Key Takeaway: The Supreme Court Clarifies the Boundaries of Employee Benefits in Government-Owned Corporations

Irene G. Ancheta, et al. v. Commission on Audit (G.R. No. 236725, February 02, 2021)

In the bustling corridors of government-owned corporations in the Philippines, the promise of benefits like rice and medical allowances can be a beacon of hope for many employees. Yet, the case of Irene G. Ancheta and her fellow employees at the Subic Water District serves as a stark reminder that not all that glitters is gold. At the heart of this legal battle lies a fundamental question: Can employees hired after a specific date continue to receive benefits established before the Salary Standardization Law took effect?

The Subic Water District, a government-owned corporation, found itself at the center of a dispute with the Commission on Audit (COA) over the legality of disbursing various benefits to its employees in 2010. The COA’s notice of disallowance hinged on the fact that these benefits were granted to employees hired after June 30, 1989, in violation of the Salary Standardization Law (RA No. 6758).

Legal Context: Navigating the Salary Standardization Law

The Salary Standardization Law, enacted on July 1, 1989, aimed to standardize the salaries and benefits of government employees across the board. This law was a response to the disparity in compensation among different government sectors. Under Section 12 of RA No. 6758, all allowances are deemed included in the standardized salary rate, with certain exceptions like representation and transportation allowances.

However, the law also provided a cushion for existing employees. Those who were incumbents as of July 1, 1989, and were receiving additional compensations not integrated into the standardized salary, were allowed to continue receiving them. This provision was designed to prevent the sudden diminution of pay for long-serving employees.

The law’s impact is not just a matter of numbers on a paycheck. For instance, consider a long-time employee at a government hospital who has been receiving a medical allowance for years. Under RA No. 6758, this allowance can continue, but a new hire would not be entitled to the same benefit.

Case Breakdown: The Journey of the Subic Water District Employees

The story of Irene G. Ancheta and her colleagues began with the release of benefits totaling P3,354,123.50 in 2010. These included rice allowance, medical allowance, Christmas groceries, year-end financial assistance, mid-year bonus, and year-end bonus. However, the COA issued a notice of disallowance, arguing that these benefits were granted to employees hired after the critical date of June 30, 1989.

The employees appealed to the COA Regional Office No. 3, which upheld the disallowance. The appeal then moved to the COA Proper, which affirmed the decision but modified the liability, excluding regular, casual, and contractual employees from refunding the amounts received.

Undeterred, the employees sought relief from the Supreme Court, arguing that the benefits were authorized by letters from the Department of Budget and Management (DBM). These letters suggested that benefits established before December 31, 1999, could continue to be granted to incumbents as of that date.

The Supreme Court, however, was not swayed. It emphasized that the relevant date under RA No. 6758 is July 1, 1989, not December 31, 1999, as suggested by the DBM letters. The Court’s decision underscored the importance of adhering to the statutory date:

‘We stress that the Court has consistently construed the qualifying date to be July 1, 1989 or the effectivity date of RA No. 6758, in determining whether an employee was an incumbent and actually receiving the non-integrated remunerations to be continuously entitled to them.’

The Court also addressed the issue of the approving and certifying officers’ liability. It found that they acted with gross negligence by relying on outdated board resolutions and DBM authorizations, despite clear legal precedents:

‘Ancheta and Rapsing’s reliance upon the DBM Letters, previous board resolutions, and dated authorizations fell short of the standard of good faith and diligence required in the discharge of their duties to sustain exoneration from solidary liability.’

Practical Implications: Navigating Employee Benefits in the Public Sector

This ruling serves as a critical reminder for government-owned corporations and their employees about the strict boundaries set by the Salary Standardization Law. It highlights the importance of understanding the legal framework governing employee benefits and the potential consequences of non-compliance.

For businesses and organizations operating within the public sector, this case underscores the need for diligent review of existing policies and practices. It is crucial to ensure that any benefits offered align with the legal requirements set forth by RA No. 6758.

Key Lessons:

• Adhere strictly to the dates specified in RA No. 6758 when determining eligibility for benefits.
• Regularly review and update internal policies to comply with current laws and regulations.
• Ensure that approving and certifying officers are well-informed about legal precedents and current statutes to avoid liability.

Frequently Asked Questions

What is the Salary Standardization Law?

The Salary Standardization Law (RA No. 6758) is a Philippine law that standardizes the salaries and benefits of government employees, aiming to eliminate disparities in compensation.

Who is considered an incumbent under RA No. 6758?

An incumbent under RA No. 6758 is an employee who was in service as of July 1, 1989, and was receiving additional compensations not integrated into the standardized salary rate at that time.

Can new employees receive benefits established before the law’s effectivity?

No, new employees hired after July 1, 1989, are not entitled to benefits established before the law’s effectivity unless these benefits are integrated into the standardized salary rate.

What happens if a government-owned corporation continues to grant unauthorized benefits?

The corporation risks having these benefits disallowed by the COA, and approving and certifying officers may be held liable for the disallowed amounts.

How can organizations ensure compliance with RA No. 6758?

Organizations should regularly review their compensation policies, ensure that they adhere to the law’s provisions, and seek legal advice to stay updated on relevant case law and statutory changes.

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