851.
Hence, the amount already paid by Iran to Respondents must be credited from the 13 th month pay amount due to them.
DISSENTING/CONCURRING OPINION(S):

08 Framanlis Farms, Inc. v. MOLE AUTHOR: De Leon


G.R. No. 72616-17 March 8, 1989
TOPIC: Substitute payment
PONENTE: GRIO-AQUINO, J.
CASE LAW/ DOCTRINE: such benefits in the form of food or free electricity, assuming they were given, were not a proper substitute
for the 13th month pay required by law.

FACTS:
In April 1980, eighteen (18) employees of the petitioners filed against their employer, and the other petitioners two labor standard
cases alleging that in 1977 to 1979 they were not paid emergency cost of living allowance (ECOLA) minimum wage, 13th month pay,
holiday pay, and service incentive leave pay.

Petitioners (company) alleged that the private respondents were not regular workers on their hacienda but were migratory
(sacadas) or pakyaw workers who worked on-and-off and were hired seasonally, or only during the milling season, to do piece-work
on the farms, hence, they were not entitled to the benefits claimed by them. They also alleged that under the decrees, the living
allowance shall be paid on a monthly, not percentage, basis depending on the total assets or authorized capital stock of the
employer, whichever is higher and applicable. They admitted that their total assets and authorized capital stock exceeded P2 million.
However, in 1977 they had applied for exemption under PDs 525 and 1123 but no ruling has been issued by the Ministry of Labor on
their application.

The claims for holiday pay, service incentive leave pay, social amelioration bonus and underpayment of minimum wage were not
controverted. With respect to the complainants' other claims, the petitioners submitted only random payrolls which showed that
the women workers were underpaid as they were receiving an average daily wage of P5.94 only, although the male workers
received P10 more or less, per day.

Minister of labor ruled in favor of the employees.


Deputy minister of labor modified. (binawasan yung award, mahaba yung award pag nilagay ko dito)
Anyway, both of them ruled that:
The claims for 13th month pay for 1977, as well as for ECOLA under PD Nos. 525 and 1123 shall, pending outcome of respondent's
application for exemption therefrom, be held in abeyance."

Deputy Minister clarified that pakyaw workers were excluded from holiday and service incentive leave pay

Upon the denial of its motion for reconsideration, Framanlis Farms, Inc. filed this petition for certiorari alleging that the Deputy
Minister erred:

2. in requiring the petitioners to pay 13th month pay despite the fact that they (petitioners) had substantially
complied with the requirement by extending yearly bonuses and other benefits in kind and in cash to the complainants,
pursuant to Section 3(c) of PD 851 which exempts the employer from paying 13th month pay when its equivalent has
already been given;
3. in not precisely stating who among the private respondents are pakyaw and non-pakyaw workers.

ISSUE(S): W/N the petitioner complied with the requirement of 13th month pay

HELD: No.
RATIO: petitioners admitted that they failed to pay their workers 13th month pay in 1978 and 1979. However, they argued that they
substantially complied with the law by giving their workers a yearly bonus and other non-monetary benefits amounting to not less
than 1/12th of their basic salary, in the form of:

1. a weekly subsidy of choice pork meat for only P9.00 per kilo and later increased to P11 per kilo in March 1980,
instead of the market price of P10 to P15 per kilo;

2. free choice pork meat in May and December of every year; and

3. free light or electricity.

4. all of which were allegedly "the equivalent" of the 13th month pay.

Unfortunately, under Section 3 of PD No. 851, such benefits in the form of food or free electricity, assuming they were given, were
not a proper substitute for the 13th month pay required by law. PD 851 provides:

Section 3. Employees covered The Decree shall apply to all employees except to:

x x x. xxx xxx

The term 'its equivalent' as used in paragraph (c) hereof shall include Christmas bonus, mid-year bonus, profit-sharing
payments and other cash bonuses amounting to not less than 1/12 of the basic salary but shall not include cash and stock
dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary
benefits.
Where an employer pays less than 1/12 of the employee's basic salary, the employer shall pay the difference."

Neither may year-end rewards for loyalty and service be considered in lieu of 13th month pay. Section 10 of the Rules and
Regulations Implementing Presidential Decree No. 851 provides:

Section 10. Prohibition against reduction or elimination of benefits-Nothing herein shall be construed to authorize any
employer to eliminate, or diminish in any way, supplements, or other employee benefits or favorable practice being
enjoyed by the employee at the time of promulgation of this issuance."

The failure of the Minister's decision to identify the pakyaw and non-pakyaw workers does not render said decision invalid. The
workers may be identified or determined in the proceedings for execution of the judgment.
DISSENTING/CONCURRING OPINION(S):

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