The Supreme Court ruled that government employees, including those in government-owned and controlled corporations like the Philippine Ports Authority (PPA) and the Manila International Airport Authority (MIAA), are not entitled to receive Cost of Living Allowance (COLA) and amelioration allowance on top of their standardized salaries after Republic Act No. 6758 (RA 6758) took effect. The court clarified that these allowances were already integrated into the standardized salary rates prescribed by RA 6758, aiming to provide equal pay for substantially equal work. This decision reinforces the policy of standardized compensation across the public sector, preventing double compensation and promoting fiscal responsibility.

Can Government Employees Demand Extra COLA? Examining PPA & MIAA’s Pay Disputes

This case consolidates petitions from the Philippine Ports Authority (PPA) and Samahang Manggagawa sa Paliparan ng Pilipinas (SMPP), each contesting decisions regarding the payment of Cost of Living Allowance (COLA) and amelioration allowance to their employees. The central question is whether employees of government-owned and controlled corporations (GOCCs) are entitled to receive COLA and amelioration allowance on top of their standardized salaries, given the provisions of Republic Act No. 6758 (RA 6758). This act aimed to standardize compensation in the government sector, raising questions about what constitutes fair compensation and whether certain allowances should be considered separate from basic pay.

Prior to the last quarter of 1989, both PPA and MIAA were paying their officials and employees COLA and amelioration allowance. Subsequently, they discontinued these payments, citing Department of Budget and Management (DBM) Corporate Compensation Circular (CCC) No. 10, series of 1989, which implemented RA 6758. However, the Supreme Court, in De Jesus v. Commission On Audit, declared DBM-CCC No. 10 ineffective due to non-publication. As a result, PPA and MIAA paid back the withheld COLA and amelioration allowance. On March 16, 1999, DBM-CCC No. 10 was published, leading PPA and MIAA to cease these payments again. This sparked petitions for mandamus from Pantalan and SMPP, arguing for the continued payment of these allowances on top of their basic salaries.

PPA and MIAA contended that COLA and amelioration allowances were already integrated into the salaries under RA 6758. PPA also argued that Pantalan’s petition was premature due to a failure to exhaust administrative remedies and pay the required docket fees. The Regional Trial Court (RTC) initially ruled in favor of the employees, mandating the integration of COLA and amelioration allowance into their basic salaries. However, the Court of Appeals (CA) reversed the RTC decision in the case of MIAA, citing the non-inclusion of DBM as an indispensable party. The CA in PPA case affirmed the RTC’s decision. This divergence led to the consolidated petitions before the Supreme Court.

The Supreme Court addressed several procedural issues before delving into the substantive matter of COLA and amelioration allowance. The Court dismissed arguments of laches, noting that the employees consistently demanded the integration of their allowances. It also rejected the claim of failure to exhaust administrative remedies, as the core issue involved the interpretation of RA 6758, a question of law that does not require administrative resolution. Furthermore, the Court found no merit in the argument that DBM was an indispensable party, as the resolution of the case hinged on the proper interpretation of the law rather than requiring DBM’s direct involvement.

At the heart of the consolidated petitions was the interpretation of Section 12 of RA 6758, which addresses the consolidation of allowances and compensation. The employees argued that they were entitled to the payment of COLA and amelioration allowance in addition to their basic salaries. However, the Supreme Court referred to several prior rulings, including Ronquillo v. NEA, Gutierrez v. DBM, and Republic v. Cortez, to emphasize that COLA and amelioration allowance are already deemed integrated into the standardized salaries of government workers since July 1, 1989. This integration was intended to create a higher base for bonuses and retirement pay, benefiting the employees in the long run.

The Court quoted Section 12 of RA 6758:

SEC. 12. Consolidation of Allowances and Compensation. — All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowances of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.

This provision clearly indicates that COLA and amelioration allowance, as forms of additional compensation, are to be included in the standardized salary rates, unless explicitly exempted.

The Court also referenced DBM-CCC No. 10, which further clarified the integration of allowances into the basic salary. Section 4 of DBM-CCC No. 10 states that COLA and amelioration allowance are deemed integrated into the basic salary effective July 1, 1989. This circular, along with DBM Circular No. 2005-002, reinforces the prohibition on paying COLA and other benefits already integrated into the basic salary, unless otherwise provided by law or ruled by the Supreme Court. The intent behind integrating these allowances was to create a higher standardized basic pay, which would serve as a more substantial basis for calculating bonuses and retirement benefits.

Concerns about the principle of non-diminution of benefits were also addressed by the Court. While RA 6758 aims to standardize salary rates, the legislature included safeguards to prevent a decrease in overall compensation. Section 17 of RA 6758 provides for a transition allowance, designed to bridge any gap between pre-RA 6758 salaries and standardized pay rates. This transition allowance is treated as part of the basic salary for computing retirement pay, year-end bonuses, and other similar benefits, ensuring that employees do not suffer a reduction in their overall compensation package.

The Supreme Court also cautioned against the potential for salary distortions and double compensation if COLA and amelioration allowance were paid on top of the standardized salaries. Such double compensation is prohibited by Section 8, Article IX (B) of the Constitution, which states that no public officer or employee shall receive additional, double, or indirect compensation unless specifically authorized by law. The Court referenced Gutierrez, et al, v. Department of Budget and Management, et al., explaining that COLA is intended to cover increases in the cost of living and should be integrated into the standardized salary rates, rather than paid as an additional benefit.

Finally, the Court addressed PPA’s counterclaim for exemplary damages, litigation expenses, and attorney’s fees. The Court denied this claim, finding no evidence that Pantalan acted in bad faith when filing the petition for mandamus. The Court also found no factual, legal, or equitable justification for awarding litigation expenses and attorney’s fees. Consequently, the Supreme Court granted PPA’s petition, reversing the Court of Appeals’ decision and affirming that COLA and amelioration allowance are already integrated into the standardized salaries of PPA and MIAA employees.

FAQs

What was the key issue in this case?	The key issue was whether government employees are entitled to receive COLA and amelioration allowance on top of their standardized salaries after the implementation of Republic Act No. 6758.
What did the Supreme Court rule?	The Supreme Court ruled that COLA and amelioration allowance are already integrated into the standardized salary rates of government employees, and they are not entitled to receive these allowances on top of their basic salaries.
What is Republic Act No. 6758?	Republic Act No. 6758, also known as the Compensation and Position Classification Act of 1989, is a law that aims to standardize the compensation and benefits of employees in the government sector.
What is DBM-CCC No. 10?	DBM-CCC No. 10 is the Department of Budget and Management Corporate Compensation Circular No. 10, which prescribes the implementing rules and regulations of RA 6758, including the integration of allowances into basic salaries.
What does “deemed included” mean in the context of RA 6758?	“Deemed included” means that the standardized salary rates are already inclusive of the COLA and amelioration allowance, and no separate payment is required.
What is a transition allowance?	A transition allowance is a provision under Section 17 of RA 6758, designed to bridge the difference in pay between the pre-RA 6758 salary of government employees and their standardized pay rates, ensuring no reduction in compensation.
Why did the Court deny PPA’s counterclaim for damages?	The Court denied PPA’s counterclaim because there was no showing that Pantalan acted in bad faith when it filed the petition for mandamus, and there was no legal basis for awarding litigation expenses and attorney’s fees.
What principle does the ruling uphold?	The ruling upholds the principle of standardized compensation in the government sector, preventing double compensation and promoting fiscal responsibility, while ensuring that employees do not suffer a diminution of pay.

In conclusion, the Supreme Court’s decision clarifies the compensation structure for government employees, emphasizing that COLA and amelioration allowances are integrated into standardized salaries under RA 6758. This ruling ensures consistency and fairness in government compensation while adhering to constitutional prohibitions against double compensation. 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: Philippine Ports Authority v. PANTALAN, G.R. No. 192836, November 29, 2022