The Supreme Court of the Philippines ruled that a law, initially constitutional, can become unconstitutional if subsequent laws create discriminatory effects. The case involved a challenge to a provision in the New Central Bank Act that subjected rank-and-file employees of the Bangko Sentral ng Pilipinas (BSP) to the Salary Standardization Law (SSL), while officers were exempted. Subsequent laws exempted rank-and-file employees of other government financial institutions (GFIs) from the SSL. Consequently, the Supreme Court found that the continued enforcement of the proviso was unconstitutional, violating the equal protection clause. This means that laws must be evaluated not only at their inception but also in light of evolving legal landscapes.

When the Law Changes: Equal Protection and Evolving Statutes

Central Bank (now Bangko Sentral ng Pilipinas) Employees Association, Inc. v. Bangko Sentral ng Pilipinas and the Executive Secretary (G.R. No. 148208, December 15, 2004) presented a critical question: Can a law, initially valid, become unconstitutional if its continued operation results in a violation of equal protection due to the passage of subsequent laws? The case revolved around Section 15(c), Article II of Republic Act (R.A.) No. 7653, the New Central Bank Act, specifically its proviso that subjected the compensation of Bangko Sentral ng Pilipinas (BSP) employees in salary grade 19 and below to the rates prescribed under Republic Act No. 6758, the Salary Standardization Act (SSL). The petitioner argued that this created an unconstitutional divide between BSP officers and rank-and-file employees, violating the equal protection clause.

The legal framework for analyzing equal protection claims in the Philippines is well-established. The equal protection clause, enshrined in the Constitution, does not prohibit the legislature from creating classifications, but such classifications must be reasonable. This reasonableness hinges on several factors: the classification must be based on substantial distinctions, it must be germane to the purpose of the law, it must not be limited to existing conditions, and it must apply equally to all members of the same class. These standards ensure that laws do not arbitrarily discriminate but rather serve legitimate state interests.

Initially, the Supreme Court found that Section 15(c) was valid under these standards. The classification between BSP officers and rank-and-file employees was deemed reasonable because it addressed the BSP’s need to attract competent officers and executives by offering competitive compensation packages. However, the landscape shifted with the enactment of subsequent laws amending the charters of seven other government financial institutions (GFIs): Land Bank of the Philippines (LBP), Social Security System (SSS), Small Business Guarantee and Finance Corporation (SBGFC), Government Service Insurance System (GSIS), Development Bank of the Philippines (DBP), Home Guaranty Corporation (HGC), and Philippine Deposit Insurance Corporation (PDIC).

These subsequent laws contained a crucial commonality: a blanket exemption of all their employees from the coverage of the SSL, either expressly or impliedly. This created a situation where the rank-and-file employees of these other GFIs were not subject to the SSL’s compensation restrictions, while the BSP’s rank-and-file employees remained bound by it. Consequently, the Supreme Court had to consider whether the continued application of the challenged proviso constituted a violation of the equal protection clause, not just within the BSP, but in comparison to other GFIs. This analysis led to a nuanced understanding of the concept of relative constitutionality.

The court explored the concept of relative constitutionality, recognizing that a statute valid at one time might become void at another due to altered circumstances. The Court quoted Vernon Park Realty v. City of Mount Vernon, emphasizing that an ordinance valid when adopted can be struck down as invalid when, at a later time, its operation under changed conditions proves confiscatory. Similarly, Rutter v. Esteban demonstrated that even a valid law could become unreasonable and oppressive due to subsequent changes. These principles were then applied to the equal protection clause, highlighting that a statute nondiscriminatory on its face might be grossly discriminatory in its operation.

The Supreme Court ultimately held that the enactment of subsequent laws exempting all rank-and-file employees of other GFIs from the SSL leeched all validity out of the challenged proviso. It emphasized that the equal protection clause prohibits enacting laws that allow invidious discrimination, directly or indirectly. The Court noted that GFIs have long been recognized as comprising one distinct class, separate from other governmental entities. Before the SSL, P.D. No. 985 recognized this distinction. Although the SSL aimed to standardize compensation, the rates of pay were still determined based on prevailing rates in the private sector for comparable work.

In this framework, the subsequent enactments exposed the proviso to more serious scrutiny. The second level of inquiry focused on whether the exclusion of BSP rank-and-file employees could stand constitutional scrutiny, given that Congress did not exclude the rank-and-file employees of other GFIs. The Court found that the policy determination argument could support the inequality between the rank-and-file and officers of the BSP but not the inequality between BSP rank-and-file and other GFIs similarly situated. The challenge to the constitutionality of Section 15(c) was premised on the irrational discriminatory policy adopted by Congress in its treatment of persons similarly situated.

The court determined that no substantial distinctions justified the unequal treatment between the rank-and-file of the BSP and the seven other GFIs. The echo of the cases such as Atlantic Coast Line Railroad Co. v. Ivey was resounding when it was established that the distinction made by the law is not only superficial, but also arbitrary. It is not based on substantial distinctions that make real differences between the BSP rank-and-file and the seven other GFIs. With no traits of qualification being peculiar to only the seven GFIs or their rank-and-file so as to justify the exemption denied the BSP rank-and-file employees, (not to mention the anomaly of the SEC getting one)The Supreme Court therefore declared the continued enforcement of the challenged provision anathema to the equal protection of the law, and the same should be declared as an outlaw.

FAQs

What was the key issue in this case?	The key issue was whether a law that initially complied with the equal protection clause could become unconstitutional due to subsequent laws that created discriminatory effects.
What is the equal protection clause?	The equal protection clause guarantees that no person shall be denied the equal protection of the laws, meaning similar individuals should be treated similarly. It permits reasonable classifications but prohibits arbitrary discrimination.
What is the Salary Standardization Law (SSL)?	The SSL is a law in the Philippines that standardizes the compensation of government employees, aiming to provide equal pay for substantially equal work. It sets guidelines for salary structures across government agencies.
What is a Government Financial Institution (GFI)?	A GFI is a financial institution owned or controlled by the government. These institutions often play a role in supporting the economy and providing financial services to the public.
What is the ‘rational basis test’?	The rational basis test is a legal standard where a law is constitutional if it has a reasonable connection to a legitimate government purpose. This test is commonly used in equal protection cases involving economic or social regulations.
What is ‘relative constitutionality’?	Relative constitutionality recognizes that a law’s validity can change over time due to altered circumstances. A law initially constitutional might become unconstitutional if its continued operation is rendered discriminatory.
Why was the BSP rank-and-file initially subject to the SSL?	The BSP rank-and-file was initially subject to the SSL to ensure consistency and fairness in compensation across government. This alignment was intended to maintain equal pay for equal work.
How did subsequent laws affect the situation?	Later laws exempted rank-and-file employees in other GFIs from the SSL, while the BSP’s rank-and-file remained subject to it. This created a disparity that the Court deemed unconstitutional.
What was the Court’s final ruling?	The Supreme Court ruled that the continued enforcement of the proviso subjecting BSP rank-and-file employees to the SSL was unconstitutional, recognizing the discriminatory effect caused by subsequent legislation.

The Supreme Court’s decision in this case highlights the dynamic nature of constitutional law. It serves as a reminder that the validity of a law is not static but can be affected by subsequent legislative actions and changes in the legal landscape. Therefore, a thorough assessment of the legal framework must be made, considering both the initial enactment and its interplay with evolving legislation.

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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: CENTRAL BANK (NOW BANGKO SENTRAL NG PILIPINAS) EMPLOYEES ASSOCIATION, INC., VS. BANGKO SENTRAL NG PILIPINAS AND THE EXECUTIVE SECRETARY, G.R. No. 148208, December 15, 2004