The Supreme Court ruled that the incentive allowances granted to employees of the National Housing Authority (NHA) under Board Resolution No. 464 were unlawful. These allowances, paid from February 1994 to December 1999, were disallowed because they conflicted with Presidential Decree (P.D.) 1597 and Republic Act (R.A.) 6758, which aimed to standardize government compensation. This decision underscores the principle that government entities cannot grant additional compensation or benefits unless explicitly authorized by law, reinforcing the importance of adherence to standardized compensation systems.

Can NHA Employees Claim Additional Benefits Despite Compensation Standardization Laws?

This case revolves around the disallowance of incentive allowances paid to Generoso Abellanosa, Carmencita Pineda, Bernadette Laigo, Menelio Rucat, and Doris Siao, all employees of the National Housing Authority (NHA). These allowances were initially authorized under NHA Board Resolution No. 464, meant to encourage personnel to work on projects, particularly in regions outside Metro Manila. However, the Commission on Audit (COA) disallowed these payments, leading to a legal battle that reached the Supreme Court. The core legal question is whether NHA had the authority to grant these incentive allowances given the existing laws on government compensation standardization, specifically P.D. 1597 and R.A. 6758.

The story begins with the creation of the NHA through P.D. 757 in 1975. Section 10 of this decree allowed the NHA’s General Manager to determine the rates of allowances and other additional compensation for its officers and staff, exempting them from the rules of the Wage and Position Classification Office and the Civil Service Commission. Then, P.D. 985 was enacted to standardize compensation across the national government, yet it also included a provision allowing government corporations to establish additional financial incentives for their employees, funded by their corporate funds. This seemed to provide a legal basis for the NHA to grant additional benefits.

However, the landscape shifted with the enactment of P.D. 1597 in 1978, which aimed to further rationalize the compensation system in the national government. Section 3 of P.D. 1597 explicitly repealed all laws and issuances that exempted agencies from the National Compensation and Position Classification System established by P.D. 985. This repeal raised questions about the continued validity of NHA’s authority to grant allowances under P.D. 757. Further, Section 5 of P.D. 1597 mandated that all allowances and fringe benefits be subject to the President’s approval upon the recommendation of the Budget Commission. The NHA Board of Directors then issued Resolution No. 464 in 1982, granting additional incentive benefits to its project personnel. This resolution was implemented through Memorandum Circular No. 331.

In 1989, R.A. 6758, also known as the Compensation and Position Classification Act, further rationalized government salaries. Section 12 of R.A. 6758 consolidated all allowances into the standardized salary rates, with specific exceptions such as representation and transportation allowances, clothing and laundry allowances, and hazard pay. Section 16 of R.A. 6758 repealed all laws and issuances inconsistent with the new compensation system, including the proviso under Section 2 of P.D. 985, which had allowed government corporations to grant additional incentives. The Department of Budget and Management (DBM) issued Corporate Compensation Circular (CCC) No. 10 to implement R.A. 6758, further clarifying which allowances could still be granted.

In 1998, the Supreme Court declared CCC No. 10 ineffective due to a lack of publication, leading the NHA to resume payment of the incentive allowance. However, the COA later questioned the legality of these payments, resulting in the disallowance of .808,645.90. Petitioners then filed claims for payment of P1,003,210.96 covering the balance for the period February 1994 to December 1999. This claim led to an adverse opinion from the COA-NHA, and eventually, the disallowance of the payments under Notice of Disallowance (ND) No. NHA-2005-001. The COA argued that the power granted to GOCCs and GFIs to fix compensation had been repealed by Section 3 of P.D. 1597 and that NHA Resolution No. 464 lacked legal basis.

The petitioners argued that the incentive allowances were incidental to the NHA’s express powers under P.D. 757, that P.D. 985 did not effectively repeal Section 10 of P.D. 757, and that P.D. 1597 did not repeal the exception in Section 2 of P.D. 985. They also claimed that the allowances fell within the exceptions of R.A. 6758 and that the reopening of settled accounts was invalid. Moreover, they asserted that the disallowance was unjust, given that they had rendered services and achieved the government’s objectives. The Supreme Court ultimately disagreed with the petitioners.

The Court found that the issuance of Resolution No. 464 was without legal basis. At the time of its issuance in 1982, Section 3 of P.D. 1597 had already expressly repealed all decrees, executive orders, and issuances that authorized the grant of allowances inconsistent with the National Compensation and Position Classification Plan. The Court emphasized that while Section 2 of P.D. 1597 only mentions Section 4 of P.D. 985, Section 3 of P.D. 1597 specifically refers to all inconsistent laws or issuances. Thereafter, R.A. 6758 further reinforced this policy by expressly decreeing that all allowances not specifically mentioned therein, or as may be determined by the DBM, shall be deemed included in the standardized salary rates prescribed.

Under Section 12 of R.A. 6758, all kinds of allowances are integrated in the standardized salary rates, except: representation and transportation allowance (RATA); clothing and laundry allowance; subsistence allowance of marine officers and crew on board government vessels; subsistence allowance of hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation as may be determined by the DBM. Only those additional compensation benefits being received by incumbents as of 1 July 1989, which were not integrated into the standardized salary rates, would continue to be authorized. The incentive allowances granted under Resolution No. 464 were not among these exceptions, and there was no allegation that the DBM had specifically determined these to be an exception to the standardized salary rates. Consequently, such allowances could no longer be granted after the effectivity of R.A. 6758.

The Supreme Court rejected the petitioners’ argument that the grant of incentive allowances was incidental to and necessary for the enforcement of the NHA’s powers and duties. The Court clarified that these considerations could not prevail in the light of express provisions of law that rationalized government salary rates in pursuit of similarly noteworthy objectives. Further, the Court dismissed the contention that R.A. 6758 does not apply because the allowances are temporary and given only to a few employees, noting that R.A. 6758 does not distinguish between permanent and temporary allowances or whether they are provided to an entire class of government employees. The law’s policy is to provide equal pay for substantially equal work and to base differences in pay upon substantive differences in duties and responsibilities.

Finally, the Court addressed the petitioners’ concerns about the reopening of settled accounts and the alleged injustice of the disallowance. Citing Baybay Water District v. Commission on Audit, the Court reiterated that public officers’ erroneous application and enforcement of the law do not estop the government from making a subsequent correction of those errors. The Supreme Court emphasized that where there is an express provision of law prohibiting the grant of certain benefits, the law must be enforced, even if it prejudices certain parties due to an error committed by public officials in granting the benefit. The Court stated that practice, no matter how long continued, cannot give rise to any vested right if it is contrary to law. This principle ensures that the government can correct past errors to comply with existing laws, even if it affects individuals who have relied on those errors.

FAQs

What was the key issue in this case?	The central issue was whether the National Housing Authority (NHA) could grant incentive allowances to its employees given the existing laws on government compensation standardization, specifically Presidential Decree (P.D.) 1597 and Republic Act (R.A.) 6758. The Commission on Audit (COA) disallowed the payments, leading to the legal dispute.
What did the Supreme Court rule?	The Supreme Court ruled that the incentive allowances granted to NHA employees under Board Resolution No. 464 were unlawful because they conflicted with P.D. 1597 and R.A. 6758, which aimed to standardize government compensation. The Court affirmed the COA’s decision to disallow the payments.
What is P.D. 1597?	P.D. 1597, enacted in 1978, further rationalized the compensation system in the national government. Section 3 of P.D. 1597 repealed all laws and issuances that exempted agencies from the National Compensation and Position Classification System.
What is R.A. 6758?	R.A. 6758, also known as the Compensation and Position Classification Act of 1989, further rationalized government salaries. It consolidated all allowances into standardized salary rates, with specific exceptions listed in the law.
Were there any exceptions to the standardized salary rates under R.A. 6758?	Yes, Section 12 of R.A. 6758 provided exceptions for representation and transportation allowance (RATA), clothing and laundry allowance, subsistence allowance for marine officers and hospital personnel, hazard pay, and allowances for foreign service personnel. Any other additional compensation required specific determination by the DBM.
Why were the NHA incentive allowances disallowed?	The NHA incentive allowances were disallowed because they were not among the exceptions listed in R.A. 6758 and the DBM did not specifically determine them to be an exception to the standardized salary rates. Consequently, these allowances could not be legally granted after R.A. 6758 took effect.
Can past errors in applying the law be corrected?	Yes, the Supreme Court emphasized that public officers’ erroneous application and enforcement of the law do not prevent the government from correcting those errors later. If a law prohibits certain benefits, it must be enforced, even if it affects individuals who have relied on those errors.
Does long-standing practice override the law?	No, the Supreme Court clarified that practice, no matter how long it has been followed, cannot create a vested right if it is contrary to law. The government can correct past errors to comply with existing laws, even if it affects individuals who have relied on those errors.

This case underscores the importance of adhering to standardized compensation systems in government and reinforces the principle that government entities cannot grant additional compensation or benefits unless explicitly authorized by law. It also highlights the government’s ability to correct past errors in applying the law, even if it affects individuals who have relied on those errors.

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: Generoso Abellanosa, et al. vs. Commission on Audit and National Housing Authority, G.R. No. 185806, July 24, 2012