On March 20, 2012, the Clark Development Corporation, the operating arm of the Bases Conversion Development Authority, tasked to manage the Clark Special Economic Zone, executed a renegotiated collective bargaining agreement with its supervisory employees’ union.
The collective bargaining agreement contained economic terms in favor of the supervisory employees, specifically the grant of additional annual union leave, bereavement leave, salary increases, uniform allowance, monthly Personal Economic Relief Allowance and a signing bonus. Said agreement also granted free use of guesthouses, use of a service vehicle, as well as the reproduction and distribution of the agreement to all members of the supervisory employees’ union.
However, the Governance Commission for Government-Owned and -Controlled Corporations (Governance Commission) opined that the collective bargaining agreement violated Section 9 of Executive Order No. 7, which was signed by the Philippine President on September 8, 2010. Section 9 imposed a moratorium on increases in the salaries, allowances, incentives and other benefits in Government-Owned and -Controlled Corporations unless specifically authorized by the Philippine President.
The Governance Commission stated that the Philippine President has not given Clark Development Corporation the authority to renegotiate the collective bargaining agreement with the supervisory employees’ union and to grant the union members increases or additional benefits.
Furthermore, the Bases Conversion Development Authority recommended that Clark Development Corporation defer or renegotiate its collective bargaining agreement with the supervisory employees’ union should it fail to prove the financial sustainability of the economic terms of such agreement.
On August 1, 2012, the supervisory employees’ union filed before the National Conciliation and Mediation Board a complaint against Clark Development Corporation for its failure to implement the collective bargaining agreement.
On November 5, 2012, the Accredited Voluntary Arbitrator ruled in favor of the supervisory employees’ union and upheld the economic terms or grant of benefits in the collective bargaining agreement. According to the Accredited Voluntary Arbitrator, Section 10 of Executive Order No. 7, Series of 2010, suspended the grant of allowances, bonuses, incentives, and other perks to members of the boards of directors/trustees of Government-Owned and -Controlled Corporations, but only until December 31, 2010. The Accredited Voluntary Arbitrator also held that the approval of the Philippine President in the grant of additional benefits was presumed under the rule on liberal construction in favor of labor under Article 4 of the Labor Code of the Philippines.
Aggrieved, Clark Development Corporation elevated the case to the Court of Appeals through a petition for review.
On April 8, 2013, the Court of Appeals affirmed the Accredited Voluntary Arbitrator’s findings. The Court of Appeals explained that Executive Order No. 7, Series of 2010, does not apply to Clark Development Corporation, as well as to the supervisory employees’ union. The Court of Appeals added that the Philippine President’s approval of the grant of additional benefits was presumed in line with the principle that all doubts should be resolved in favor of labor.
Clark Development Corporation filed its petition for review on certiorari before the Supreme Court and asserted that the Court of Appeals and the Accredited Voluntary Arbitrator erred in allowing the grant of additional benefits to the supervisory employees’ union.
Clark Development Corporation asserted the following:
- The economic terms of the collective bargaining agreement were invalid and cannot be enforced because these were renegotiated without the approval of the Philippine President.
- The GOCC Governance Act of 2011 gave the Philippine President the authority to fix the Government-Owned and -Controlled Corporations’ compensation framework.
- Corollarily, approval of additional benefits by the Philippine President cannot be presumed.
By contrast, the supervisory employees’ union contended that:
- The collective bargaining agreement was the law between the parties and must be respected.
- The collective bargaining agreement was renegotiated consistent with the employees’ rights to organization and collective bargaining.
- Executive Order No. 7, Series of 2010, was not applicable to Government-Owned and -Controlled Corporations without original charter.
- The GOCC Governance Act of 2011 recognized the vested rights of government employees to their salaries.
In the meantime, the Governance Commission moved to intervene in the proceedings and argued that:
- The collective bargaining agreement contravened Executive Order No. 7, Series of 2010, and the GOCC Governance Act of 2011.
- The moratorium on the grant of additional benefits remained effective pending the promulgation and approval of the compensation and position classification system for Government-Owned and -Controlled Corporations.
- In any event, there were no factual and legal bases to presume the consent of the Philippine President on the collective bargaining agreement’s economic provisions.
Were the additional benefits granted to the supervisory employees under the collective bargaining agreement valid?
The Supreme Court ruled in the negative.
The Supreme Court began with the settled rule that the right of government employees to self-organization is not as extensive as in the right of private employees. It then mentioned that the right of government employees to collective bargaining and negotiation is subject to limitations, in that only the terms and conditions of government employment not fixed by law can be negotiated.
The Supreme Court pointed out that in order to control the grant of excessive salaries, allowances, incentives, and other benefits, Executive Order No. 7, Series of 2010, particularly Section 9, has imposed a moratorium on the grant of additional salaries and allowances to employees and officers of Government-Owned and -Controlled Corporations until specifically authorized by the Philippine President.
The Supreme Court stressed that the clause “until specifically authorized by the Philippine President” is not in the nature of an exception. Rather, the clause provides for the situation where the Philippine President, deems it proper to lift the moratorium. According to the Supreme Court, the use of the preposition “until” before the phrase “specifically authorized by the Philippine President” denotes that the moratorium continues up to a particular time, i.e., when the President authorizes anew the grant of the prohibited increases.
On this score, the Supreme Court took judicial notice that the Philippine President has not lifted the moratorium. The Court thus ruled that the economic terms of the collective bargaining agreement executed by the Clark Development Corporation with its supervisory employees’ union on March 20, 2012 were void for violating the law.
The Supreme Court noted the reliance of the Accredited Voluntary Arbitrator and the Court of Appeals upon Section 10 of Executive Order No. 7, Series of 2010. The Supreme Court, however, pointed out that Section 10 is inapplicable to the supervisory employees’ union of Clark Development Corporation, as the said section pertains to members of the Board of Directors/Trustees of Government-Owned and -Controlled Corporations.
The Supreme Court then declared as erroneous the exclusion by the Court of Appeals of Clark Development Corporation from the coverage of Executive Order No. 7, Series of 2010. This was because nothing in the law makes any express distinction between Government-Owned and -Controlled Corporations with original charter, and those incorporated under the Corporation Code. For the Supreme Court, Executive Order No. 7, Series of 2010, applies to all Government-Owned and -Controlled Corporations regardless of the manner of creation.
The Supreme Court added that although the GOCC Governance Act of 2011 authorizes the Governance Commission to develop a compensation and position classification system applicable to all officers and employees of Government-Owned and -Controlled Corporations, such system is subject to approval of the Philippine President.
In the present case, the Supreme Court found that the Governance Commission did not give its favorable recommendation on the renegotiation of additional benefits by Clark Development Corporation and the supervisory employees’ union. The Supreme Court noted that the Governance Commission even opined that the collective bargaining agreement violated Section 9 of Executive Order No. 7, Series of 2010.
The Supreme Court then highlighted that on March 22, 2016, the Philippine President issued Executive Order No. 203, Series of 2016, which disallowed the Governing Boards of all covered Government-Owned and -Controlled Corporations, whether Chartered or Non-chartered, to negotiate with their officers and employees the economic terms of their collective bargaining agreements.
For the Supreme Court, such provision supports the finding that the moratorium under Executive Order No. 7, Series of 2010, has remained effective pending the promulgation and approval of the compensation framework for all the Government-Owned and -Controlled Corporations. The Court found no factual and legal bases for the Court of Appeals and the Accredited Voluntary Arbitrator to presume that the Philippine President approved the renegotiated economic provisions of the collective bargaining agreement between Clark Development Corporation and its supervisory employees’ union.
The Supreme Court emphasized that the construction in favor of labor only applies when there are doubts in the interpretation and implementation of the provisions of the Labor Code of the Philippines and its implementing rules and regulations. The Supreme Court stated that the language of Section 9 of Executive Order No. 7, Series of 2010, on the moratorium on increases in rates of salaries and other benefits is unambiguous. Consequently, the Supreme Court emphasized that the law must be interpreted following its plain and obvious meaning and applied according to its express terms. For the Supreme Court, the law requires the Philippine President’s consent as to additional benefits effectively lifting the moratorium, and any presumption of such approval is unwarranted.
The Supreme Court concluded that Clark Development Corporation had valid reason not to implement the increases in salaries and benefits as provided in the renegotiated collective bargaining agreement. This is because the law has fixed the terms and conditions of government employment, and any contract that violates the law is void and cannot be a source of rights and obligations.
Further reading:
- Clark Development Corp. v. Association of CDC Supervisory Personnel Union, G.R. No. 207853, March 30, 2022.
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