38. RODOLFO J. SERRANO v.

SEVERINO SANTOS TRANSIT (Liz)

its coverage of workers who are paid on a purely commission basis is
9 August 2010 | Employees Paid by Results: Service Incentive Leave Pay only with respect to field personnel. The more recent case of Auto Bus
Transport Systems, Inc v. Bautista clarifies that an employee who is paid
on purely commission basis is entitled to Service Incentive Leave Pay
PETITIONER: RODOLFO J. SERRANO
RESPONDENT: SEVERINO SANTOS TRANSIT and/or SEVERINO
SANTOS FACTS:
1. Petitioner Serrano was hired as bus conductor by respondent
SUMMARY: Petitioner Serrano was hired as bus conductor by Severino Santos Transit, a bus company owned and operated by its
respondent Severino Santos Transit, a bus company owned and operated co-respondent Severino Santos.
by its co-respondent Severino Santos. After 14 years of service Serrano 2. After 14 years of service, Serrano applied for optional retirement
applied for optional retirement from the company whose representative from the company whose representative advised him that he must
advised him that he must first sign the already prepared Quitclaim before first sign the already prepared Quitclaim before his retirement pay
his retirement pay could be released. As Serrano’s request to first go over could be released.
the computation of his retirement pay was denied, he signed the 3. As Serrano’s request to first go over the computation of his
Quitclaim on which he wrote “U.P.” (under protest) after his signature, retirement pay was denied, he signed the Quitclaim on which he
indicating his protest to the amount of P75,277.45 which he received, wrote “U.P.” (under protest) after his signature, indicating his
computed by the company at 15 days per year of service. Serrano soon protest to the amount of P75,277.45 which he received, computed
after filed a complaint, alleging that the company erred in its computation by the company at 15 days per year of service.
since under Republic Act No. 7641, otherwise known as the Retirement 4. Serrano soon after filed a complaint before the Labor Arbiter,
Pay Law, his retirement pay should have been computed at 22.5 days per alleging that the company erred in its computation since the
year of service to include the cash equivalent of the 5-day service Retirement Pay Law (RA No. 7641), his retirement pay should
incentive leave (SIL) and 1/12 of the 13th month pay which the company have been computed at 22.5 days per year of service to include the
did not. The company maintained, however, that the Quitclaim signed by cash equivalent of the 5-day service incentive leave (SIL) and 1/12
Serrano barred his claim and, in any event, its computation was correct of the 13th month pay which the company did not.
since petitioner was not entitled to the 5-day SIL and pro-rated 13th 5. RESPONDENT SEVERINO SANTOS’ CONTENTION: The
month pay for, as a bus conductor, he was paid on commission basis. I: Quitclaim signed by Serrano barred his claim and, in any event, its
Whether or not the 22.5 days pay per year of service is the correct computation was correct since Serrano was not entitled to the 5-
formula in arriving at the complete retirement pay of complainant day SIL and pro-rated 13th month pay for, as a bus conductor, he
was paid on commission basis. Respondents, noting that the
DOCTRINE: retirement differential pay amounted to only P1,431.15, explained
For purposes, however, of applying the law on Service Incentive Leave, that in the computation of petitioner’s retirement pay, five months
as well as on retirement, the Court notes that there is a difference were inadvertently not included because some index cards
between drivers paid under the boundary system and conductors who are containing his records had been lost.
paid on a commission basis. In practice, taxi drivers do not receive fixed 6. LA’s Ruling: Labor Arbiter ruled in favor of petitioner.
wages. They retain only those sums in excess of the boundary or fee they a. In Labor Advisory on Retirement Pay Law, it was
pay to the owners or operators of the vehicles. Conductors, on the other decisively made clear that “the law expanded the concept
hand, are paid a certain percentage of the bus earnings for the day. It of “one-half month salary” from the usual one-month
bears emphasis that under P.D. 851 or the SIL Law, the exclusion from salary divided by two.” “Half-month’s pay” is
“expanded” because it means not just the salary for 15
 days but also one-twelfth of the 13th-month pay and the beyond sixty-five (65) years which is hereby
cash value of five-day service incentive leave. THIS IS declared the compulsory retirement age, who has
THE MINIMUM. The retirement pay package can be served at least five (5) years in the said
improved upon by voluntary company policy, or
establishment, may retire and shall be entitled to
particular agreement with the employee, or through a
collective bargaining agreement.” Thus, having retirement pay equivalent to at least one-half
established that 22.5 days pay per year of service is the (1/2) month salary for every year of service, a
correct formula in arriving at the complete retirement pay fraction of at least six (6) months being
of complainant. considered as one whole year.
7. NLRC Ruling: NLRC reversed the Labor Arbiter’s ruling and 2. Unless the parties provide for broader inclusions, the term one-half
dismissed petitioner’s complaint. It, however, ordered respondents (1/2) month salary shall mean fifteen (15) days plus one-twelfth
to pay retirement differential in the amount of P2,365.35. NLRC
(1/12) of the 13th month pay and the cash equivalent of not more
held that since petitioner was paid on purely commission basis, he
was excluded from the coverage of the laws on 13 th month pay and than five (5) days of service incentive leaves.
SIL pay, hence, the 1/12 of the 13th month pay and the 5-day SIL 3. Admittedly, Serrano worked for 14 years for the bus company
should not be factored in the computation of his retirement pay. which did not adopt any retirement scheme. Even if Serrano as bus
Petitioner’s motion for reconsideration was denied. conductor was paid on commission basis then, he falls within the
8. CA: The appellate court affirmed the NLRC’s ruling holding that coverage of R.A. 7641 and its implementing rules. As thus
it was based on substantial evidence, hence, should be respected. correctly ruled by the Labor Arbiter, Serrano’s retirement pay
Petitioner’s MR was denied.
should include the cash equivalent of the 5-day SIL and 1/12 of the
13th month pay.
ISSUE: Whether or not the 22.5 days retirement pay per year of service is
4. Retirement pay; applicability to employees on commission basis
the correct formula?
a. Even if the petitioner as bus conductor was paid on
commission basis, he falls within the coverage of R.A.
RULING: 7641 and its implementing rules. Thus, his retirement pay
1. Republic Act No. 7641 which was enacted on December 9, 1992 should include the cash equivalent of 5-days SIL and 1/12
amended Article 287 of the Labor Code by providing for of 13th month pay. The NLRC’s reliance on the case of R
retirement pay to qualified private sector employees in the absence & E Transport, Inc. as a basis for ruling that bus
of any retirement plan in the establishment. The pertinent provision conductors are not covered by the law on SIL and 13th
of said law reads: month pay is erroneous since that involved a taxi driver
a. Section 1. Article 287 of Presidential Decree No. 442, as who was paid according to the “boundary system.” There
amended, otherwise known as the Labor Code of the is a difference between drivers paid under the “boundary
Philippines, is hereby amended to read as follows: system” and conductors who are paid on commission
i. In the absence of a retirement plan or agreement basis. In practice, taxi drivers do not receive fixed wages
providing for retirement benefits of employees in and retain only those sums in excess of the “boundary” or
the establishment, an employee upon reaching fee they pay to the owners or operators of the vehicles.
the age of sixty (60) years or more, but not
Conductors, on the other hand, are paid a certain
percentage of the bus’ earnings for the day.