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19. BOIE-TAKEDA CHEMICALS, INC. v. HON. DIONISIO C. DE LA SERNA, [G.R. No.

92174. December 10, 1993.] (Minimum Wage, Cash Wage/Commission)

The respondent contended that commissions made by petitioners medical representatives


should be included in the computation of their 13th month pay.

Petitioners questions the Revised Guidelines on the Implementation of the 13th Month Pay
Law issued by then Secretary Drilon providing for the inclusion of commissions in the
13th month pay. They maintain that remunerations which do not form part of the basic or
regular salary of an employee, such as commissions, should not be considered in the
computation of the 13th month pay.

In common practice, in the Philippines and elsewhere, medical representatives are


employees engaged in the promotion of pharmaceutical products or medical devices
manufactured by their employer. They promote such products by visiting identified
physicians and inform such physicians, orally and with the aid of printed brochures, of the
existence and chemical composition and virtuses of particular products of their company.
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.

ISSUE:

Whether or not commissions are excluded from basic salary? What item or items of
employee remuneration should go into the computation of thirteenth month pay?

RULING:

Yes.

Contrary to respondents contention, Memorandum Order No. 28 did not repeal, supersede
or abrogate P.D. 851. As may be gleaned from the language of Memorandum Order No. 28,
it merely "modified" Section 1 of the decree by removing the P1,000.00 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 P1,000.00, 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" as defined in P.D. 851
applies equally to "basic salary" under Memorandum Order No. 28.

In the case of San Miguel Corp. v. Inciong, 103 SCRA 139, this Court delineated the
coverage of the term "basic salary" as used in P.D. 851. We said at some length:

"Under Presidential Decree 851 and its implementing rules, the basic salary of an employee
is used as the basis in the determination of his 13th month pay. Any compensations or
remunerations which are deemed not part of the basic pay is excluded as basis in the
computation of the mandatory bonus.

"Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:chanrob1es virtual 1aw library
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of
Instructions No. 174;

b) Profit-sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of
the regular basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975.

"Under a later set of Supplementary Rules and Regulations Implementing Presidential


Decree 851 issued by then Labor Secretary Blas Ople, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in the computation of the 13th
month pay.

"The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of
Instructions No. 174, and profit-sharing payments indicate the intention to strip basic salary
of other payments which are properly considered as fringe benefits. Likewise, the catch-all
exclusionary phrase all allowances and monetary benefits which are not considered or
integrated as part of the basic salary shows also the intention to strip basic salary of any
and additions which may be in the form of allowances or fringe benefits.

"The all embracing phrase earnings and other remunerations which are deemed not part of
the basic salary includes within its meaning payments for sick, vacation, or maternity
leaves, premium for works performed on rest days and special holidays, pays for regular
holidays and night differentials. As such they are deemed not part of the basic salary and
shall not be considered in the computation of the 13th-month pay. If they were not
excluded, it is hard to find any earnings and other remunerations expressly excluded in the
computation of the 13th-month pay. Then the exclusionary provision would prove to be idle
and with no purpose.

Quite obvious from the foregoing is that 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.

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." library

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 particular 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.
20. PHILIPPINE DUPLICATORS, INC. vs. NATIONAL LABOR RELATIONS
COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS, [G.R.
No. 110068. February 15, 1995.]

Petitioners salesman who make or close a sale of duplicating machines distributed by


petitioner corporation earned a sales commission.

The respondent contended that such commission should be included in the computation of
their 13th month pay.

Petitioner invoked the decision handed down to this Court, through its Second Division, on
10 December 1993 in the two (2) consolidated cases of Boie-Takeda Chemicals, Inc., vs.
Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano,
in G.R. Nos. 92174 and 102552, respectively. In its decision, the Second Division inter alia
declared null and void the second paragraph of Section 5(a) 1 of the Revised Guidelines
issued by then Secretary Labor Drilon.

ISSUE:

Whether or not the petitioners salesman earned sales commission should be included in
the computation of its 13th month pay?

RULING:

Yes.

First of all, the decision rendered in Boie-Takeda cannot serve as a precedent under the
doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after this
Court, (through its Third Division), had rendered the decision in the instant case. Also, the
petitioner's (first) Motion for Reconsideration of the decision dated 10 November 1993 had
already been denied, with finality, on 15 December 1993, i.e.; before the Boie-Takeda
decision became final on 5 January 1994.

The doctrines enunciated in these two (2) cases present quite different factual situations
(although the same word "commissions" was used or invoked) the legal characterizations
of which must accordingly differ.

"In the instant case, there is no question that the sales commission earned by the salesmen
who make or close a sale of duplicating machines distributed by petitioner corporation,
constitute part of the compensation or remuneration paid to salesmen for serving as
salesmen, and hence as part of the 'wage' or salary of petitioner's salesmen. Indeed, it
appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater
part of the salesmen's wages or salaries being composed of the sales or incentive
commissions earned on actual sales closed by them. No doubt this particular salary
structure was intended for the benefit of the petitioner corporation, on the apparent
assumption that thereby its salesmen should be moved to greater enterprise and
diligence and close more sales in the expectation and close more sales
commissions. This, however, does not detract from the character of such commissions as
part of the salary or wage paid to each of its salesmen corporation."

In other words, the sales commissions received by every duplicating machine sold
constituted part of the basic compensation or remuneration of the salesmen of Philippine
Duplicators for doing their job. The 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.

Considering the above circumstances, the sales commissions were an integral part of the
basic salary structure of Philippine Duplicators' employees-salesmen. These commissions
are not overtime payments, nor profit-sharing payments nor any other fringe benefit. 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.

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." 4 The Second
Division characterized these payments as additional monetary benefits not properly included
in the term "basic salary" in computing their 13th month pay. We note that productivity
bonuses are generally tied to the productivity, or capacity for revenue production, of a
corporation; 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. More generally, a bonus is an amount granted and paid ex gratia to the
employee; its payment constitutes an act of enlightened generosity and self-interest on the
part of the employer, rather than as a demandable or enforceable obligation.

The doctrine set out in the decision of the Second Division is, accordingly, that additional
payments made to employees, to the extent they partake of the nature of profit-sharing
payments, are properly excluded from the ambit of the term "basic salary" for purposes of
computing the 13th month pay due to the employees. Such additional payments are not
"commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised
Guidelines Implementing 13th Month Pay.

We observe that the third item excluded from the term "basic salary" is cast in open ended
and apparently circular terms: "other remunerations which are not part of the basic salary."
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. 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. However, 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.

We recognize that both productivity bonuses and sales commissions may have an incentive
effect. But there is reason to distinguish one from the other here. Productivity bonuses are
generally tied to the productivity or profit generation of the employer corporation.
Productivity bonuses are not directly dependent on the extent on individual employee exerts
himself. A productivity bonus is something extra for which no specific additional services are
rendered by any particular employee and hence not legally demandable, absent a
contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid
in Duplicators, are intimately related to or directly proportional to the extent or energy of an
employee's endeavors. Commissions are paid upon the specific results achieved by a
salesman-employee. It is a percentage of the sales closed by a salesman and operates as
an integral part of such salesman's basic pay.

Finally, the statement of the Second Division in Boie-Takeda declaring null and void the
second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month
Pay issued by former Labor Secretary Drilon, is properly understood as holding that the
second paragraph provides no legal basis for including within the term "commission" there
used additional payments to employees which are, as a matter of fact, in the nature of
profit-sharing payments or bonuses. If and to the extent that such second paragraph is so
interpreted and applied, it must be regarded as invalid as having been issued in excess of
the statutory authority of the Secretary of Labor. That same second paragraph, however,
correctly recognizes that commissions, like those paid in Duplicators, may constitute part of
the basic salary structure of salesmen and hence should be included in determining the 13th
month pay; to this extent, the second paragraph is and remains valid.