Navigating Tuition Fee Increases: How to Properly Allocate Funds for Employee Benefits

TLDR: This case clarifies that under Batas Pambansa Blg. 232, educational institutions can allocate the 60% incremental proceeds from tuition fee increases not only for salary increases but also for employee benefits and allowances. It also reinforces the three-year prescription period for filing money claims under the Labor Code.

G.R. No. 109977, September 05, 1997

Introduction

Imagine a scenario where a university increases its tuition fees, promising better compensation for its faculty and staff. But how should that money be divided? Should it all go to salaries, or can a portion be used for other benefits? This question lies at the heart of a legal battle between the University of Pangasinan and its faculty union, ultimately decided by the Supreme Court. The case highlights the importance of understanding the legal framework governing tuition fee increases and the allocation of funds for employee compensation in the Philippines.

The University of Pangasinan Faculty Union filed a complaint seeking salary differentials and other benefits. The Secretary of Labor initially ruled in favor of the union. The University of Pangasinan questioned the Secretary’s order, arguing that the recomputation of salary differentials was based on a misinterpretation of relevant laws, particularly Presidential Decree No. 451 and Batas Pambansa Blg. 232. The Supreme Court ultimately clarified the rules surrounding the allocation of tuition fee increases and the prescription period for labor claims.

Legal Context: P.D. 451 vs. B.P. Blg. 232

The legal landscape governing tuition fee increases in the Philippines has evolved over time. Initially, Presidential Decree No. 451 (P.D. 451) dictated how incremental proceeds from tuition fee increases should be utilized. Later, Batas Pambansa Blg. 232 (B.P. Blg. 232), also known as the Education Act of 1982, amended these rules, granting the Ministry of Education, Culture and Sports (now the Department of Education) broader authority in regulating tuition fees.

Under P.D. 451, Rule V, Section 1 of the Implementing Rules and Regulations stated that:

“At least sixty percent of the total incremental proceeds from the increase in tuition fee and/ or other school charges shall be applied toward an equitable increase in the emoluments and other benefits for members of the faculty, including the staff and administrative employees of the school concerned.”

This was initially interpreted to mean that the 60% must be entirely devoted to wage increases. However, B.P. Blg. 232 changed this. Section 42 of B.P. Blg. 232 provides that:

“Each private school shall determine its rate of tuition and other school fees or charges. The rates and charges adopted by schools pursuant to this provision shall be collectible, and their application or use authorized, subject to rules and regulations promulgated by the Ministry of Education, Culture and Sports.”

This change allowed the Ministry of Education to issue guidelines permitting the charging of allowances and other benefits against the 60% incremental proceeds. This shift is crucial in understanding the Supreme Court’s decision.

Another important legal principle at play is the prescription period for filing money claims under the Labor Code. Article 291 of the Labor Code states that:

“All money claims arising from employer-employee relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they shall be forever barred.”

Case Breakdown: University of Pangasinan vs. Secretary of Labor

The University of Pangasinan Faculty Union declared a strike due to unresolved grievances. The university questioned the legality of the strike. The DOLE Regional Director recommended dismissing the union’s claims for salary differentials for school years 1974-1981 due to prescription but favored the salary differential claims for later years.

Here’s a breakdown of the key events:

• August 7, 1986: The Union presented demands and grievances, threatening a strike.
• September 15, 1986: The Union went on strike.
• September 18, 1986: The Ministry of Labor issued a Return-to-Work Order.
• October 5, 1989: The Secretary of Labor ordered a recomputation of salary differentials.
• October 10, 1991: Former Labor Secretary Ruben D. Torres ordered the University of Pangasinan to pay P6,840,700.15 to the employees.

The Secretary of Labor adopted the Regional Director’s recommendations and ordered a recomputation of salary differentials. The recomputation resulted in a finding that the university owed P6,840,700.15 to its employees. The University of Pangasinan argued that the Secretary of Labor committed grave abuse of discretion because the recomputation was grounded upon a misapprehension of the laws involved.

The Supreme Court, in its decision, stated:

“From the foregoing, it is clear that the rule has since been changed as to allow the benefits and allowances named above to be charged to the sixty percent incremental proceeds of the tuition fee increases.”

Furthermore, the Court noted:

“Consequently, the Secretary of Labor acted with grave abuse of discretion in adopting the recommended computation of the Regional Director which we find erroneous for incorporating the period from SYs 1974-1975 to 1980-1981.”

Practical Implications

This case has significant implications for private educational institutions in the Philippines. It clarifies that under B.P. Blg. 232, schools have the flexibility to allocate the 60% incremental proceeds from tuition fee increases not only for salary increases but also for employee benefits and allowances. This provides institutions with more options in structuring their compensation packages and attracting and retaining qualified personnel.

However, schools must ensure that they comply with the rules and regulations promulgated by the Department of Education regarding the allocation of tuition fee increases. They should also be mindful of the three-year prescription period for filing money claims under the Labor Code.

Key Lessons

• Understand the Law: Educational institutions must be well-versed in the laws and regulations governing tuition fee increases and employee compensation.
• Document Everything: Maintain accurate records of tuition fee increases, the allocation of incremental proceeds, and employee compensation packages.
• Act Promptly: Employees must file money claims within the three-year prescription period to avoid being barred from recovering what is due to them.

Frequently Asked Questions

Q: Can schools use tuition fee increases for purposes other than employee compensation?

A: Yes, but a certain percentage, currently 60%, must be allocated for increases in salaries, wages, allowances, and fringe benefits of faculty and staff.

Q: What benefits can be charged against the 60% incremental proceeds?

A: Allowances, 13th-month pay, social security, medicare, and retirement contributions can be charged against the 60%.

Q: What happens if an employee doesn’t file their claim within three years?

A: The claim is barred by prescription and cannot be legally enforced.

Q: Does this ruling apply to all private schools in the Philippines?

A: Yes, this ruling applies to all private educational institutions in the Philippines.

Q: What should schools do to ensure compliance with these regulations?

A: Schools should consult with legal counsel to ensure their policies and practices comply with current laws and regulations.

Q: What if the CBA provides for a different allocation scheme?

A: The Collective Bargaining Agreement (CBA) must still adhere to the minimum requirements set by law and regulations regarding the allocation of tuition fee increases.

ASG Law specializes in labor law and education law. Contact us or email hello@asglawpartners.com to schedule a consultation.