2012 Labor Law, Q9

Dennis was a taxi driver who was being paid on the “boundary” system basis. He worked tirelessly for Cabrera Transport Inc. for fourteen (14) years until he was eligible for retirement. He was entitled to retirement benefits. During the entire duration of his service, Dennis was not given his 13th month pay or his service incentive leave pay.
Is Dennis entitled to 13th month pay and service leave incentive pay? Explain. (5%)
Since he was not given his 13th month pay and service incentive leave pay, should Dennis be paid upon retirement, in addition to the salary equivalent to fifteen (15) days for every year of service, the additional 2.5 days representing one-twelfth (1/12) of the 13th month pay as well as the five (5) days representing the service incentive leave for a total of 22.5 days? Explain. (5%)

Quick check

Why are taxi drivers operating under the boundary system legally excluded from receiving 13th month pay under P.D. 851?

Under Article 95 of the Labor Code, why are boundary-paid taxi drivers exempt from service incentive leave pay?

How is the statutory retirement pay of an eligible employee generally computed under Article 302 of the Labor Code?

What components comprise the retirement pay base of a taxi driver who is legally exempt from 13th month pay and leave pay?

Choices available with full access.

What is the legal status of taxi drivers under the boundary system in relation to their transport operators?

Choices available with full access.

Unlock the full Labor Law answers

Learn more about these topics

1. Boundary System Exemption
Under the Rules and Regulations Implementing Presidential Decree No. 851, employees who are paid on a pure commission, boundary, or task basis are excluded from the coverage of 13th month pay. Taxi drivers operating under the boundary system earn their income based on the excess of daily customer fares over the fixed boundary amount paid to the operator. Because their compensation depends on their daily collections rather than a fixed hourly or daily wage, boundary-paid drivers are legally exempt from receiving statutory 13th month pay.

2. Service Leave Exemption
Under Article 95 of the Labor Code and its Implementing Rules, field personnel and workers whose time and performance are unsupervised by the employer are exempted from entitlement to service incentive leave pay. Taxi drivers operating under the boundary system drive throughout public roads without direct, continuous managerial supervision over their daily working hours or routes. Consequently, because they regulate their own working time and operate free from constant workplace oversight, boundary-paid drivers cannot claim statutory service incentive leave.

3. Retirement Pay Base
Under Article 302 of the Labor Code, statutory retirement pay for eligible employees is equivalent to at least one-half month salary for every year of service, which includes fifteen days salary, one-twelfth of the 13th month pay, and five days of service incentive leave. However, where an employee is legally exempt from 13th month pay and service incentive leave, those component benefits cannot be factored into the retirement pay computation. Thus, a boundary-paid driver's retirement pay is limited strictly to fifteen days salary per year of service.

About these questions and answers
The questions reproduced here are the official texts of the Philippine Bar Examinations, published by the Supreme Court. They are reproduced for study purposes.The suggested answers are the author’s own.

They are not official answers, have no connection with the Supreme Court, the Office of the Bar Confidant, or any bar review institution, and are not endorsed by any of them. Official answer keys, where released, should be preferred over anything here.Nothing on this page is legal advice, and reading it creates no lawyer-client relationship. Do not rely on any suggested answer in an actual legal matter. Consult counsel on your own facts.Suggested answers reflect the law and jurisprudence the author considers applicable as of the date shown.

Where a question comes from an earlier examination, the suggested answer applies the law as it now stands, which may differ from the law in force when the question was given, and may therefore differ from what would have been the correct answer at that time. Where the difference is material, the answer notes it.The practice scoring feature measures wording overlap with the suggested answer. It is not a grade, carries no official weight, and says nothing about whether your reasoning is sound.Errors are possible. If you find one, please tell me and I will correct it.Last reviewed: October 2026