Blaquera vs. Alcala, G.R. 109406
Blaquera vs. Alcala, G.R. 109406
Blaquera vs. Alcala, G.R. 109406
In G.R. No. 119597, the facts are different but the petition poses a common issue with the other
consolidated cases. The petitioner, Association of Dedicated Employees of the Philippine
Tourism Authority ("ADEPT"), is an association of employees of the Philippine Tourism Authority
("PTA") who were granted productivity incentive bonus for calendar year 1992 pursuant to
Republic Act No. 6971 ("RA 6971"), otherwise known as the Productivity Incentives Act of 1990.
Subject bonus was, however, disallowed by the Corporate Auditor on the ground that it was
"prohibited under Administrative Order No. 29 dated January 19, 1993." The disallowance of
the bonus in question was finally brought on appeal to the Commission on Audit (COA) which
denied the appeal in its Decision 7 of March 6, 1995, ratiocinating, thus:
". . . Firstly, the provisions of RA #6971 insofar as the coverage is concerned, refer to business
enterprises including government owned and/or controlled corporations performing proprietary
functions.
Section 1a of the Supplemental Rules Implementing RA #6971 classified such coverage as:
"All business enterprises, with or without existing duly certified labor organizations, including
government owned and/or controlled corporations performing proprietary functions which are
established solely for business or profit and accordingly excluding those created, maintained or
acquired in pursuance of a policy of the State enunciated in the Constitution, or by law and
those whose officers and employees are covered by the Civil Service. (emphasis supplied)
The PTrA is a GOCC created in pursuance of a policy of the State. Section 9 of Presidential
Decree No. 189 states that "To implement the policies and program of the Department (Dept. of
Tourism), there is hereby created a Philippine Tourism Authority, . . . ." Likewise, Section 21 of
the same decree provides that "All officials and employees of the Authority, . . ., shall be subject
to Civil Service Law, rules and regulations, and the coverage of the Wage and Position
Classification Office."
Furthermore, although Supplemental Rules and Regulations implementing R.A. #6971 was
issued only on December 27, 1991, the law itself is clear that it pertains to private business
enterprises whose employees are covered by the Labor Code of the Philippines, as mentioned in
the following provisions:
"Section 5. Labor Management Committee. . . . that at the request of any party to the
negotiation, the National Wages and Productivity Commission of the Department of Labor and
Employment shall provide the necessary studies, . . . ."
"Section 8. Notification. — A business enterprise which adopts a productivity incentive
program shall submit copies of the same to the National Wages and Productivity Commission
and to the Bureau of Internal Revenue for their information and record."
"Section 9. Disputes and Grievances. — Whenever disputes, grievances, or other matters
arise from the interpretation or implementation of the productivity incentive program, . . . may
seek the assistance of the National Conciliation and Mediation Board of the Department of
Labor and Employment for such purpose. . . ."
Therefore, considering the foregoing, the PTrA is within the "exclusion" provision of the
Implementing Rules of RA #6971 and so, it (PTrA) does not fall within its coverage as being
entitled to the productivity incentive bonus under RA #6971.
Secondly, Administrative Order No. 29 which is the basis for the grant of the productivity
incentive bonus/benefits for CY 1992 also expressly provides "prohibiting payments of similar
benefits in future years unless duly authorized by the President."
Thirdly, the disallowance of the Auditor, PTrA has already been resolved when this Commission
circularized thru COA Memorandum #92-758 dated April 3, 1992 the Supplemental to Rules
Implementing RA 6971 otherwise known as the "Productivity Incentives Act of 1990." . . .
Lastly, considering the title of RA #6971, i.e. "An Act to encourage productivity and maintain
industrial peace by providing incentives to both labor and capital", and its implementing rules
and regulations prepared by the Department of Labor and Employment and the Department of
Finance, this Office concludes that said law/regulation pertains to agencies in the private sector
whose employees are covered by the Labor Code."
With the denial of its appeal, petitioner found its way here via the petition in G.R. No. 119597,
to seek relief from the aforesaid decision of COA.
We will first resolve the issue on the applicability of RA 6971 to petitioner ADEPT in G.R. No.
119597 before passing upon the constitutionality or validity of Administrative Orders 29 and
268.
Section 3 of RA 6971, reads:
"SEC. 3. Coverage. — This Act shall apply to all business enterprises with or without
existing and duly recognized or certified labor organizations, including government-owned and
controlled corporations performing proprietary functions. It shall cover all employees and
workers including casual, regular, supervisory and managerial employees." (emphasis ours)
Pursuant to Section 10 8 of RA 6971, the Secretary of Labor and Secretary of Finance issued
Supplemental Rules to Implement the said law, as follows:
"Section 1. Paragraph (a) Section 1, Rule II of the Rules Implementing RA 6971, shall be
amended to read as follows:
Coverage. These Rules shall apply to:
(a) All business enterprises with or without existing duly certified labor organizations,
including government-owned and controlled corporations performing proprietary functions
which are established solely for business or profit or gain and accordingly excluding those
created, maintained or acquired in pursuance of a policy of the state, enunciated in the
Constitution or by law, and those whose officers and employees are covered by the Civil Service.
(emphasis ours)
xxx xxx xxx"
Petitioner contends that the PTA is a government-owned and controlled corporation performing
proprietary function, and therefore the Secretary of Labor and Employment and Secretary of
Finance exceeded their authority in issuing the afore-stated Supplemental Rules Implementing
RA 6971.
Government-owned and controlled corporations may perform governmental or proprietary
functions or both, depending on the purpose for which they have been created. If the purpose
is to obtain special corporate benefits or earn pecuniary profit, the function is proprietary. If it is
in the interest of health, safety and for the advancement of public good and welfare, affecting
the public in general, the function is governmental. 9 Powers classified as "proprietary" are
those intended for private advantage and benefit. 10
The PTA was established by Presidential Decree No. 189, as amended by Presidential Decree No.
564 ("PD 564").
Its general purposes 11 are:
1. To implement the policies and programs of the Department of Tourism ("Department");
2. To develop tourist zones;
3. To assist private enterprises in undertaking tourism projects;
4. To operate and maintain tourist facilities;
5. To assure land availability for private investors in hotels and other tourist facilities;
6. To coordinate all tourism project plans and operations.
Its specific functions and powers 12 are:
1. Planning and development of tourism projects
a. To assist the Department make a comprehensive survey of the physical and natural
tourism resources of the Philippines; to establish the order of priority for development of said
areas; to recommend to the President the proclamation of a tourist zone; and to define and fix
the boundaries of the zone;
b. To formulate a development plan for each zone;
c. To submit to the President through the National Economic and Development Authority
for review and approval all development plans before the same are enforced or implemented;
d. To submit to the President an Annual Progress Report;
e. To assist the Department to determine the additional capacity requirements for various
tourist facilities and services; to prepare a ten-year Tourism Priorities Plan; to update annually
the ten year Tourism Priorities Plan.
f. To gather, collate and analyze statistical data and other pertinent information for the
effective implementation of PD 564.
2. Acquisition and disposition of lands and other assets for tourist zone purposes
a. To acquire possession and ownership of all lands transferred to it from other
government corporations and institutions and any land having tourism potential and earmarked
in the Tourism Priorities Plans for intensive development into a tourist zone or as a part thereof,
subject to the approval of the President.
b. To acquire by purchase, by negotiation or by condemnation proceedings any private land
within and without the tourist zones for any of the following reasons: (a) consolidation of lands
for tourist zone development purposes, (b) prevention of land speculation in areas declared as
tourist zones, (c) acquisition of right of way to the zones, (d) protection of water shed areas and
natural assets with tourism value, and (e) for any other purpose expressly authorized under PD
564.
c. For the purpose of providing land acquisition assistance to registered tourism
enterprises, to sell, subdivide, resell, lease, sublease, rent out, or otherwise, to said registered
tourism enterprises under sufficiently soft terms for use specifically in the development of
hotels, recreational facilities, and other tourist services.
d. To develop and/or subdivide any land in its name or undertake condominium projects
thereon, and sell subdivision lots or condominium units to private persons for investment
purposes.
e. To take over or transfer to a registered tourism enterprise in accordance with law any
lease on foreshore areas within a tourist zone or adjacent thereto, in cases said areas are not
being utilized in accordance with the PTA's approved zone development plan and wherein the
lessee concerned does not agree to conform accordingly.
f. To arrange for the reclamation of any land adjacent to or adjoining a tourist zone in
coordination with appropriate government agencies.
3. Infrastructure development for tourist zone purposes
a. To contract, supervise and pay for infrastructure works and civil works within a tourist
zone owned and operated by the PTA..
b. To coordinate with appropriate government agencies the development of infrastructure
requirements supporting a tourist zone.
c. To take water from any public stream, river, creek, lake, spring, or waterfall and to alter,
straighten, obstruct or increase the flow of water in streams.
4. Zone administration and control
a. To formulate and implement zoning regulations.
b. To determine and regulate the enterprises to be established within a tourist zone.
c To ensure, through the proper authorities concerned, the ecological preservation,
maintenance and/or rehabilitation of the common and the public areas within a tourist zone
and the environment thereof.
d. To identify and recommend to the President the preservation and/or restoration of
national monuments or preserves; to arrange for the preservation and/or restoration of the
same with appropriate government agencies or with the private sector or with the owners
themselves of said tourist attractions; and to identify and recommend to the appropriate
authorities concerned the declaration of tourist areas and attractions as national monuments
and preserves.
5. Project and investment promotions
a. To identify, develop, invest in, own, manage and operate such projects as it may deem to
be vital for recreation and rest but not sufficiently attractive economically for private
investment.
b. To construct hotel buildings and other tourist facilities within a tourist zone and in turn
lease such facilities to registered tourism enterprises for operation, management and
maintenance.
c. To organize, finance, invest in, manage and operate wholly-owned subsidiary
corporations.
6. Direct assistance to registered enterprises
a. To administer the tax and other incentives granted to registered enterprises.
b. To evaluate, approve and register or reject any and all tourism projects or enterprises
established within the tourist zones.
c. To grant medium and long-term loans and/or re-lend any funds borrowed for the
purpose to duly qualified registered tourism enterprises.
d. To guarantee local and foreign borrowings of registered enterprises.
e. To provide equity investments in the form of cash and/or land.
f. To extend technical, management and financial assistance to tourism projects.
g. To identify, contact and assist in negotiations of suitable partners for both local and
foreign investors interested in investment or participation in the tourism industry.
h. To assist registered enterprises and prospective investors to have their papers processed
with dispatch by government offices.
7. Other powers and functions
a. To engage or retain the services of financial, management, legal, technical, and/or
project consultants from the private or government sector.
b. To have the power to succeed by its corporate name.
c. To adopt, alter, and use a corporate seal.
d. To sue and be sued under its corporate name.
e. To enter into any contracts of any kind and description.
f. To own or possess personal and/or real property.
g. To make, adopt and enforce rules and regulations to execute its powers, duties and
functions.
h. To purchase, hold, and alienate shares of stock or bonds of any corporation.
i. To collect fees or charges as may be imposed under PD 564.
j. To contract indebtedness and issue bonds.
k. To fix and collect rentals for the lease, use or occupancy of lands, buildings, or other
property owned or administered by PTA..
l. To do any and all acts and things necessary to carry out the purposes for which the PTA
is created.
Categorized in light of the foregoing provisions of law in point, PTA's governmental functions
include the first, third, fourth, and sixth of the aforesaid general purposes. The second 13 and
fifth general purposes fall under its proprietary functions.
With respect to PTA's specific functions and powers, the first and fourth are governmental in
nature while the fifth specific functions and powers are proprietary in character. The second,
third, sixth, and seventh specific functions and powers can be considered partly-governmental
and partly-proprietary, considering that 2(a), 2(b), 2(c), 2(d), 2(e), 3(a), 6(c), 6(d), 6(e), 7(h), 7(j),
and 7(k) are proprietary functions while 2(f), 3(b), 3(c), 6(a), 6(b), 6(f), 6(g), 6(h), 7(a), 7(b), 7(c),
7(d), 7(f), 7(g), and 7(l) are governmental functions. The specific functions and powers treated in
7(e) and 7(i) may be classified either as proprietary or governmental, depending on the
circumstances under which they are exercised or performed.
The aforecited powers and functions of PTA are predominantly governmental, principally geared
towards the development and promotion in the scenic Philippine archipelago. But it is
irrefutable that PTA also performs proprietary functions, as envisaged by its charter.
Reliance on the above analysis of the functions and powers of PTA does not suffice for the
determination of whether or not it is within the coverage of RA 6971. For us to resolve the
issues raised here solely on the basis of the classification of PTA's powers and functions may
lead to the rendition of judgment repugnant to the legislative intent and to established
doctrines, as well, such as on the prohibition against government workers to strike. Under RA
6971, the workers have the right to strike.
To ascertain whether PTA is within the ambit of RA 6971, there is need to find out the legislative
intent, and to refer to other provisions of RA 6971 and other pertinent laws, that may aid the
Court in ruling on the right of officials and employees of PTA to receive bonuses under RA 6971.
Petitioner cites an entry in the journal of the House of Representatives to buttress its
submission that PTA is within the coverage of RA 6971, to wit:
"Chairman Veloso: The intent of including government-owned and controlled corporations
within the coverage of the Act is the recognition of the principle that when government goes
into business, it (divests) itself of its immunity from suit and goes down to the level of ordinary
private enterprises and subjects itself to the ordinary laws of the land just like ordinary private
enterprises. Now, when people work therefore in government-owned or controlled
corporations, it is as if they are also, just like in the private sector, entitled to all the benefits of
all laws that apply to workers in the private sector. In my view, even including the right to
organize, bargain . . ." VELOSO (Bicameral Conference Committee on Labor and Employment,
pp. 15-16)
After a careful study, the Court is of the view, and so holds, that contrary to petitioner's
interpretation, the government-owned and controlled corporations Mr. Chairman Veloso had in
mind were government-owned and controlled corporations incorporated under the general
corporation law. This is so because only workers in private corporations and government-owned
and controlled corporations, incorporated under the general corporation law, have the right to
bargain (collectively). Those in government corporations with special charter, which are subject
to Civil Service Laws, have no right to bargain (collectively), except where the terms and
conditions of employment are not fixed by law. Their rights and duties are not comparable with
those in the private sector.
"Since the terms and conditions of government employment are fixed by law, government
workers cannot use the same weapons employed by workers in the private sector to secure
concessions from their employers. The principle behind labor unionism in private industry is
that industrial peace cannot be secured through compulsion by law. Relations between private
employers and their employees rest on an essentially voluntary basis. Subject to the minimum
requirements of wage laws and other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the process of collective
bargaining. In government employment, however, it is the legislature and, where properly given
delegated power, the administrative heads of government which fix the terms and conditions of
employment. And this is effected through statutes or administrative circulars, rules, and
regulations, not through collective bargaining agreements." (Alliance of Government Workers v.
Minister of Labor and Employment, 124 SCRA 1) (emphasis ours)
Government corporations may be created by special charters or by incorporation under the
general corporation law. Those created by special charters are governed by the Civil Service Law
while those incorporated under the general corporation law are governed by the Labor Code.
The legislative intent to place only government-owned and controlled corporations performing
proprietary functions under the coverage of RA 6971 is gleanable from the other provisions of
the law. For instance, section 2 of said law envisions "industrial peace and harmony" and "to
provide corresponding incentives to both labor and capital;" section 4 refers to "representatives
of labor and management;" section 5 mentions of "collective bargaining agent(s) of the
bargaining unit(s);" section 6 relates to "existing collective bargaining agreements," and "labor
and management;" section 7 speaks of "strike or lockout;" and section 9 purports to "seek the
assistance of the National Conciliation and Mediation Board of the Department of Labor and
Employment" and "include the name(s) of the voluntary arbitrators or panel of voluntary
arbitrator." All the afore-cited provisions of law apply only to private corporations and
government-owned and controlled corporations organized under the general corporation law.
Only they have collective bargaining agents, collective bargaining units, collective bargaining
agreements, and the right to strike or lockout.
To repeat, employees of government corporations created by special charters have neither the
right to strike nor the right to bargain collectively, as defined in the Labor Code. The case of
Social Security System Employees Association indicates the following remedy of government
workers not allowed to strike or bargain collectively, to wit:
"Government employees may, therefore, through their unions or associations, either petition
the Congress for the betterment of the terms and conditions of employment which are within
the ambit of legislation or negotiate with the appropriate government agencies for the
improvement of those which are not fixed by law. If there be any unresolved grievances, the
dispute may be referred to the Public Sector Labor-Management Council for appropriate action.
But employees in the civil service may not resort to strikes, walkouts and other temporary work
stoppages, like workers in the private sector, to pressure the Government to accede to their
demands." (supra, footnote 14, p. 698; emphasis ours)
It is a rule in statutory construction that every part of the statute must be interpreted with
reference to the context, i.e., that every part of the statute must be considered together with
the other parts, and kept subservient to the general intent of the whole enactment. The
provisions of RA 6971, taken together, reveal the legislative intent to include only government-
owned and controlled corporations performing proprietary functions within its coverage.
Every statute must be construed and harmonized with other statutes as to form a uniform
system of jurisprudence. 24 We note Section 1, Rule X of the Omnibus Rules Implementing Book
V of EO 292, which reads:
"SEC. 1. Each department or agency of government, whether national or local, including
bureaus and agencies, state colleges and universities, and government owned and controlled
corporations with original charters, shall establish its own Department or Agency Employee
Suggestions and Incentives Award System in accordance with these Rules and shall submit the
same to the Commission for approval. (emphasis ours)
It is thus evident that PTA, being a government-owned and controlled corporation with original
charter subject to Civil Service Law, Rules and Regulations, is already within the scope of an
incentives award system under Section 1, Rule X of the Omnibus Rules Implementing EO 292
issued by the Civil Service Commission ("Commission"). Since government-owned and
controlled corporations with original charters do have an incentive award system, Congress
enacted a law that would address the same concern of officials and employees of government-
owned and controlled corporations incorporated under the general corporation law.
All things studiedly considered in proper perspective, the Court finds no reversible error in the
finding by respondent Commission that PTA is not within the purview of RA 6971. As regards the
promulgation of implementing rules and regulations, it bears stressing that the "power of
administrative officials to promulgate rules in the implementation of the statute is necessarily
limited to what is provided for in the legislative enactment." In the case under scrutiny, the
Supplementary Rules Implementing RA 6971 issued by the Secretary of Labor and Employment
and the Secretary of Finance accord with the intendment and provisions of RA 6971.
Consequently, not being covered by RA 6971, AO 29 applies to the petitioner.
We now tackle the common issue posited by the consolidated petitions on the constitutionality
of AO 29 and AO 268.
Petitioners contend and argue, that:
I. AO 29 AND AO 268 ARE VIOLATIVE OF THE PROVISIONS OF EO 292 AND, HENCE, NULL
AND VOID.
II. AO 29 AND AO 268 UNLAWFULLY USURP THE CONSTITUTIONAL AUTHORITY GRANTED
SOLELY TO THE CIVIL SERVICE COMMISSION.
III. THE FORCED REFUND OF INCENTIVE PAY IS AN UNCONSTITUTIONAL IMPAIRMENT OF A
CONTRACTUAL OBLIGATION.
IV. ASSUMING, FOR THE SAKE OF ARGUMENT ONLY, THAT THE GRANT OF PRODUCTIVITY
INCENTIVE BENEFITS WAS INVALID, THE SAME SHOULD BE THE PERSONAL LIABILITY OF
OFFICIALS DIRECTLY RESPONSIBLE THEREFOR IN ACCORDANCE WITH SECTION 9 OF AO 268.
Issued by the then President Corazon Aquino ("President Aquino") on July 25, 1987 in the
exercise of her legislative powers under the 1987 Constitution, EO 292, or the Administrative
Code of 1987, provided for the following incentive award system:
"Sec. 31. Career and Personnel Development Plans. — Each department or agency shall
prepare a career and personnel development plan which shall be integrated into a national plan
by the Commission. Such career and personnel development plans which shall include
provisions on merit promotions, performance evaluation, in-service training, including overseas
and local scholarships and training grants, job rotation, suggestions and incentive award
systems, and such other provisions for employees' health, welfare, counseling, recreation and
similar services.
Sec. 35. Employee Suggestions and Incentive Award System. — There shall be established
a government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated by the
Commission.
In accordance with rules, regulations, and standards promulgated by the Commission, the
President or the head of each department or agency is authorized to incur whatever necessary
expenses involved in the honorary recognition of subordinate officers and employees of the
government who by their suggestions, inventions, superior accomplishment, and other personal
efforts contribute to the efficiency, economy, or other improvement of government operations,
or who perform such other extraordinary acts or services in the public interest in connection
with, or in relation to, their official employment."
Sec. 36. Personnel Relations. — (1) It shall be the concern of the Commission to provide
leadership and assistance in developing employee relations programs in the department or
agencies.
(2) Every Secretary or head of agency shall take all proper steps toward the creation of an
atmosphere conducive to good supervisor-employee relations and the improvement of
employee morale."
Pursuant to the provision of Section 12(2), 28 Chapter 3, Book V of EO 292, the Commission
adopted and prescribed the Omnibus Rules Implementing Book V of EO 292 which, among
others, provide:
"Sec. 1. Each department or agency of government, whether national or local, including
bureaus and agencies, state colleges and universities, and government owned and controlled
corporations with original charters, shall establish its own Department or Agency Employee
Suggestions and Incentives Award System in accordance with these Rules and shall submit the
same to the Commission for approval."
"Sec. 2. The System is designed to encourage creativity, innovativeness, efficiency,
integrity and productivity in the public service by recognizing and rewarding officials and
employees, individually or in groups, for their suggestions, inventions, superior
accomplishments, and other personal efforts which contribute to the efficiency, economy, or
other improvement in government operations, or for other extraordinary acts of services in the
public interest.
xxx xxx xxx"
"Sec. 7. The incentive awards shall consist of, though not limited to, the following:
xxx xxx xxx
(c) Productivity Incentive which shall be given to an employee or group of employees who
has exceeded their targets or has incurred incremental improvement over existing targets.
On February 21, 1992, President Aquino issued AO 268 which granted "each official and
employee of the government the productivity incentive benefits in a maximum amount
equivalent to thirty percent (30%) of his one (1) month basic salary but in no case shall such
amount be less than two thousand pesos (P2,000.00)," 29 for those who have rendered at least
one year of service as of December 31, 1991. 30 Said AO carried the prohibition, provided in
Section 7 thereof, which reads:
"SEC. 7. The productivity incentive benefits herein authorized shall be granted only for
Calendar Year 1991. Accordingly, all heads of agencies, including the governing boards of
government-owned or -controlled corporations and financial institutions, are hereby strictly
prohibited from authorizing/granting productivity incentive benefits or other allowances of
similar nature for Calendar Year 1992 and future years pending the result of a comprehensive
study being undertaken by the Office of the President in coordination with the Civil Service
Commission and the Department of Budget and Management on the matter.
The formulation of the necessary implementing guidelines for Executive Order No. 486 dated 8
November 1991 establishing a performance-based incentive system for government-owned or
-controlled corporations shall likewise be included in the comprehensive study referred to in the
preceding paragraph."
On January 19, 1993, President Ramos issued AO 29 which granted productivity incentive
benefits to government employees in the maximum amount of P1,000.00 for the calendar year
1992 but reiterated the proscription under Section 7 of AO 268, thus:
"SEC. 2. The prohibition prescribed under Section 7 of Administrative Order No. 268 is
hereby reiterated. Accordingly, all heads of government offices/agencies, including government-
owned and/or controlled corporations, as well as their respective governing boards are hereby
enjoined and prohibited from authorizing/granting Productivity Incentive Benefits or any and all
similar forms of allowances/benefits without prior approval and authorization via
Administrative Order by the Office of the President. Henceforth, anyone found violating any of
the mandates in this Order, including all officials/employees and the COA Auditor-in-Charge of
such government office/agency found to have taken part thereof, shall be accordingly and
severely dealt with in accordance with the applicable provisions of existing penal laws.
Consequently, all administrative authorizations to grant any form of allowances/benefits and all
forms of additional compensation usually paid outside of the prescribed basic salary under R.A.
No. 6758, the Salary Standardization Law that are inconsistent with the legislated policy on the
matter or are not covered by any legislative action are hereby revoked.
The implementation of Executive Order No. 486 dated November 8, 1991, as amended by
Executive Order No. 518 dated May 29, 1992, is hereby deferred until a more comprehensive
and equitable scheme for the grant of the benefits that can be applied government-wide is
formulated by the Department of Budget and Management."
Petitioners theorize that AO 29 and AO 268 violate EO 292 and since the latter is a law, it
prevails over executive issuances. Petitioners likewise assert that AO 29 and AO 268 encroach
upon the constitutional authority of the Civil Service Commission to adopt measures to
strengthen the merit and rewards system and to promulgate rules, regulations and standards
governing the incentive awards system of the civil service.
The Court is not impressed with petitioners' submission. AO 29 and AO 268 were issued in the
valid exercise of presidential control over the executive departments.
In establishing a Civil Service Commission, the 1987 Constitution delineated its function, as
follows: cdphil
"The Civil Service Commission, as the central personnel agency of the Government, shall
establish a career service and adopt measures to promote morale, efficiency, integrity,
responsiveness, progressiveness, and courtesy in the civil service. It shall strengthen the merit
and rewards system, integrate all human resources development programs for all levels and
ranks, and institutionalize a management climate conducive to public accountability. It shall
submit to the President and the Congress an annual report on its personnel programs." (Section
3, Article IX, B, 1987 Constitution)
The Commission handles personnel matters of the government . As the central personnel agency
of the Government, it is tasked to formulate and establish a system of incentives and rewards
for officials and employees in the public sector, alike.
The functions of the Commission have been decentralized to the different departments, offices,
and agencies of the government —
"SEC. 1. Declaration of Policy. — The State shall insure and promote the Constitutional
mandate that appointments in the Civil Service shall be made only according to merit and
fitness, that the Civil Service Commission, as the central personnel agency of the Government
shall establish a career service, adopt measures to promote morale, efficiency, integrity,
responsiveness, and courtesy in the civil service, strengthen the merit and rewards system,
integrate all human resources development programs for all levels and ranks, and
institutionalize a management climate conducive to public accountability; that public office is a
public trust and public officers and employees must at all times be accountable to the people;
and that personnel functions shall be decentralized, delegating the corresponding authority to
the departments, offices and agencies where such functions can be effectively performed."
(Section 1, Chapter I, Subtitle A, Title I, EO 292) (emphasis ours)
Specifically, implementation of the Employee Suggestions and Incentive Award System has
been decentralized to the “President” or to the head of each department or agency —
"Sec. 35. Employee Suggestions and Incentive Award System. — There shall be established
a government-wide employee suggestions and incentive awards system which shall be
administered under such rules, and regulations, and standards as maybe promulgated by the
Commission.
In accordance with rules, regulations, and standards promulgated by the Commission, the
President or the head of each department or agencies authorized to incur whatever necessary
expenses involved in the honorary recognition of subordinate officers and employees of the
government who by their suggestions, inventions, superior accomplishment, and other personal
efforts contribute to the efficiency, economy, or other improvement of government operations,
or who perform such other extraordinary acts or services in the public interest in connection
with, or in relation to, their official employment." (EO 292) (emphasis ours)
The President is the head of the government. Governmental power and authority are
exercised and implemented through him. His power includes the control over executive
departments —
"The president shall have control of all the executive departments, bureaus, and offices. He shall
ensure that the laws be faithfully executed." (Section 17, Article VII, 1987 Constitution)
Control means "the power of an officer to alter or modify or set aside what a subordinate
officer had done in the performance of his duties and to substitute the judgment of the former
for that of the latter ." It has been held that "[t]he President can, by virtue of his power of
control, review, modify, alter or nullify any action, or decision, of his subordinate in the
executive departments, bureaus, or offices under him. He can exercise this power motu
proprio without need of any appeal from any party."
When the President issued AO 29 limiting the amount of incentive benefits, enjoining heads of
government agencies from granting incentive benefits without prior approval from him, and
directing the refund of the excess over the prescribed amount , the President was just
exercising his power of control over executive departments. This is decisively clear from the
WHEREAS CLAUSES of AO 268 and AO 29, to wit:
ADMINISTRATIVE ORDER NO. 268
"xxx xxx xxx
WHEREAS, the productivity incentive benefits granted by the different agencies are of varying
amounts, causing dissension/demoralization on the part of those who had received less and
those who have not yet received any such benefit, thereby defeating the purpose for which the
same should be granted; and
WHEREAS, there exists the need to regulate the grant of the productivity incentive benefits or
other similar allowances in conformity with the policy on standardization of compensation
pursuant to Republic Act No. 6758;
xxx xxx xxx"
ADMINISTRATIVE ORDER NO. 29
"xxx xxx xxx
WHEREAS, the faithful implementation of statutes, including the Administrative Code of 1987
and all laws governing all forms of additional compensation and personnel benefits is a
Constitutional prerogative vested in the President of the Philippines under Section 17, Article VII
of the 1987 Constitution;
WHEREAS, the Constitutional prerogative includes the determination of the rates, the timing
and schedule of payment, and final authority to commit limited resources of government for
the payment of personnel incentives, cash awards, productivity bonus, and other forms of
additional compensation and fringe benefits;
WHEREAS, some government agencies have overlooked said Constitutional prerogative and
have unilaterally granted to their respective officials and employees incentive awards;
WHEREAS, the Office of the President issued Administrative Order No. 268, dated February 21,
1992, strictly prohibiting the grant of Productivity Incentive Bonus or other allowances of similar
nature for Calendar Year 1992 and future years pending the issuance of the requisite
authorization by the President;
WHEREAS, notwithstanding said prohibition some government offices/agencies and
government-owned and/or controlled corporations and financial institutions have granted
productivity incentive benefits in varying nomenclature and amounts without the proper
authorization/coordination with the Office of the President;
WHEREAS, the unilateral and uncoordinated grant of productivity incentive benefits gave rise to
discontentment, dissatisfaction and demoralization among government personnel who have
received less or have not received at all such benefits;
xxx xxx xxx"
The President issued subject Administrative Orders to regulate the grant of productivity
incentive benefits and to prevent discontentment, dissatisfaction and demoralization among
government personnel by committing limited resources of government for the equal payment
of incentives and awards. The President was only exercising his power of control by modifying
the acts of the respondents who granted incentive benefits to their employees without
appropriate clearance from the Office of the President, thereby resulting in the uneven
distribution of government resources. In the view of the President, respondents did a mistake
which had to be corrected. In so acting, the President exercised a constitutionally-protected
prerogative —
"The President's duty to execute the law is of constitutional origin. So, too, is his control of all
executive departments. Thus it is, that department heads are men of his confidence. His is the
power to appoint them; his, too, is the privilege to dismiss them at pleasure. Naturally, he
controls and directs their acts. Implicit then is his authority to go over, confirm, modify or
reverse the action taken by his department secretaries. In this context, it may not be said that
the President cannot rule on the correctness of a decision of a department secretary. (Lacson-
Magallanes Co., Inc. v. Paño, 21 SCRA 898)
Neither can it be said that the President encroached upon the authority of the Commission on
Civil Service to grant benefits to government personnel. AO 29 and AO 268 did not revoke the
privilege of employees to receive incentive benefits. The same merely regulated the grant and
amount thereof.
Sound management and effective utilization of financial resources of government are basically
executive functions, not the Commission's. Implicit is this recognition in EO 292, which states:
"Sec. 35. Employee Suggestions and Incentive Award System. — There shall be established
a government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated by the
Commission.
In accordance with rules, regulations, and standards promulgated by the Commission, the
President or the head of each department or agency is authorized to incur whatever necessary
expenses involved in the honorary recognition of subordinate officers and employees of the
government who by their suggestions, inventions, superior accomplishment, and other personal
efforts contribute to the efficiency, economy, or other improvement of government operations,
or who perform such other extraordinary acts or services in the public interest in connection
with, or in relation to, their official employment." (Chapter 5, Subtitle A, Book V) (emphasis
ours)
Conformably, it is "the President or the head of each department or agency who is authorized
to incur the necessary expenses involved in the honorary recognition of subordinate officers
and employees of the government." It is not the duty of the Commission to fix the amount of
the incentives. Such function belongs to the President or his duly empowered alter ego.
Anent petitioners' contention that the forcible refund of incentive benefits is an
unconstitutional impairment of a contractual obligation, suffice it to state that "[n]ot all
contracts entered into by the government will operate as a waiver of its non-suability;
distinction must be made between its sovereign and proprietary acts (United States of America
v. Ruiz, 136 SCRA 487)" 35 The acts involved in this case are governmental. Besides, the Court is
in agreement with the Solicitor General that the incentive pay or benefit is in the nature of a
bonus which is not a demandable or enforceable obligation.
It is understood that the Judiciary, Civil Service Commission, Commission on Audit, Commission
on Elections, and Office of the Ombudsman, which enjoy fiscal autonomy, are not covered by
the amount fixed by the President. As explained in Bengzon vs. Drilon (208 SCRA 133):
"As envisioned in the Constitution, the fiscal autonomy enjoyed by the Judiciary, the Civil
Service Commission, the Commission on Audit, the Commission on Elections, and the Office of
the Ombudsman contemplates a guarantee of full flexibility to allocate and utilize their
resources with the wisdom and dispatch that their needs require. It recognizes the power and
authority to levy, assess and collect fees, fix rates of compensation not exceeding the highest
rates authorized by law for compensation and pay plans of the government and allocate and
disburse such sums as may be provided by law or prescribed by them in the course of the
discharge of their functions.
"Fiscal autonomy means freedom from outside control. If the Supreme Court says it needs 100
typewriters but DBM rules we need only 10 typewriters and sends its recommendations to
Congress without even informing us, the autonomy given by the Constitution becomes an
empty and illusory platitude.
"The Judiciary, the Constitutional Commissions, and the Ombudsman must have the
independence and flexibility needed in the discharge of their constitutional duties. The
imposition of restrictions and constraints on the manner the independent constitutional offices
allocate and utilize the funds appropriated for their operations is anathema to fiscal autonomy
and violative not only of the express mandate of the Constitution but especially as regards the
Supreme Court, of the independence and separation of powers upon which the entire fabric of
our constitutional system is based. In the interest of comity and cooperation, the Supreme
Court, Constitutional Commissions, and the Ombudsman have so far limited their objections to
constant reminders. We now agree with the petitioners that this grant of autonomy should
cease to be a meaningless provision."
Untenable is petitioners' contention that the herein respondents be held personally liable for
the refund in question. Absent a showing of bad faith or malice, public officers are not
personally liable for damages resulting from the performance of official duties.
Every public official is entitled to the presumption of good faith in the discharge of official
duties. Absent any showing of bad faith or malice, there is likewise a presumption of regularity
in the performance of official duties.
In upholding the constitutionality of AO 268 and AO 29, the Court reiterates the well-
entrenched doctrine that "in interpreting statutes, that which will avoid a finding of
unconstitutionality is to be preferred."
Considering, however, that all the parties here acted in good faith, we cannot countenance the
refund of subject incentive benefits for the year 1992, which amounts the petitioners have
already received. Indeed, no indicia of bad faith can be detected under the attendant facts and
circumstances. The officials and chiefs of offices concerned disbursed such incentive benefits in
the honest belief that the amounts given were due to the recipients and the latter accepted the
same with gratitude, confident that they richly deserve such benefits.
WHEREFORE, the Petitions in G.R. Nos. 109406, 110642, 111494, and 112056 are hereby
DISMISSED, and as above ratiocinated, further deductions from the salaries and allowances of
petitioners are hereby ENJOINED.
In G.R. No. 119597, the assailed Decision of respondent Commission on Audit is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Narvasa, C .J ., Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza,
Panganiban, Martinez and Quisumbing, JJ ., concur.
Regalado, J ., on official leave.
Footnotes
1. The applicable provisions are contained in Chapter 5, Subtitle A, Title I of Book V:
"Sec. 31. Career and Personnel Development Plans. — Each department or agency shall
prepare a career and personnel development plan which shall be integrated into a national plan
by the Commission. Such career and development plans which shall include provisions on merit
promotions, performance evaluation, in-service training, including overseas and local
scholarships and training grants, job rotation, suggestions and incentive award systems, and
such other provisions for employees' health, welfare, counseling, recreation and similar
services."
Sec. 35. Employee Suggestions and Incentive Award System. — There shall be established
a government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated by the
Commission.
In accordance with rules, regulations, and standards promulgated by the Commission, the
President or the head of each department or agency is authorized to incur whatever necessary
expenses involved in the honorary recognition of subordinate officers and employees of the
government who by their suggestions, inventions, superior accomplishment, and other personal
efforts contribute to the efficiency, economy, or other improvement of government operations
or who perform such other extraordinary acts or services in the public interest in connection
with, or in relation to, their official employment."
2. "Sec. 36. Personnel Relations. — (1) It shall be the concern of the Commission to
provide leadership and assistance in developing employee relations programs in the
department or agencies.
(2) Every Secretary or head of agency shall take all proper steps toward the creation of an
atmosphere conducive to good supervisor-employee relations and the improvement of
employee morale."
The applicable provisions are contained in Sections 1, 2 and 7 (c) of Rule X:
"Sec. 1. Each department or agency of government, whether national or local, including
bureaus and agencies state colleges and universities, and government owned and controlled
corporations with original charters, shall establish its own Department or Agency Employee
Suggestions and Incentives Award System in accordance with these Rules and shall submit the
same to the Commission for approval."
"Sec. 2. The System is designed to encourage creativity, innovativeness, efficiency,
integrity and productivity in the public service by recognizing and rewarding officials and
employees, individually or in groups, for their suggestions, inventions, superior
accomplishments, and other personal efforts which contribute to the efficiency, economy, or
other improvement in government operations, or for other extraordinary acts of services in the
public interest.
xxx xxx xxx"
3. Sec. 7. — The incentive awards shall consist of, though not limited to, the following:
xxx xxx xxx
"(c) Productivity Incentive which shall be given to an employee or group of employees who
has exceeded their targets or has incurred incremental improvement over existing targets."
"SEC. 1. All agencies of the National Government, including government-owned and/or
-controlled corporations and government financial institutions, and local government units are
hereby authorized to grant productivity incentive benefits in the maximum amount of ONE
THOUSAND PESOS (P1,000.00) each to their permanent and full-time temporary and casual
employees, including contractual personnel with employment in the nature of regular
employee, who have rendered at least one (1) year of service in the Government as of
December 31, 1992."
4. SEC. 2. The prohibition prescribed under Section 7 of Administrative Order No. 268 is
hereby reiterated. Accordingly, all heads of government offices/agencies, government-owned
and/or controlled corporations, as well as their respective governing boards are hereby
enjoined and prohibited from authorizing/granting Productivity Incentive Benefits or any and all
similar forms of allowances/benefits without prior approval and authorization via
Administrative Order by the Office of the President. Henceforth, anyone found violating any of
the mandates in this Order, including all officials/employees and the COA Auditor-in-Charge of
such government office/agency found to have taken part thereof, shall be accordingly and
severely dealt with in accordance with the applicable provisions of existing penal laws.
Consequently, all administrative authorizations to grant any form of allowances/benefits and all
forms of additional compensation usually paid outside of the prescribed basic salary under R.A.
No. 6758, the Salary Standardization Law, that are inconsistent with the legislated policy on the
matter or are not covered by any legislative action are hereby revoked.
The implementation of Executive Order No. 486 dated November 8, 1991, as amended by
Executive Order No. 518 dated May 29, 1992, is hereby deferred until a more comprehensive
and equitable scheme for the grant of the benefits that can be applied government-wide is
formulated by the Department of Budget and Management."
5. "SEC. 7. The productivity incentive benefits herein authorized shall be granted
only for Calendar Year 1991. Accordingly, all heads of agencies, including the governing boards
of government-owned or -controlled corporations and financial institutions, are hereby strictly
prohibited from authorizing/granting productivity incentive benefits or other allowances of
similar nature for Calendar Year 1992 and future years pending the result of a comprehensive
study being undertaken by the Office of the President in coordination with the Civil Service
Commission and the Department of Budget and Management on the matter.
The formulation of the necessary implementing guidelines for Executive Order No. 486 dated 8
November 1991 establishing a performance-based incentive system for government-owned or
-controlled corporations shall likewise be included in the comprehensive study referred to in the
preceding paragraph."
6. Rollo, G.R. No. 119597, p. 29.
7. Ibid, pp. 21-23.
8. SEC. 10. Rule Making Power — The Secretary of Labor and Employment and the
Secretary of Finance, after due notice and hearing, shall jointly promulgate and issue within six
(6) months from the effectivity of this Act such rules and regulations as are necessary to carry
out the provisions hereof."
9. Department of Public Services and Labor Unions v. the Court of Industrial Relations, 1
SCRA 319.
10. Words and Phrases, "Proprietary Function."
11. Section 4, Presidential Decree No. 564.
12. Section 5, Presidential Decree No. 564.
13. The full text of the second general purpose reads:
"(b) Develop tourist zones. — To promote the development into integrated resort complexes
of selected and well defined geographic areas with potential tourism value, known otherwise as
'tourist zones', wherein optimum use of natural assets and attractions as well as existing
facilities and concentration of efforts and limited resources of both government and private
sector may be effected and realized in order to generate foreign exchange as well as other
tourist receipts. Such tourist zones shall consist of substantially undeveloped areas the
ownership of which may partially or wholly acquired by the Authority or whose existing owners
may choose to contribute their property into a consortium or in a new corporation in which the
Authority shall participate, which in any case shall be under the control of the Authority as to
the manner of development to be undertaken within the zone."
14. Social Security System Employees Association (SSSEA) v. Court of Appeals, 175 SCRA 686,
696.
"Considering that under the 1987 Constitution '[t]he civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the Government, including government-owned
or -controlled corporations with original charters' [Art. IX (B), Sec. 2(1); see also Sec. 1 of E.O.
No. 180 where the employees in the civil service are denominated as government employees]
and that the SSS is one such government-controlled corporation with an original charter, having
been created under R.A. No. 1161, its employees are part of the civil service [NASECO v. NLRC,
G.R. Nos. 69870 & 70295, November 24, 1988] and are covered by the Civil Service
Commission's memorandum prohibiting strikes."
15. Section 13, Executive Order No. 180.
16. Section 2 (1), Article IX, B. 1987 Constitution; PNOC-Energy Development Corporation v.
Leogardo, 175 SCRA 26; National Service Corporation v. NLRC, 168 SCRA 134.
17. SEC. 2. Declaration of Policy. — It is the declared policy of the State to encourage higher
levels of productivity, maintain industrial peace and harmony and promote the principle or
shared responsibility in the relations between workers and employers, recognizing the right of
labor to its just share in the fruits of production and the right of business enterprises to
reasonable returns of investments and to expansion and growth, and the accordingly to provide
corresponding incentives to both labor and capital for undertaking voluntary programs to
ensure greater sharing by the workers in the fruits of their labor."
18. "SEC. 4. Definition of Terms. — As used in this Act:
xxx xxx xxx
b) "Labor-Management Committee" refers to a negotiating body in a business enterprise
composed of the representatives of labor and management created to establish a productivity
incentives program, and to settle disputes arising therefrom in accordance with Section 9
hereof."
19. "SEC. 5. Labor-Management Committee. — a) . . .
b) In business enterprises with duly recognized or certified labor organizations, the
representatives of labor shall be those designated by the collective bargaining agent(s) of the
bargaining unit(s).
c) In business enterprises without duly recognized or certified labor organizations, the
representatives of labor shall be elected by at least a majority of all rank-and-file employees
who have rendered at least six (6) months of continuous service."
20. "SEC. 6. Productivity Incentives Program. — a) . . .
b) Productivity agreements reached by the parties as provided in this Act shall supplement
existing collective bargaining agreements.
c) If, during the existence of the productivity incentives program or agreement, the
employees will join or form a union, such program or agreement may, in addition to the terms
and conditions agreed upon by labor and management, be integrated in the collective
bargaining agreement that may be entered into between them."
21. "SEC. 7. Benefits and Tax Incentives. — a) . . .
b) Any strike or lockout arising from any violation of the productivity incentives program
shall suspend the effectivity thereof pending settlement of such strike or lockout; Provided, That
the business enterprise shall not be deemed to have forfeited tax incentives accrued prior to
the date of occurrence of such strike or lockout, and the workers shall not be required to
reimburse the productivity bonuses already granted to them under the incentive program.
Likewise, bonuses which have already accrued before the strike or lockout shall be paid within
six (6) months from their accrual.
xxx xxx xxx"
22. "SEC. 9. Dispute and Grievances. — Whenever disputes, grievances, or other
matters arise from the interpretation or implementation of the productivity incentives program,
the labor-management committee shall meet to resolve the dispute, and may seek the
assistance of the National Conciliation and Mediation Board of the Department of Labor and
Employment for such purpose. Any dispute which remains unresolved within twenty (20) days
from the time of its submission to the labor-management committee shall be submitted for
voluntary arbitration in line with the pertinent provisions of the Labor Code, as amended.
The productivity incentives program shall include the name(s) of the voluntary arbitrator or
panel of voluntary arbitrators previously chosen and agreed upon by the labor-management
committee."
23. Paras v. Commission on Elections, 264 SCRA 54.
24. Cabada v. Alunan III, 260 SCRA 838.
25. Section 29, Presidential Decree No. 564.
26. Teoxon v. Member of the Board of Administrators, 33 SCRA 585.
27. Section 6, Article XVIII, 1987 Constitution.
28. "SEC. 12. Powers and Functions. — The Commission shall have the following powers and
functions:
xxx xxx xxx
(2) Prescribe, amend and enforce rules and regulations for carrying into effect the
provisions of the Civil Service Law and other pertinent laws;
xxx xxx xxx"
29. Section 2, Administrative Order No. 268.
30. Section 1, Administrative Order No. 268.
31. Supra, footnote 3.
32. Mondano v. Silvosa, etc., et al., 97 Phil. 148.
33. Echeche v. Court of Appeals, 198 SCRA 584, citing Oliveros-Torre v. Bayot, 58 SCRA 272,
and Ang-Angco v. Castillo, et al., 118 Phil. 1468.
34. These are found in Book IV of Executive Order No. 292 whose applicable provisions
follow:
"SEC. 1 Declaration of Policy. — It is the policy of the State that the Department of Finance shall
be primarily responsible for the sound and efficient management of the financial resources of
the Government, its subdivisions, agencies and instrumentalities." (Title II)
"SEC. 1 Declaration of Policy. — The national budget shall be formulated and implemented as an
instrument of national development, reflective of national objectives and plans; supportive of
and consistent with the socio-economic development plans and oriented towards the
achievement of explicit objectives and expected results, to ensure that the utilization of fund
and operations of government entities are conducted effectively; formulated within the context
of a regionalized governmental structure and within the totality of revenues and other receipts,
expenditures and borrowings of all levels of government-owned or -controlled corporations."
35. M.H. Wylie v. Rarang, 209 SCRA 357.
36. Yulo v. Civil Service Commission, 219 SCRA 478, citing Mabutol v. Pascual, 124 SCRA 867.
37. Mendiola v. People, 207 SCRA 85.
38. Fernando v. Sto. Tomas, 234 SCRA 546; Tuzon v. Court of Appeals, 212 SCRA 471.
39. National Economic Protectionism Association v. Ongpin, 171 SCRA 666, citing Paredes v.
Executive Secretary, 128 SCRA 6.
C o p y r i g h t 1 9 9 4 - 1 9 9 9 C D T e c h n o l o g i e s A s i a, I n c.