Netlink Computer v. Delmo
REITERATIONFacts
The Antecedents: Eric S. Delmo (Delmo) was hired by Netlink Computer, Inc. Products and Services (Netlink) as an account manager. He generated substantial sales, earning commissions in both Philippine Pesos and US Dollars. Netlink refused to pay his full commissions, citing partial cash advances and later faulting him for supposed absences and tardiness, issuing memoranda to pressure him into resigning. Delmo was eventually refused entry into the company premises, prompting him to file a complaint for illegal dismissal. Procedural History: The Labor Arbiter ruled in favor of Delmo, finding him illegally dismissed and ordering reinstatement with full backwages and other benefits, including unpaid commissions. The National Labor Relations Commission (NLRC) modified this, setting aside reinstatement and backwages due to valid causes for termination but ordering Netlink to pay indemnity for lack of procedural due process, unpaid commissions, and 13th month pay. The Court of Appeals (CA) affirmed the NLRC's ruling with modifications, adjusting the unpaid commission amount and ruling that Delmo was entitled to pro-rata 13th month pay only for a portion of the year, citing the principle that commissions are payable only upon actual payment by the client and that the exchange rate at the time of sale should apply. The CA also upheld the award of attorney's fees. The Petition: Netlink appealed to the Supreme Court, arguing that the CA erred in not holding that the applicable exchange rate for US dollar commissions should be the rate at the time of sale, not at the time of payment, and in awarding attorney's fees.
Issue(s)
Whether Netlink's established practice of paying commissions in US dollars for US dollar-denominated sales had become a company policy, and whether the payment of commissions should be in US dollars. Whether the applicable exchange rate for US dollar commissions is the rate at the time of sale or at the time of payment. Whether the award of attorney's fees was warranted.
Ruling
The Supreme Court DENIED the petition for review on certiorari, AFFIRMED the decision of the Court of Appeals promulgated on May 9, 2003, and ORDERED the petitioner to pay the costs of suit.
Ratio Decidendi
On the payment of commissions in US dollars: The Court reiterated that while all obligations are generally settled in Philippine currency, parties may agree to settle in any other currency, as provided by Republic Act No. 8183. In this case, there was no written contract specifying payment in US dollars. However, Netlink's established practice of paying its sales agents in US dollars for US dollar-denominated sales had become a company policy. This practice ripened into a benefit that could not be unilaterally diminished or discontinued by Netlink under the principle of non-diminution of benefits enshrined in Article 100 of the Labor Code. To rule otherwise would cause an unjust diminution of Delmo's commissions. On the applicable exchange rate: The Court held that the real value of the foreign exchange-incurred obligation should be preserved up to the date of payment, citing jurisprudence established under Republic Act No. 529, which remains applicable even after its repeal. Therefore, the rate of exchange at the time of payment, not at the time of sale, controls the computation of the commissions to preserve their real value. On the award of attorney's fees: The Court affirmed the CA's award of attorney's fees, citing the case of Consolidated Rural Bank (Cagayan Valley), Inc. vs. National Labor Relations Commission. The Court held that in actions for recovery of wages or where an employee is forced to litigate and incur expenses to protect their rights and interests, an award of attorney's fees equivalent to ten percent (10%) of the total award is legally and morally justifiable, even if not explicitly claimed. Delmo had incurred expenses to protect and enforce his right to his commissions, making the award warranted.
Main Doctrine
In the absence of a written agreement to the contrary, an employer's established practice of paying sales commissions in foreign currency creates a benefit that cannot be unilaterally diminished or discontinued, and the rate of exchange at the time of payment, not at the time of sale, controls.