Case Summary (G.R. No. 106231)
Employment practice and the 2013 controversy
From 1992 through 2012 PNCC consistently paid a mid‑year bonus each May 15 pursuant initially to a CBA; the practice continued after expiration of the CBA. In 2013 PNCC’s president sought the OGCC’s legal opinion regarding payment of the mid‑year bonus under PD 1597. OGCC advised securing GCG approval per RA 10149. PNCC requested GCG approval; GCG refused to forward the matter to the President, deeming the grant legally infirm and not protected by the non‑diminution rule. PNCC then informed employees that the 2013 mid‑year bonus would not be released.
Labor Arbiter ruling
PNCC employees filed before the NLRC for non‑payment and diminution of wages and benefits. The Labor Arbiter found that the long‑standing practice ripened into a benefit or supplement and that its discontinuance violated Article 100 of the Labor Code (non‑diminution). The arbiter ordered payment of the 2013 mid‑year bonus and future payments equivalent to one month’s salary.
NLRC ruling and rationale
The NLRC affirmed the Labor Arbiter, reasoning that PNCC was not a GOCC for purposes of coverage because it was organized under the Corporation Code and remained a private corporation despite government majority shareholding. Accordingly, employees were governed by the Labor Code, and the mid‑year bonus grant need not be submitted for presidential approval under PD 1597 or RA 10149.
Court of Appeals disposition
The Court of Appeals affirmed the NLRC: it treated PNCC as a private corporation (an “acquired asset corporation”), relying on earlier cases (PNCC v. Pabion, Cuenca v. Altas); held that the non‑diminution rule under Article 100 was violated when PNCC ceased the mid‑year bonus; and rejected applicability of PD 1597 and RA 10149 as restraints on PNCC because it considered PNCC outside GOCC coverage for those purposes.
Issues presented to the Supreme Court
- Whether PNCC is a private corporation or a government‑owned or controlled corporation (GOCC).
- Whether PNCC employees are covered by the Labor Code or by civil service law.
- Whether PNCC is governed by RA 10149 and its Compensation and Position Classification System such that it must secure GCG/Presidential approval before granting additional benefits.
Supreme Court’s determination of PNCC’s corporate status
The Court concluded that PNCC is a GOCC. It relied on Strategic Alliance v. Radstock Securities, which characterized PNCC as government‑owned given the government’s overwhelming shareholding (noted in the decision as 90.3%) and EO No. 331 placing PNCC under DTI. The Court emphasized that incorporation under the Corporation Code does not preclude GOCC status when the government owns the requisite majority; PNCC is therefore not an autonomous private entity immune from executive control.
Constitutional and statutory coverage of employees: Labor Code versus Civil Service
Under the 1987 Constitution (Article IX‑B, Section 2(1)), the civil service embraces GOCCs only when such GOCCs have original charters. PNCC, being a non‑chartered GOCC (organized under the Corporation Code), is not within the civil service coverage defined by the Constitution; consequently its personnel remain covered by the Labor Code rather than by civil service law. The Court cited prior rulings (e.g., Paloma v. Philippine Airlines) applying the same principle to non‑chartered GOCCs.
Effect of RA 10149 on compensation and the non‑diminution rule
Although employees of non‑chartered GOCCs are governed by the Labor Code, RA 10149 establishes a national Position Classification and Compensation Plan applicable to all GOCCs, chartered or non‑chartered, and empowers the GCG to develop a Compensation and Position Classification System subject to Presidential approval. The Court interpreted RA 10149 as precluding GOCCs from unilaterally granting additional economic benefits (salaries, allowances, incentives) outside the compensation regime determined by the GCG and approved by the President. The decision cited GSIS Family Bank Employees Union v. Villanueva and PCSO v. Pulido‑Tan to illustrate that compensation and classification for GOCC employees are subject to control under RA 10149 and related rules, and that GOCCs lack free latitude to negotiate or grant economic terms contrary to the compensation framework.
Application to PNCC’s mid‑year bonus dispute
Applying RA 10149 and the identified precedents, the Court held that PNC
...continue readingCase Syllabus (G.R. No. 106231)
The Case
- Nature of the proceeding: Petition for review on certiorari seeking reversal and setting aside Court of Appeals dispositions in CA-G.R. SP No. 139311.
- Specific dispositions challenged:
- Decision dated July 12, 2018 of the Court of Appeals affirming NLRC that PNCC is not a GOCC and directing PNCC to release 2013 mid-year bonus to employees.
- Resolution dated July 15, 2019 denying PNCC’s motion for reconsideration.
- Ultimate relief sought: Reversal of the Court of Appeals rulings and dismissal of the NLRC complaint.
Antecedents — Corporate and statutory background
- Incorporation and franchises:
- PNCC originally incorporated in 1966 as Construction Development Corporation of the Philippines (CDCP) under the Corporation Code.
- PD 1113 (March 31, 1977) granted CDCP a 30-year franchise to construct, operate, and maintain toll facilities in the North and South Luzon Tollways.
- PD 1894 (December 1983) amended PD 1113 to include the Metro Manila Expressway in CDCP’s franchise.
- Government financial involvement and name change:
- CDCP obtained loans from various Government Financing Institutions (GFIs).
- LOI 1295 (Feb. 23, 1983) directed GFIs to convert CDCP’s unpaid obligations into shares of stock, making the GFIs majority stockholders.
- Debt-to-equity conversion prompted amendment of Articles of Incorporation and By-Laws and change of name from CDCP to PNCC to reflect government equity investment.
- Privatization and executive control:
- PP 50 (1986) created the Asset Privatization Trust (APT), now the Privatization and Management Office (PMO), as trustee of GFI equity shares in PNCC.
- EO 331 placed PNCC under the Department of Trade and Industry (DTI).
- Employee practice and the disputed benefit:
- Since 1992, PNCC granted mid-year bonuses every May 15 pursuant to a Collective Bargaining Agreement; even after the CBA expired, the practice continued until 2012.
Events leading to dispute over 2013 mid-year bonus
- Administrative steps in 2013:
- April 30, 2013: Atty. Luis F. Sison, PNCC President & CEO, sought OGCC opinion on release of 2013 mid-year bonus under PD 1597.
- May 10, 2013: OGCC advised PNCC to secure approval of the Governance Commission for GOCCs (GCG), citing Section 8 of RA 10149.
- May 29, 2013: PNCC formally sought GCG approval for the grant.
- June 20, 2013: GCG replied that it would not forward the request to then President Benigno Aquino III because the grant was legally infirm and its abrogation does not violate the non-diminution rule.
- Employer action and employee response:
- Following GCG’s advice, PNCC circulated a memorandum informing employees that the 2013 mid-year bonus would not be released.
- PNCC employees filed a complaint with the NLRC Arbitration Branch for non-payment of mid-year bonus and diminution of wages and benefits.
Ruling of the Labor Arbiter
- Decision dated January 29, 2014 by Labor Arbiter Romelita Rioflorido:
- Ordered PNCC to give employees their 2013 mid-year bonus and every year thereafter equal to one month’s salary.
- Held that the long-standing practice (1992 onward) ripened into a benefit or supplement that cannot be reduced, diminished, discontinued, or eliminated under Article 100 (non-diminution clause) of the Labor Code.
- Concluded PNCC violated the non-diminution clause.
Ruling of the NLRC
- Decision dated June 6, 2014 (Penned by Commissioner Dolores M. Peralta-Beley):
- Affirmed the labor arbiter’s decision ordering payment of the mid-year bonus.
- Held that PNCC is not a GOCC because it was created under the Corporation Code and remains a private corporation despite government majority ownership.
- Concluded PNCC is covered by the Labor Code, not Civil Service laws, and that the grant of the bonus need not be subject to presidential approval under PD 1597 and RA 10149.
- Procedural follow-up:
- PNCC’s motion for reconsideration denied by NLRC Resolution dated December 19, 2014.
- Employees’ motion for execution pending appeal was granted by the labor arbiter and affirmed by the NLRC (Resolution dated March 30, 2015).
Proceedings before the Court of Appeals
- Consolidation and separate dispositions:
- CA consolidated CA-G.R. SP No. 139311 and CA-G.R. SP No. 140997; cases were later separately disposed.
- CA rulings:
- In CA-G.R. SP No. 140997, CA dismissed PNCC’s petition for failure to file a motion for reconsideration of the NLRC ruling.
- In CA-G.R. SP No. 139311, Decision dated July 12, 2018 (Penned by Associate Justice Maria Filomena D. Singh; concurring Justices Sesinando L. Villon and Edwin D. Sorongon):
- Affirmed PNCC’s status as a private corporation.
- Held that, even assuming PNCC to be a GOCC, PD 1597 and RA 10149 are inapplicable to GOCCs without original charters like PNCC.
- Cited PNCC v. Pabion and Cuenca v. Hon. Altas to hold PNCC is an acquired asset corporation, remaining a private corporation despite government majority ownership.
- Ruled that PNCC’s failure to release the 2013 mid-year bonus violated Article 100 non-diminution clause.
- PNCC’s motion for reconsideration denied (Resolution dated July 15, 2019).
The Present Petition to the Supreme Court
- PNCC’s contentions:
- Argues PNCC v. Pabion (1999) is no longer relevant and that PNCC, while organized under the Corporation Code, is a GOCC under Section 3(o) and (p) of RA 10149.
- As a GOCC, PNCC contends it is not governed by the Labor Code and may validly refuse the bonus without violating Article 100.
- Respondents’ (employees’) contentions in their Comment (Jan. 29, 2021):
- Maintain that under Pabion PNCC remains a private co