The Supreme Court ruled that a Collective Bargaining Agreement (CBA) granting additional benefits to employees of a government-owned and controlled corporation (GOCC) is invalid without the President’s specific approval. This decision reinforces the principle that while government employees have the right to collective bargaining, this right is limited by laws and regulations aimed at ensuring fiscal responsibility in GOCCs. The ruling emphasizes that the terms and conditions of government employment are primarily fixed by law, and any deviation requires explicit presidential authorization. It serves as a reminder that the principle of favoring labor cannot override clear legal prohibitions and the need for government oversight of GOCC finances.

Navigating the Moratorium: Can a CBA Promise Benefits Without Presidential Consent?

This case revolves around a dispute between Clark Development Corporation (CDC) and the Association of CDC Supervisory Personnel Union (ACSP) regarding a renegotiated CBA. The CBA included additional benefits for supervisory employees, such as increased leave days, a signing bonus, and additional allowances. However, the Governance Commission for Government-Owned and Controlled Corporations (GCG) challenged the validity of the CBA, arguing that it violated Executive Order (EO) No. 7, Series of 2010, which imposed a moratorium on increases in salaries and benefits in GOCCs without presidential approval. The central legal question is whether the CBA’s economic terms are enforceable without such approval, and whether the principle of favoring labor can override this requirement.

The Court begins by addressing the right of government employees to self-organization and collective bargaining, noting that these rights are not as extensive as those of private employees. This distinction is crucial because the terms and conditions of government employment are largely fixed by law. Therefore, only aspects not already determined by law are open for negotiation. This framework sets the stage for understanding the impact of EO No. 7, which directed the rationalization of compensation systems in GOCCs and imposed a moratorium on salary and benefit increases unless specifically authorized by the President.

The Court emphasizes the broad language of the moratorium in EO No. 7, designed to halt additional salaries and allowances to GOCC employees and officers. This moratorium aimed to control excessive compensation and strengthen oversight of GOCC finances. The exception to this rule was salary adjustments made pursuant to existing Salary Standardization Laws (SSL), which did not cover the renegotiated economic provisions of the CDC and ACSP CBA. This distinction is critical, as it clarifies that the CBA’s additional benefits fell squarely within the scope of the moratorium.

Building on this, the Court cites Small Business Corporation v. Commission on Audit, clarifying that the phrase “until specifically authorized by the President” does not create an exception but rather describes a situation where the President lifts the moratorium. The use of “until” signifies that the moratorium remains in effect until the President explicitly authorizes the increases. The Court also takes judicial notice that the President never lifted the moratorium after its issuance in September 2010, rendering the CBA’s economic terms void due to their violation of the law.

The Court also dismisses the reliance of the Court of Appeals (CA) and the Accredited Voluntary Arbitrator (AVA) on Section 10 of EO No. 7, which pertains to the suspension of allowances for members of GOCC boards of directors. This section is irrelevant to ACSP, a union of supervisory employees. Further, the Court rejects the CA and AVA’s argument that EO No. 7 does not apply to CDC because it is a GOCC without an original charter, stating that the law makes no such distinction. Citing the principle of “Ubi lex non distinguit nec nos distinguere debemus” (where the law does not distinguish, neither should we), the Court asserts that EO No. 7 applies to all GOCCs, regardless of their creation.

The enactment of Republic Act (RA) No. 10149, known as the “GOCC Governance Act of 2011,” further reinforces the need for presidential approval. This law removes the authority of GOCCs to independently determine their compensation systems, tasking the GCG with developing a compensation and position classification system for all GOCC employees, subject to presidential approval. The GCG is also authorized to recommend incentives for specific positions based on GOCC performance. In this case, the GCG did not recommend the additional benefits in the CDC-ACSP CBA; instead, it opined that the CBA violated EO No. 7, while the Bases Conversion and Development Authority (BCDA) suggested deferment or renegotiation.

Significantly, the President issued EO No. 203 in 2016, adopting a compensation and position classification system for GOCCs. Section 2 of EO No. 203 explicitly prohibits GOCC governing boards from negotiating the economic terms of CBAs with their officers and employees, further supporting the GCG’s position that the moratorium under EO No. 7 remains effective until a comprehensive compensation framework is in place. This provision underscores the intent to centralize control over GOCC compensation and ensure compliance with government-wide policies.

The Court also dismisses the argument that the principle of construing in favor of labor should apply. This principle is only relevant when there are doubts in the interpretation and implementation of the Labor Code and its regulations. In this case, the language of Section 9 of EO No. 7 regarding the moratorium on salary increases is unambiguous, requiring that the law be interpreted and applied according to its plain meaning. The requirement for presidential consent to lift the moratorium is clear, and any presumption of such approval is unwarranted.

In line with these principles, the Court cites analogous cases like Social Housing Employees Association, Inc. v. Social Housing Finance Corp., where the revocation of CBA economic provisions was upheld due to violations of EO No. 7 and RA No. 10149. Similarly, in Philippine National Construction Corporation v. National Labor Relations Commission, the Court found no violation of the non-diminution rule when the company ceased granting mid-year bonuses without presidential approval, the company having failed to obtain the President’s approval as to the grant of additional benefits.

In conclusion, the Court emphasizes that CDC had a valid reason not to implement the salary and benefit increases outlined in the renegotiated CBA. Because the terms and conditions of government employment are fixed by law, any contract that violates these laws is void and cannot be a source of rights and obligations. This decision underscores the importance of adhering to legal requirements and obtaining proper authorization when negotiating CBAs in the government sector.

FAQs

What was the key issue in this case?	The central issue was whether the Clark Development Corporation (CDC) could implement a Collective Bargaining Agreement (CBA) granting additional benefits to its employees without the approval of the President of the Philippines, given Executive Order No. 7, which imposed a moratorium on such increases.
What is Executive Order No. 7 (EO 7)?	EO 7, issued in 2010, directed the rationalization of the compensation and position classification system in Government-Owned and Controlled Corporations (GOCCs) and imposed a moratorium on increases in salaries, allowances, incentives, and other benefits unless specifically authorized by the President.
What is the significance of Republic Act No. 10149 (RA 10149)?	RA 10149, also known as the “GOCC Governance Act of 2011,” removes the authority of GOCCs to determine their own compensation systems and authorizes the Governance Commission for GOCCs (GCG) to develop a compensation and position classification system applicable to all GOCCs, subject to presidential approval.
Why did the Supreme Court rule against the Collective Bargaining Agreement (CBA)?	The Supreme Court ruled against the CBA because its economic terms, which included additional benefits for employees, were renegotiated without the President’s approval, violating the moratorium imposed by EO 7 and the provisions of RA 10149 that require presidential approval for compensation systems in GOCCs.
Does the principle of construing in favor of labor apply in this case?	The Supreme Court held that the principle of construing in favor of labor does not apply because the language of Section 9 of EO 7 regarding the moratorium on salary increases is unambiguous, and the law must be interpreted and applied according to its plain meaning.
What was the role of the Governance Commission for GOCCs (GCG) in this case?	The GCG intervened in the case, arguing that the CBA contravened EO 7 and RA 10149, and that the moratorium on the grant of additional benefits remained effective pending the promulgation and approval of the compensation and position classification system for GOCCs.
What is the meaning of “Ubi lex non distinguit nec nos distinguere debemus” in this context?	This Latin phrase means “where the law does not distinguish, neither should we.” The Supreme Court cited this principle to reject the argument that EO 7 does not apply to CDC because it is a GOCC without an original charter, stating that the law makes no such distinction between GOCCs.
What are the implications of this ruling for other GOCCs and their employees?	This ruling reinforces the principle that GOCCs must adhere to legal requirements and obtain proper authorization, particularly presidential approval, when negotiating CBAs that involve increases in salaries and benefits for employees. It serves as a reminder that the right to collective bargaining is limited by laws and regulations aimed at ensuring fiscal responsibility in GOCCs.

This case clarifies the balance between labor rights and the government’s need to maintain fiscal discipline in GOCCs. The requirement for presidential approval ensures that any increases in salaries and benefits are aligned with broader government policies and financial sustainability. As such, it is crucial for GOCCs and their employees to understand these limitations and comply with the relevant laws and regulations.

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: CLARK DEVELOPMENT CORPORATION VS. ASSOCIATION OF CDC SUPERVISORY PERSONNEL UNION, G.R. No. 207853, March 20, 2022