The Supreme Court ruled that private educational institutions can allocate the employer’s share of SSS, Medicare, and Pag-Ibig premiums from the 70% incremental tuition fee increase mandated for employee benefits under Republic Act 6728. This decision clarifies that “other benefits” include these statutory contributions, giving schools discretion in distributing the 70% allocation. This ruling impacts how private schools manage tuition increases and allocate funds for employee welfare, ensuring compliance with the law while addressing operational costs.

Tuition Hikes and Employee Perks: Who Pays What?

This case revolves around the interpretation of Section 5, paragraph (2), of Republic Act (RA) 6728, also known as the “Government Assistance to Students and Teachers in Private Education Act.” The core issue is whether Cebu Institute of Medicine (CIM) could legally deduct its mandatory contributions to SSS, Medicare, and Pag-Ibig from the 70% incremental tuition fee increase earmarked for employee benefits. The Cebu Institute of Medicine Employees’ Union-National Federation of Labor (UNION) contested this practice, arguing that it effectively shifted the employer’s burden onto the employees and reduced the funds intended for their direct benefit. The Voluntary Arbitrator sided with the UNION, but CIM appealed, leading to this Supreme Court decision that would clarify the scope of “other benefits” within the context of tuition fee allocation.

At the heart of the dispute lies the interpretation of RA 6728, specifically the provision stating that 70% of tuition fee increases must go towards “salaries, wages, allowances and other benefits” of teaching and non-teaching personnel. CIM argued that SSS, Medicare, and Pag-Ibig contributions fell under the umbrella of “other benefits,” justifying their deduction from the 70% allocation. The UNION, however, contended that such deductions were impermissible, as they essentially made employees shoulder the employer’s statutory obligations, diminishing the intended benefits. The Supreme Court, in resolving this conflict, delved into the legislative intent behind RA 6728 and the permissible uses of the incremental tuition fee increase.

The Supreme Court emphasized the principle of Ubi lex non distinguit, nec nos distinguere debemus, which means where the law does not distinguish, courts should not distinguish. The Court found no specific prohibition in RA 6728 against including the employer’s share of SSS, Medicare, and Pag-Ibig premiums within the 70% allocation. To mandate that these contributions be deducted from the remaining 30% would be illogical and contradict the law’s intent to benefit employees. The Court acknowledged that the 70% allocation is not intended to be delivered in its entirety as direct compensation but could be “packaged” to include various benefits, including statutory contributions, ultimately benefiting the employees.

The Court contrasted RA 6728 with Presidential Decree (PD) 451, which governed tuition fee allocation previously. PD 451 mandated that 60% of tuition fee increases be used solely for salaries and wages, with no provision for allowances or other benefits. RA 6728 expanded the scope to include “allowances and other benefits,” thus increasing the allocation to 70%. This expansion suggests that the legislature intended to allow a broader range of employee benefits to be funded from the tuition fee increases, which could include statutory contributions like SSS, Medicare, and Pag-Ibig.

Furthermore, the Court examined the allocation of the remaining 30% of the tuition fee increase. RA 6728 stipulates that at least 20% of the incremental tuition fee increase must go towards the improvement or modernization of buildings, equipment, libraries, laboratories, gymnasia, and other similar facilities, and to the payment of other costs of operation. Unlike PD 451, RA 6728 does not provide for a “return on investments” for the educational institution. The Court concluded that allocating the employer’s share of SSS, Medicare, and Pag-Ibig premiums from the 30% intended for institutional improvements would diminish the institution’s share, making it less attractive for private educational institutions to operate, especially if they were barred from using the 70% allocation for this purpose.

The Supreme Court’s decision grants private educational institutions discretion in allocating the 70% incremental tuition fee increase. This flexibility allows them to determine the optimal mix of salaries, wages, allowances, and other benefits, including statutory contributions, while ensuring that the funds are used for the benefit of teaching and non-teaching personnel. This interpretation aligns with the legislative intent of RA 6728, which aims to support private education while ensuring fair compensation and benefits for employees. The Court’s ruling provides clarity and guidance for private educational institutions in managing tuition fee increases and allocating funds for employee welfare.

The practical implications of this decision are significant for both private educational institutions and their employees. Schools can now confidently include their share of SSS, Medicare, and Pag-Ibig premiums within the 70% allocation, simplifying their financial planning and ensuring compliance with RA 6728. Employees, while not receiving the entire 70% as direct compensation, still benefit from the payment of these statutory contributions, which provide social security, healthcare, and housing benefits. This ruling strikes a balance between the needs of educational institutions and the welfare of their employees, fostering a stable and sustainable environment for private education in the Philippines.

FAQs

What was the key issue in this case?	The key issue was whether private educational institutions could charge their mandatory share of SSS, Medicare, and Pag-Ibig premiums against the 70% incremental tuition fee increase allocated for employee benefits under RA 6728.
What did the Supreme Court decide?	The Supreme Court ruled that private educational institutions could include their share of these premiums within the 70% allocation, considering them as “other benefits” for employees.
What is the 70% incremental tuition fee increase?	RA 6728 mandates that 70% of any tuition fee increase must be used for the salaries, wages, allowances, and other benefits of teaching and non-teaching personnel.
What are SSS, Medicare, and Pag-Ibig?	SSS (Social Security System) provides social security benefits, Medicare offers health insurance, and Pag-Ibig provides housing loans to Filipino employees.
What does Ubi lex non distinguit, nec nos distinguere debemus mean?	It is a legal principle that means where the law does not distinguish, courts should not distinguish, implying that the law should be applied as written without adding additional restrictions.
How does RA 6728 differ from PD 451?	RA 6728 expands the allocation of tuition fee increases to include “allowances and other benefits,” whereas PD 451 limited it to salaries and wages only.
What portion of the tuition fee increase is for institutional improvements?	RA 6728 stipulates that at least 20% of the incremental tuition fee increase must go towards the improvement or modernization of buildings, equipment, libraries, and other facilities.
Can private schools use the 70% allocation for employee salaries?	Yes, the 70% allocation can be used for salaries, wages, allowances, and other benefits, including SSS, Medicare, and Pag-Ibig contributions, providing flexibility to the institution.

This Supreme Court decision offers clarity on the permissible uses of incremental tuition fee increases in private educational institutions, ensuring that both the institutions and their employees benefit from the allocation. By allowing schools to include statutory contributions within the 70% allocation, the Court fosters a more sustainable and equitable environment for private education in the Philippines.

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: Cebu Institute of Medicine vs. Cebu Institute of Medicine Employees’ Union-National Federation of Labor, G.R. No. 141285, July 05, 2001