Iran v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: Petitioner Antonio Iran, engaged in softdrinks merchandising, employed private respondents as drivers/salesmen and truck helpers. Their compensation included commissions per case of softdrinks sold. In June 1991, petitioner discovered cash shortages and irregularities allegedly committed by private respondents. Pending investigation, petitioner required them to report for work daily but not to go on their routes. Subsequently, private respondents stopped reporting for work, which petitioner considered abandonment, leading to their termination. Petitioner also filed a complaint for estafa. Procedural History: Private respondents filed complaints for illegal dismissal, illegal deduction, underpayment of wages, and other monetary claims. The Labor Arbiter found the dismissal valid due to just cause but ruled that petitioner failed to comply with minimum wage requirements and pay 13th month pay. The Labor Arbiter ordered petitioner to pay various sums to the complainants. Both parties appealed to the National Labor Relations Commission (NLRC). The NLRC affirmed the validity of the dismissal but found that procedural requirements were not met, awarding indemnity fees for failure to observe due process. The NLRC also corrected the wage differential computation for one complainant. Petitioner's motion for reconsideration was denied. The Petition: Petitioner elevated the case to the Supreme Court, raising issues on the exclusion of commissions in minimum wage computation, grave abuse of discretion in finding procedural lapses, and the non-crediting of advance amounts received as part of 13th month pay.
Issue(s)
Whether commissions are included in determining compliance with the minimum wage requirement. Whether petitioner committed procedural lapses in terminating private respondents. Whether advance amounts received by private respondents should be credited as part of their 13th month pay.
Ruling
The petition is impressed with merit. The decision of the NLRC is reversed and set aside regarding the exclusion of commissions in minimum wage computation and the exclusion of amounts received as part of 13th month pay. The case is remanded to the Labor Arbiter for recomputation. The award of nominal damages is modified by increasing it from P1,000.00 to P5,000.00 each for non-observance of procedural due process.
Ratio Decidendi
On the inclusion of commissions in minimum wage computation: Article 97(f) of the Labor Code defines "wage" to include 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. Commissions are direct remunerations for services rendered and constitute part of an employee's wage or salary. The NLRC's reasoning that commissions should not be included to comply with minimum wage laws is unsupported by law and jurisprudence. The Court has taken judicial notice that some salesmen depend entirely on commissions, and these commissions are part of their salary or wage. There is no law mandating that commissions be paid only after the minimum wage has been met; the minimum wage sets a floor, not an exclusion for commissions. Therefore, commissions must be considered in determining compliance with minimum wage requirements. On procedural due process in termination: In terminating employees, employers must furnish two written notices: one apprising the employee of the acts for which dismissal is sought, and another informing of the decision to dismiss. Petitioner's instruction for private respondents to report and settle accountabilities, without explicitly stating that dismissal was being sought, did not satisfy the first notice requirement. Furthermore, petitioner failed to send notice to the last known address in cases of alleged abandonment, as required by the Omnibus Rules. The twin requirements of notice and hearing are essential elements of due process and must be strictly complied with. Petitioner's failure to observe these requirements renders the termination defective. On crediting advance amounts for 13th month pay: While the vouchers for 13th month pay were submitted on appeal, labor cases allow the submission of evidence on appeal, as technical rules of evidence are not binding. The intent of PD 851 is to grant additional income, not to impose a double burden on employers already paying the equivalent of a 13th month pay. An employer paying less than 1/12th of the basic salary is only required to pay the difference. However, the vouchers presented by petitioner only covered a specific year and did not cover other years claimed by private respondents. Therefore, petitioner is only entitled to credit the amounts paid for the particular year covered by the vouchers.
Main Doctrine
Commissions earned by employees are considered part of their wages for the purpose of determining compliance with the minimum wage law. Failure to observe procedural due process in termination warrants nominal damages.