Boundary System v. Commission Basis


RA 7641 is an act amending article 287 of PD 442, as amended by providing for retirement pay to qualified private sector employees in the absence of any retirement plan in the establishment.

The said R & E Transport case should be distinguished from the 2010 case of Serrano v. Severino Santos Transit, which involves a bus conductor (petitioner) who worked for 14 years for respondent bus company which did not adopt any retirement scheme. It was held therein that even if petitioner as bus conductor was paid on commission basis, he falls within the coverage of RA 7641 and its implementing rules.

This means that petitioner's retirement pay should include the cash equivalent of the 5-day service incentive leave (SIL) and 1/12 of the 13th month pay for a total of 22.5 days. It was held by the Supreme Court that the Court of Appeals and the NLRC erred in relying on the R & E Transport case.
For purposes of applying the law on SIL, as well as on retirement, there is a difference between drivers paid under the “boundary system” and conductors who are paid on commission basis. This is so because in practice, taxi drivers do not receive fixed wages. They retain only those sums in excess of the “boundary” or fee they pay to the owners or operators of the vehicles. Conductors, on the other hand, are paid a certain percentage of the bus’ earnings for the day. It bears emphasis that under P.D. No. 851 or the SIL Law, the exclusion from its coverage of workers who are paid on a purely commission basis is only with respect to field personnel.

The earlier case of Auto Bus Transport Systems, Inc. v. Bautista, clarifies that an employee who is paid on purely commission basis is entitled to SIL.

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