SYLLABUS:
PNCC granted transportation allowances to its executives in addition to providing them with service vehicles. COA issued an Audit Observation Memorandum (AOM), finding the allowance disallowed due to a violation of COA Circular No. 77-61, which prohibits dual benefits. PNCC withdrew the allowance in 2014, prompting the executives to file a complaint with the Labor Arbiter, claiming that the allowance had ripened into company policy under Article 100 of the Labor Code. The Labor Arbiter has jurisdiction over the employees' money claims as PNCC, a GOCC without an original charter, is governed by the Labor Code. The transportation allowance did not ripen into company policy because it violated COA regulations. The withdrawal of the allowance did not violate the non-diminution rule under Article 100 of the Labor Code. The petition is denied.
FACTS:
The Philippine National Construction Corporation (PNCC), formerly known as the Construction Development Corporation of the Philippines (CDCP), was originally a private corporation incorporated in 1966. Due to financial difficulties, PNCC became a government-acquired asset corporation in the 1980s, with the government holding the majority of its shares.
In 2011, PNCC experienced significant financial challenges and implemented a retrenchment program, leading to the termination of several employees, including Felix M. Erece Jr., Janice Day E. Alejandrino, Miriam M. Pasetes, Yolanda C. Mortel, and Henry B. Salazar. These employees were subsequently rehired to executive positions due to their familiarity with the company's operations. As part of their compensation, PNCC granted them a monthly transportation allowance, which they could use either for fuel consumption or to hire a personal driver.
The allowance was granted based on Resolution No. BD-029-1996 issued by PNCC's Board of Directors. However, the employees were also provided service vehicles, a practice that violated COA Circular No. 77-61, which prohibits government officials from receiving transportation allowances if they are already provided with government service vehicles.
In 2013 and 2014, the Commission on Audit (COA) issued Audit Observation Memoranda (AOM), stating that the transportation allowance granted to the PNCC executives was disadvantageous to the company because it had been incurring financial losses. COA noted that the transportation allowances were being granted in addition to the provision of service vehicles, which violated COA regulations. COA recommended that PNCC review its policy on allowances and stop granting the benefit.
Based on the COA findings, PNCC stopped granting the transportation allowance to its executives in September 2014, despite the fact that no formal Notice of Disallowance was issued by COA.
The affected executives, who had been receiving the transportation allowance, were aggrieved by the unilateral cessation of the benefit. They filed a complaint with the Labor Arbiter seeking payment of the withheld allowances, as well as moral and exemplary damages and attorney’s fees. They argued that the transportation allowance had become part of company policy, and under Article 100 of the Labor Code (on non-diminution of benefits), PNCC could not withdraw this benefit.
The Labor Arbiter ruled in favor of the employees, holding that the transportation allowance had ripened into company policy and could not be unilaterally withdrawn by PNCC. The non-diminution rule under Article 100 of the Labor Code applied, and the employees were entitled to receive the allowance. PNCC was ordered to pay the transportation allowances to the employees.
PNCC appealed the Labor Arbiter’s decision to the National Labor Relations Commission (NLRC). The NLRC reversed the Labor Arbiter’s ruling, stating that the Labor Arbiter lacked jurisdiction over the matter. According to the NLRC, since the issue involved the cessation of a benefit based on an audit finding from COA, the proper jurisdiction belonged to COA, not the Labor Arbiter. Furthermore, the NLRC held that PNCC was a government-owned and controlled corporation (GOCC) subject to COA regulations, and thus the allowances were subject to COA's authority, not the jurisdiction of labor tribunals.
The employees then filed a petition for certiorari with the Court of Appeals (CA), challenging the NLRC’s ruling. The CA reversed the NLRC's decision and held that jurisdiction over the employees' money claims rested with the Labor Arbiter. The CA ruled that PNCC was a GOCC without an original charter, which made it subject to the Labor Coderather than the Civil Service Commission (CSC) or COA regulations. Therefore, the Labor Arbiter had the jurisdiction to decide on the money claims. The CA also remanded the case to the NLRC to resolve the appeal on the merits.
PNCC then filed a Petition for Review on Certiorari before the Supreme Court, arguing that the CA erred in ruling that the Labor Arbiter had jurisdiction over the matter and that the withdrawal of the allowances did not violate Article 100 of the Labor Code.
PNCC argued that the COA had jurisdiction over the employees' money claims because the withdrawal of the transportation allowance was based on COA audit findings. They contended that since the allowance was found disallowable by COA, it fell within COA's authority, not that of the Labor Arbiter.
The employees argued that the transportation allowance had ripened into company policy under Article 100 of the Labor Code, and PNCC could not withdraw it unilaterally. They asserted that the allowance had been granted for a long period and had become a vested right, which could not be diminished or eliminated.
ISSUES:
1. Whether the Labor Arbiter has jurisdiction over the employees’ money claims.
2. Whether the subject allowances have ripened into company policy that cannot be withdrawn by PNCC under Article 100 of the Labor Code on non-diminution of benefits.
HELD:
The Supreme Court denied PNCC’s petition and affirmed the CA’s ruling with modification. The Court held that jurisdiction over the money claims rests with the Labor Arbiter, but it ruled that the withdrawal of the subject allowance did not constitute a violation of Article 100 of the Labor Code on non-diminution of benefits.
Jurisdiction of the Labor Arbiter
The jurisdiction of the Labor Arbiter over employee claims is anchored on the Labor Code of the Philippines, particularly Article 224 (now Article 217), which grants the Labor Arbiter original and exclusive jurisdiction to hear and decide cases involving money claims arising from employer-employee relationships, provided the claim exceeds ₱5,000.
The Supreme Court ruled that the dispute between the employees and PNCC over the payment of the transportation allowance stemmed from their employer-employee relationship. The employees were executives who were rehired by PNCC after its retrenchment program, and the claim for the transportation allowance arose out of a company policy that provided benefits to employees. Because this dispute involved compensation as part of their employment, it fell within the jurisdiction of the Labor Arbiter under the Labor Code.
The Court reaffirmed that PNCC is a government-owned and controlled corporation (GOCC) without an original charter, meaning it was organized under the Corporation Code rather than through legislation. As a non-chartered GOCC, PNCC and its employees are governed by the Labor Code, not the Civil Service Law or any other law that typically applies to GOCCs with original charters. This distinction placed the dispute squarely within the jurisdiction of labor tribunals, as employees of non-chartered GOCCs are considered private employees for the purposes of labor law.
PNCC had argued that the COA, not the Labor Arbiter, had jurisdiction because the withdrawal of the allowance was based on audit findings by COA. However, the Supreme Court emphasized that an Audit Observation Memorandum (AOM) is not equivalent to a Notice of Disallowance. The AOM merely contained preliminary observations and recommendations for PNCC’s management to review the policy on the allowance; it did not amount to a formal disallowance that would place the matter under COA’s jurisdiction.
Moreover, the Supreme Court noted that COA does not have original and exclusive jurisdiction over all money claims against GOCCs. It has concurrent jurisdiction with labor tribunals in specific cases. Since there was no formal Notice of Disallowance, COA’s audit findings did not deprive the Labor Arbiter of jurisdiction over the employees’ claims.
Thus, the Labor Arbiter had the rightful authority to decide on the employees’ money claims since these claims arose from an employer-employee relationship.
Non-Diminution of Benefits under Article 100 of the Labor Code
The non-diminution of benefits rule, as provided under Article 100 of the Labor Code, prohibits employers from eliminating or reducing benefits that employees are already enjoying at the time the law was enacted or that have become part of company policy over time. The principle is designed to protect employees from arbitrary or unjust withdrawal of benefits by their employers.
The Supreme Court clarified that the non-diminution rule applies only to benefits that are lawfully granted and authorized by law or policy. It does not apply to benefits that were erroneously or illegally granted in violation of applicable laws or regulations. Thus, while Article 100 protects employees from the arbitrary withdrawal of benefits, it cannot be used to justify the continuation of an unauthorized or illegal benefit.
In this case, the transportation allowance granted to PNCC executives violated COA Circular No. 77-61, which prohibits the grant of transportation allowances to government officials who are already provided with service vehicles. The employees received both service vehicles and transportation allowances, which was manifestly illegal under COA regulations.
The Supreme Court held that a mistaken grant of benefits, no matter how long it has been in place, cannot ripen into company policy that employees can invoke as a vested right. A benefit that violates the law does not acquire the character of permanence, even if it had been continuously granted over time. The law prohibits the continuation of such erroneous practices, and companies are legally obligated to correct them.
Compliance with COA Regulations Overrides Non-Diminution Claims: The Court stressed that public fundsare involved when dealing with GOCCs like PNCC, and such funds are subject to strict regulatory oversight. The Commission on Audit (COA) has the constitutional mandate to audit and regulate the disbursement of public funds to prevent irregular, unnecessary, or unconscionable expenditures. COA’s regulations, such as the prohibition on dual allowances, must be followed. The withdrawal of the transportation allowance by PNCC was necessary to comply with COA Circular No. 77-61, which takes precedence over the non-diminution rule.
Non-Diminution Rule Cannot Be Invoked to Perpetuate Illegal Benefits: The Court reiterated that Article 100of the Labor Code was not designed to protect unlawful benefits. It cannot be used to shield employees from the revocation of benefits that are contrary to law or regulation. The rule against diminution does not prevent employers from discontinuing benefits that were granted in error or in violation of law. In this case, the transportation allowance was improperly granted, and its withdrawal was not only permissible but required by law. As such, PNCC’s decision to discontinue the benefit was valid and did not violate Article 100.
