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Antonio Iran is a softdrinks merchandiser who employs several truck drivers who will deliver his products to various stores. He gives commissions to his employees for every case of softdrinks sold. This is on top of their daily wage. In 1991, Iran was sued by his employees for illegal dismissal. One of the allegations of the employees was that Iran was paying below the minimum wage. Iran however argued that if you add the commissions the employees earned and received, it will turn out that they were paid above the minimum wage.
The Labor Arbiter and the National Labor Relations Commission (NLRC) on appeal ruled against Iran. The NLRC ruled that “An employee should receive the minimum wage as mandated by law and that the attainment of the minimum wage should not be dependent on the commission earned by an employee. A commission is an incentive for an employee to work harder for a better production that will benefit both the employer and the employee. To include the commission in the computation of wage in order to comply with labor standard laws is to negate the practice that a commission is granted after an employee has already earned the minimum wage or even beyond it.”
ISSUE: Whether or not commissions earned should be included in determining compliance with the payment of minimum wage.
HELD: Yes. “Wage” paid to any employee shall mean the 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, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. This definition explicitly includes commissions as part of wages. While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a little more industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services rendered. In fact, commissions have been defined as the recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commissions are part of a salesman’s wage or salary.
Thus, the commissions earned by the employees of Iran in selling softdrinks constitute part of the compensation or remuneration paid to drivers/salesmen and truck helpers for serving as such, and hence, must be considered part of the wages paid them.
Drivers and conductors who are compensated purely on a commission basis are automatically entitled to the basic minimum pay mandated by law should said commissions be less than their basic minimum for eight hours work. It can, thus, be inferred that were said commissions equal to or even exceed the minimum wage, the employer need not pay, in addition, the basic minimum pay prescribed by law. It follows then that commissions are included in determining compliance with minimum wage requirements.