G.R. No. 50999 . March 23, 1990.
JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.

FACTS

Private respondent F.E. Zuellig (M), Inc. filed an application for clearance to terminate the services of petitioners Jose Songco, Romeo Cipres, and Amancio Manuel on the ground of retrenchment. Petitioners initially opposed the dismissal but later agreed not to contest it, leaving the sole issue of the proper basis for computing their separation pay. Petitioners were sales personnel receiving substantial monthly salaries plus sales commissions. The applicable Collective Bargaining Agreement (CBA) provided for a retirement gratuity equivalent to one month’s salary per year of service for separations like permanent lay-off. The Labor Code, under Article 284, also mandated separation pay for retrenchment, to be computed based on the employee’s pay.
The Labor Arbiter ruled that private respondent must pay separation pay equivalent to one month’s salary for every year of service, but explicitly excluded commissions and allowances from the computation of that “one month salary.” The National Labor Relations Commission (NLRC) affirmed this decision. Hence, this petition, with the core issue being whether earned sales commissions and allowances should be included in the “salary” base for computing separation pay.

ISSUE

Whether earned sales commissions and allowances should be included in the monthly salary of petitioners for the purpose of computing their separation pay under the Labor Code and the applicable CBA.

RULING

Yes, earned commissions and allowances should be included. The petition is granted. The Supreme Court modified the NLRC decision, ruling that commissions and allowances form part of the wage or salary for separation pay computation.
The legal logic is anchored on the statutory definition of “wage” under Article 97(f) of the Labor Code, which explicitly includes remuneration earned on a commission basis. The Court rejected the narrow interpretation that would exclude commissions, emphasizing the liberal and compassionate spirit of labor laws intended to favor the welfare of workers. The purpose of separation pay is to alleviate the economic burden on dismissed employees; thus, a restrictive computation would defeat this objective, especially for sales personnel whose commissions constitute a significant portion of their earnings.
The Court took judicial notice that some sales personnel work solely on commission, and to exclude such earnings would absurdly mean they receive no “salary” and would thus be denied separation pay—an outcome contrary to law and equity. While the cited case of Soriano v. NLRC distinguished commissions earned from actual market transactions, the Court applied it by analogy to include such earned commissions here, specifying that the average commissions from the last year of employment should be used. The ruling is firmly grounded in Article 4 of the Labor Code and Article 1702 of the Civil Code, which mandate that all doubts in interpretation be resolved in favor of labor to ensure safety and decent living. The case was remanded to the Labor Arbiter for proper recomputation inclusive of allowances and commissions.