The Supreme Court ruled that sales commissions are considered part of an employee’s wages, regardless of whether they are explicitly stated in the employment agreement. This decision emphasizes that employers must fulfill their obligations to pay these commissions and cannot unilaterally deduct amounts without the employee’s consent. It reinforces the principle that employers bear the burden of proving wage payments and that the absence of a formal agreement does not negate an employee’s right to rightful compensation for services rendered, ensuring fair labor practices and protecting employees from unjust enrichment.

Unpaid Commissions and Unfair Deductions: Can Employers Unilaterally Alter Employee Compensation?

Marilyn Asentista filed a complaint against her employer, JUPP & Company, Inc., and its President, Joseph Ascutia, for non-payment of sales commissions and unauthorized car plan deductions. Asentista, initially hired as a sales secretary and later promoted to sales agent, was entitled to a two percent commission for every attained monthly quota. Despite consistently meeting her targets, JUPP failed to pay her earned commissions. Furthermore, the company unilaterally deducted amounts for a car plan participation, despite the absence of a formal agreement. This led Asentista to resign and file a claim for unpaid commissions and a refund for the car plan deductions, igniting a legal battle that reached the Supreme Court.

The core legal question revolved around whether sales commissions can be considered part of an employee’s wages, even if not explicitly stated in the employment agreement, and whether an employer can deduct car plan payments without the employee’s consent. The Labor Arbiter initially dismissed Asentista’s complaint, emphasizing the absence of a provision for sales commissions in her employment agreement. However, the National Labor Relations Commission (NLRC) reversed this decision, giving credence to Asentista’s claim based on electronic messages from Ascutia. The NLRC also held that JUPP lacked the authority to forfeit Asentista’s commissions and apply them as rentals for the vehicle. The Court of Appeals (CA) sided with the Labor Arbiter, rejecting the email evidence. The Supreme Court, however, took a different stance, ultimately siding with the employee, Asentista.

The Supreme Court emphasized that the employer’s admission in their position paper was crucial, stating that respondents could no longer refute Asentista’s entitlement to a discretionary commission. Building on this, the Court cited Section 97(f) of the Labor Code, which defines wages as remuneration of earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis. This section underscores that wages include commissions, regardless of whether they are explicitly stated in a written contract. The Court explicitly stated:

remuneration of 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 and Employment, of board, lodging, or other facilities customarily furnished by the employer to the employee.

The Court further referenced the case of Toyota Pasig, Inc. v. De Peralta, which affirmed the inclusion of sales commissions as part of a salesman’s remuneration. This precedent highlights that commissions are direct remunerations for services rendered and should be considered part of an employee’s wage or salary. The ruling reinforces the principle that commissions serve as incentives and direct compensation for the employee’s efforts.

Moreover, the Court addressed the burden of proof in cases involving non-payment of monetary claims. It stated that employers have the burden of proving that employees received their wages and benefits. This doctrine recognizes that employers possess exclusive control over employment records, personnel files, payrolls, and other relevant documents. In De Guzman v. NLRC, et al., the Court articulated:

It is settled that once the employee has set out with particularity in his complaint, position paper, affidavits and other documents the labor standard benefits he is entitled to, and which he alleged that the employer failed to pay him, it becomes the employer’s burden to prove that it has paid these money claims. One who pleads payment has the burden of proving it, and even where the employees must allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment.

This allocation of the burden of proof is crucial, as it acknowledges the practical difficulties employees face in proving non-payment. The Court found that Asentista had sufficiently detailed her unpaid monetary claims based on Ascutia’s electronic messages. Therefore, the burden shifted to the respondents to demonstrate that Asentista had been paid her benefits.

Furthermore, the Supreme Court addressed the issue of the car plan deductions. The Court sided with Asentista that, absent an express agreement, the respondents could not deduct car participation and amortization payments from her unpaid sales commission. The case of Locsin v. Mekeni provides guidance on this matter, stating that, in the absence of specific terms and conditions governing a car plan agreement, the employer cannot retain installment payments and treat them as rent.

The Court also noted that the service vehicle was primarily used for the employer’s business, with any personal benefit to the employee being merely incidental. The Supreme Court stated:

In the absence of specific terms and conditions governing a car plan agreement between the employer and employee, the former may not retain the installment payments made by the latter on the car plan and treat them as rents for the use of the service vehicle, in the event that the employee ceases his employment and is unable to complete the installment payments on the vehicle. The underlying reason is that the service vehicle was precisely used in the former’s business; any personal benefit obtained by the employee from its use is merely incidental.

The Court concluded that JUPP was unjustly enriched by deducting car plan payments from Asentista’s commission without her consent. Under Article 22 of the New Civil Code, every person who acquires something at the expense of another without just or legal ground must return the same. In line with the ruling in Locsin v. Mekeni Food Corp, the Court determined that a quasi-contractual relation was created between the parties, precluding Mekeni from enriching itself by charging petitioner for the use of its vehicle. This vehicle was essential to the full and effective promotion of its business. Therefore, Mekeni could not claim that the payments constituted rent for the use of the company vehicle.

FAQs

What was the main issue in this case?	The central issue was whether sales commissions should be considered part of an employee’s wages, even if not explicitly stated in the employment contract, and if the employer could deduct car plan payments without the employee’s consent.
What did the Supreme Court decide regarding sales commissions?	The Supreme Court ruled that sales commissions are indeed part of an employee’s wages. This holds true regardless of whether they are expressly mentioned in the employment agreement.
Can an employer deduct amounts for a car plan without the employee’s agreement?	No, the Supreme Court held that absent an express agreement, the employer cannot deduct car participation and amortization payments from the employee’s unpaid sales commission.
Who has the burden of proof in cases of unpaid monetary claims?	The employer has the burden of proving that the employee received their wages and benefits and that payments were made according to the law.
What is unjust enrichment, and how does it apply to this case?	Unjust enrichment is when a person benefits at the expense of another without legal justification. In this case, the employer was unjustly enriched by deducting car plan payments without consent from Asentista’s commission.
What was the basis for the Supreme Court’s decision on the car plan deductions?	The Supreme Court referenced the case of Locsin v. Mekeni, which stated that without specific terms and conditions governing a car plan, the employer cannot retain installment payments as rent.
What does the Labor Code say about wages?	Section 97(f) of the Labor Code defines wages as remuneration of earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis.
What was the outcome of the case?	The Supreme Court granted Asentista’s petition and ordered JUPP & Company, Inc. and/or Joseph V. Ascutia to pay Marilyn B. Asentista the amount of P210,077.95 plus ten percent (10%) of the total monetary award as attorney’s fees and legal interest at the rate of six percent (6%) per annum from its finality until full payment.

This ruling reinforces the rights of employees to receive fair compensation for their work, including sales commissions, and protects them from unauthorized deductions. It also highlights the importance of clear and specific agreements regarding car plans and other employee benefits. Understanding these principles can help employees protect their rights and ensure that they are treated fairly by their employers.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Asentista v. Jupp & Company, Inc., G.R. No. 229404, January 24, 2018