Boie-Takeda Chemicals, Inc. v. De la Serna
REITERATIONFacts
The Antecedents: Two consolidated petitions, G.R. No. 92174 (Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna) and G.R. No. 102552 (Philippine Fuji Xerox Corp. vs. Cresenciano B. Trajano), arose from disputes concerning the inclusion of commissions in the computation of the 13th month pay. In G.R. No. 92174, a labor inspection found that Boie-Takeda Chemicals, Inc. had not included commissions earned by its medical representatives in their 13th month pay computation for 1986-1988, and the company contested this, arguing that commissions were not part of the 'regular or basic salary.' After Boie-Takeda failed to appear for hearings, the Regional Director ordered restitution, and the Acting Labor Secretary modified the order, excluding commissions earned before August 13, 1989. In G.R. No. 102552, a similar inspection found Philippine Fuji Xerox Corp. to have underpaid the 13th month pay of its salesmen for 1986-1988 by not including commissions, and after conciliation failed, the Regional Director ordered restitution, with the Undersecretary denying the company's appeal. Procedural History: In both cases, the petitioners challenged the orders of the labor officials, alleging grave abuse of discretion for giving effect to Section 5 of the Revised Guidelines on the Implementation of the Thirteenth Month Pay, which they contended usurped legislative power and violated equal protection. The cases were consolidated due to the common issue. The Petition: The petitioners argued that Presidential Decree No. 851 (the 13th Month Pay Law) and its implementing rules, as clarified by jurisprudence, exclude commissions from the computation of 13th month pay because they are not part of the 'basic salary.' They asserted that the Revised Guidelines issued by then Secretary Drilon exceeded statutory authority and violated the equal protection clause, also pointing to a prior opinion by Secretary Drilon himself that excluded commissions.
Issue(s)
Whether the respondent labor officials committed grave abuse of discretion amounting to lack of jurisdiction in giving effect to Section 5 of the Revised Guidelines on the Implementation of the Thirteenth Month Pay. Whether commissions earned by employees paid on a fixed or guaranteed wage plus commission basis should be included in the computation of the 13th month pay.
Ruling
The consolidated petitions are GRANTED. The second paragraph of Section 5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law is declared null and void for being violative of the law it was intended to implement, thus issued with grave abuse of discretion. The assailed Orders of January 17, 1990 and October 10, 1991 are SET ASIDE.
Ratio Decidendi
On the issue of grave abuse of discretion: The Court held that the second paragraph of Section 5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law, which included commissions in the computation of the 13th month pay, 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 they are designed to implement. Administrative regulations must be in harmony with the law and cannot widen its scope. Therefore, the said provision of the Revised Guidelines was declared null and void for being violative of the law it was intended to implement, and its issuance constituted grave abuse of discretion. The Court clarified that Memorandum Order No. 28 did not repeal or supersede P.D. 851. It merely modified Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept and definition of 13th month pay, and the basis for its computation (basic salary), remained unaltered as provided under P.D. 851. Thus, the interpretation of 'basic salary' under P.D. 851 applied equally to 'basic salary' under Memorandum Order No. 28. On the inclusion of commissions in the 13th month pay computation: The Court ruled that commissions earned by employees paid on a fixed or guaranteed wage plus commission basis are not to be included in the computation of the 13th month pay. Presidential Decree No. 851, the 13th Month Pay Law, requires payment based on the 'basic salary.' The implementing rules, particularly the Supplementary Rules and Regulations issued by then Labor Secretary Blas Ople, clarified that 'earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay.' The Court emphasized that the term 'basic salary' is to be understood in its common, generally-accepted meaning, which is the rate of pay for a standard work period exclusive of additional payments. Commissions are considered additional pay for extra efforts exerted in consummating sales and do not form part of the basic salary. The Court distinguished this from the case of Songco vs. National Labor Relations Commission, where the term 'salary' was used generically and not restricted to 'basic salary.'
Main Doctrine
Commissions earned by employees paid on a fixed or guaranteed wage plus commission basis are not to be included in the computation of the 13th month pay, as they are considered additional compensation and not part of the 'basic salary' as defined by Presidential Decree No. 851 and its implementing rules.