December 2009 - Philippine Supreme Court Decisions/Resolutions

Philippine Supreme Court Jurisprudence

G.R. No. 166570 - Efren M. Herrera, et al. v. National Power Corporation, et al.

SECOND DIVISION

[G.R. NO. 166570 : December 18, 2009]

EFREN M. HERRERA and ESTHER C. GALVEZ, for and on their behalf and on behalf of OTHER SEPARATED, UNREHIRED and RETIRED EMPLOYEES OF THE NATIONAL POWER CORPORATION, Petitioners, v. NATIONAL POWER CORPORATION, THE DEPARTMENT OF BUDGET AND MANAGEMENT and THE OFFICE OF THE SOLICITOR GENERAL, Respondents.

D E C I S I O N

DEL CASTILLO, J.:

The question at the heart of this case is whether petitioners, former employees of the National Power Corporation (NPC) who were separated from service due to the government's initiative of restructuring the electric power industry, are entitled to their retirement benefits in addition to the separation pay granted by law.

Absent explicit statutory authority, we cannot provide our imprimatur to the grant of separation pay and retirement benefits from one single act of involuntary separation from the service, lest there be duplication of purpose and depletion of government resources. Within the context of government reorganization, separation pay and retirement benefits arising from the same cause, are in consideration of the same services and granted for the same purpose. Whether denominated as separation pay or retirement benefits, these financial benefits reward government service and provide monetary assistance to employees involuntarily separated due to bona fide reorganization.

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court on a pure question of law against the Decision¹ dated December 23, 2004 rendered by the Regional Trial Court (RTC), Branch 101, Quezon City in SCA No. Q-03-50681 (for Declaratory Relief) entitled National Power Corporation v. Napocor Employees and Workers Union (NEWU), NAPOCOR Employees Consolidated Union (NECU), NPC Executive Officers Association, Inc. (NPC-EXA), Esther Galvez and Efren Herrera, for and on their behalf and in behalf of other separated, unrehired, and retired employees of the National Power Corporation, the Department of Budget and Management (DBM), the Office of the Solicitor General (OSG), the Civil Service Commission (CSC) and the Commission on Audit (COA). Said Decision ruled that the petitioners are not entitled to receive retirement benefits under Commonwealth Act No. 186 (CA No. 186),² as amended, over and above the separation benefits they received under Republic Act (RA) No. 9136,³ otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA).

Legal and factual background

RA No. 9136 was enacted on June 8, 2001 to provide a framework for the restructuring of the electric power industry, including the privatization of NPC's assets and liabilities.⁴ One necessary consequence of the reorganization was the displacement of employees from the Department of Energy, the Energy Regulatory Board, the National Electrification Administration and the NPC. To soften the blow from the severance of employment, Congress provided in Section 63 of the EPIRA, for a separation package superior than those provided under existing laws, as follows:

SEC. 63. Separation Benefits of Officials and Employees of Affected Agencies. - National government employees displaced or separated from the service as a result of the restructuring of the [electric power] industry and privatization of NPC assets pursuant to this Act, shall be entitled to either a separation pay and other benefits in accordance with existing laws, rules or regulations or be entitled to avail of the privileges provided under a separation plan which shall be one and one-half month salary for every year of service in the government: Provided, however, That those who avail of such privilege shall start their government service anew if absorbed by any government-owned successor company. In no case shall there be any diminution of benefits under the separation plan until the full implementation of the restructuring and privatization. x x x (Emphasis supplied)cralawlibrary

The implementing rules of the EPIRA, approved by the Joint Congressional Power Commission on February 27, 2002,⁵ further expounded on the separation benefits, viz:

RULE 33. Separation Benefits

Section 1. General Statement on Coverage.

This Rule shall apply to all employees in the National Government service as of June 26, 2001 regardless of position, designation or status, who are displaced or separated from the service as a result of the restructuring of the electric [power] industry and privatization of NPC assets: Provided, however, That the coverage for casual or contractual employees shall be limited to those whose appointments were approved or attested [to] by the Civil Service Commission (CSC).

Section 2. Scope of Application.

This Rule shall apply to affected personnel of DOE, ERB, NEA and NPC.

Section 3. Separation and Other Benefits.

(a) The separation benefit shall consist of either a separation pay and other benefits granted in accordance with existing laws, rules and regulations or a separation plan equivalent to one and one half (1-1?2) months' salary for every year of service in the government, whichever is higher; Provided, That the separated or displaced employee has rendered at least one (1) year of service at the time of effectivity of the Act.

x x x

(e) For this purpose, "Salary", as a rule, refers to the basic pay including the thirteenth (13th) month pay received by an employee pursuant to his appointment, excluding per diems, bonuses, overtime pay, honoraria, allowances and any other emoluments received in addition to the basic pay under existing laws.

(f) Likewise, "Separation" or "Displacement" refers to the severance of employment of any official or employee, who is neither qualified under existing laws, rules and regulations nor has opted to retire under existing laws, as a result of the Restructuring of the electric power industry or Privatization of NPC assets pursuant to the Act. (Emphasis supplied)cralawlibrary

On February 28, 2003, all NPC employees, including the petitioners, were separated from the service. As a result, all the employees who held permanent positions at the NPC as of June 26, 2001 opted for and were paid the corresponding separation pay equivalent to one and a half months' salary per year of service. Nonetheless, in addition to the separation package mandated by the EPIRA, a number of NPC employees also claimed retirement benefits under CA No. 186,⁶ as amended by RA No. 660⁷ and RA No. 1616.⁸ Under these laws, government employees who have rendered at least 20 years of service are entitled to a gratuity equivalent to one month's salary for every year of service for the first 20 years, one and a half months' salary for every year of service over 20 but below 30 years, and two months' salary for every year of service in excess of 30 years.⁹

The NPC, on the other hand, took the position that the grant of retirement benefits to displaced employees in addition to separation pay was inconsistent with the constitutional proscription on the grant of a double gratuity. Unable to amicably resolve this matter with its former employees, the NPC filed on September 18, 2003, a Petition for Declaratory Relief¹⁰ against several parties,¹¹ including the petitioners, before the RTC of Quezon City, to obtain confirmation that RA No. 9136 did not specifically authorize NPC to grant retirement benefits in addition to separation pay.¹² The case was docketed as SCA No. Q-03-50681 and raffled to Branch 101 of said court.

After submission of the respondents' respective Answers and Comments,¹³ the parties agreed that the court a quo would resolve the case based on the arguments raised in their memoranda¹⁴ since only a question of law was involved.¹⁵ In due course, the court a quo rendered the assailed Decision, finding that employees who received the separation benefit under RA No. 9136 are no longer entitled to retirement benefits:

The aforementioned law speaks of two (2) options for the employee to choose from, that is: (1) to receive separation pay and other benefits in accordance with existing laws, rules, and regulations or (2) to avail of the privileges provided under a separation plan (under R.A. 9136), which shall be one and one half months' salary for every year of service in the government.

Under Section 3(f) of Rule 33 of the Implementing Rules and Regulations of R.A. 9136, "separation or displacement refers to the severance of employment of any official or employee, who is neither qualified under existing laws, rules, and regulations nor has opted to retire under existing laws as a result of the Restructuring of the electric power industry or Privatization of NPC assets pursuant to the act". Thus, it is clear that the receipt of benefits under the EPIRA law, by employees who opted to retire under such law bars the receipt of retirement benefits under R.A. 1616.

Moreover, Section 8 of Article IX-B of the 1987 Constitution prohibits the grant of both separation pay and retirement benefits. x x x

x x x

In said constitutional provision, it is x x x clear that additional or indirect compensation is barred by law and only [allowed] when so specifically authorized by law. Furthermore, on the Private Respondents' contention that the second paragraph should be applied in their [case], the same will not hold water. This is so because "retirement benefits" [are] not synonymous to pension or gratuities as contemplated by law.

R.A. 9136 did not clearly and unequivocally authorize the payment of additional benefits to Private Respondents as the benefits referred to in such law should not be interpreted to include retirement benefits in addition to their separation pay. Separation from service due to [the] restructuring of the [electric] power industry should not be interpreted to mean "retirement" as both are different in every respect. The law specifically defines the meaning of "separation" by virtue of the restructuring. x x x

x x x

Thus, the Respondent-Employees are not entitled to receive retirement benefits under Republic Act No. 1616 over and above the separation benefits they received under Republic Act No. 9136.¹⁶

Petitioners sought recourse from the assailed Decision directly before this court on a pure question of law. The Department of Budget and Management (DBM) submitted its Comment on June 30, 2005,¹⁷ while the NPC, through the Office of the Solicitor General, filed its Comment on August 23, 2005.¹⁸ Petitioners then filed their Consolidated Reply by registered mail on November 18, 2005.¹⁹ After the parties filed their respective memoranda,²⁰ the case was

submitted for decision.

Petitioners' arguments

Before us, petitioners argue that:

1) The EPIRA does not bar the application of CA No. 186, as amended. Petitioners are therefore entitled to their retirement pay in addition to separation pay.

2) Petitioners have vested rights over their retirement benefits.

3) The payment of both retirement pay and separation pay does not constitute double compensation, as the Constitution provides that "pensions or gratuities shall not be considered as additional, double or indirect compensation".

Respondents' arguments

Respondents NPC and the DBM, on the other hand, maintain that:

1) Section 63 of RA No. 9136 and Section 3, Rule 33 of its Implementing Rules and Regulations do not authorize the grant of retirement benefits in addition to the separation pay already received. Rather, Section 63 requires separated employees to choose between a separation plan under existing laws or the separation package under the EPIRA.

2) The grant of both separation pay and retirement benefit amounts to double gratuity in direct contravention of the Constitution.

3) No law authorizes the payment of both separation pay and retirement benefits to petitioners.

Issue

The sole issue in this case is whether or not NPC employees who were separated from the service because of the reorganization of the electric power industry and who received their separation pay under RA No. 9136 are still entitled to receive retirement benefits under CA No. 186, as amended.

Our Ruling

We deny the petition and affirm the court a quo's Decision dated December 23, 2004 in SCA No. Q-03-50681.

Absent clear and unequivocal statutory authority, the grant of both separation pay and retirement benefits violates the constitutional proscription on additional compensation.

Section 8 of Article IX(B) of the Constitution provides that "[n]o elective or appointive public officer or employee shall receive additional, double, or indirect compensation, unless specifically authorized by law". In prior decisions, we have ruled that there must be a clear and unequivocal statutory provision to justify the grant of both separation pay and retirement benefits to an employee.²¹ Here, absent an express provision of law, the grant of both separation and retirement benefits would amount to double compensation from one single act of separation from employment.

Petitioners claim that Section 9 of RA No. 6656²² amounts to sufficient statutory basis for the grant of both retirement benefits and separation pay. Section 9 provides:

x x x Unless also separated for cause, all officers and employees, who have been separated pursuant to reorganization shall, if entitled thereto, be paid the appropriate separation pay and retirement and other benefits under existing laws within ninety (90) days from the date of the effectivity of their separation or from the date of the receipt of the resolution of their appeals as the case may be. Provided, That application for clearance has been filed and no action thereon has been made by the corresponding department or agency. Those who are not entitled to said benefits shall be paid a separation gratuity in the amount equivalent to one (1) month salary for every year of service. Such separation pay and retirement benefits shall have priority of payment out of the savings of the department or agency concerned. (Emphasis supplied)cralawlibrary

Unfortunately for the petitioners, their interpretation has little legal precedent. The CSC has previously ruled that employees similarly situated to petitioners herein were not entitled to both separation pay and retirement benefits; instead, the concerned employee must either avail of the separation benefit or opt to retire if qualified under existing laws. In CSC Resolution No. 021112,²³ the CSC interpreted the phrase "separation pay and retirement" in RA No. 6656 as follows:

x x x While the aforequoted provision of law used the conjunctive "and" between the words "separation pay" and "retirement", this does not mean that both benefits shall be given to an affected employee. This interpretation is supported by the phrase "if entitled thereto" found before the phrase "be paid the appropriate separation pay and retirement and other benefits under existing laws". Thus, payment of both separation and retirement benefits is not absolute.

Also, in CSC Resolution No. 00-1957,²⁴ the CSC declared:

The aforequoted provision of law says: 'separation pay and retirement and other benefits under existing laws'. Be it noted that the conjunctive 'and' is used between 'separation pay and retirement', which in its elementary sense would mean that they are to be taken jointly. (Ruperto G. Martin, Statutory Construction, sixth edition, p. 88) Obviously, therefore, 'separation pay and retirement' refer to only one benefit, of which an employee affected by the reorganization, if entitled thereto, must be paid plus other benefits under existing laws, i.e. terminal leave pay, etc.

Further, in Cajiuat v. Mathay,²⁵ we found that in the absence of express provisions to the contrary, gratuity laws should be construed against the grant of double compensation. Cajiuat involved employees of the Rice and Corn Administration who exercised their option to retire under CA No. 186 and received the appropriate retirement benefits. Subsequently, the Rice and Corn Administration was abolished by Presidential Decree No. 4.²⁶ Said Decree also provided for the payment of a gratuity in Section 26, paragraph 3:

Permanent officials and employees of the Rice and Corn Administration who cannot be absorbed by the Administration, or who cannot transfer or to be transferred to other agencies, or who prefer to retire, if qualified for retirement, or to be laid off, shall be given gratuity equivalent to one month salary for every year of service but in no case more than twenty-four months salary, in addition to all other benefits to which they are entitled under existing laws and regulations. x x x

On the basis of this provision, the retired employees of the Rice and Corn Administration claimed that they were entitled to the separation gratuity, over and above the retirement benefits already received. We disagreed and held that:

x x x [t]here must be a provision, clear and unequivocal, to justify a double pension. The general language employed in paragraph 3, Section 26 of Presidential Decree No. 4 fails to meet that test. All that it states is that permanent employees of the Rice and Corn Administration who are retirable are entitled to gratuity equivalent to one month salary for every year of service but in no case more than twenty four months salary in addition to other benefits to which they are entitled under existing laws and regulations. To grant double gratuity is unwarranted. No reliance can be placed [on] the use of the term "other benefits" found in the paragraph relied upon. As clearly stated in the memorandum of the Solicitor General, they refer to "those receivable by a retiree under the general retirement laws, like the refund of contributions to the retirement fund and the money value of the accumulated vacation and sick leaves of said official employee. The clause "in addition to all other benefits to which they are entitled under existing laws and regulations" was inserted to insure the payment to the retiree of the refund of the contributions to the retirement fund and the money value of the accumulated vacation and sick leaves of said official or employee.²⁷

Nothing in the EPIRA justifies the grant of both the separation package and retirement benefits.

The EPIRA, a legislative enactment dealing specifically with the privatization of the electric power industry, provides:

SEC. 63. Separation Benefits of Officials and Employees of Affected Agencies. - National government employees displaced or separated from the service as a result of the restructuring of the [electric power] industry and privatization of NPC assets pursuant to this Act, shall be entitled to either a separation pay and other benefits in accordance with existing laws, rules or regulations or be entitled to avail of the privileges provided under a separation plan which shall be one and one-half month[s'] salary for every year of service in the government: Provided, however, That those who avail of such privilege shall start their government service anew if absorbed by any government-owned successor company. In no case shall there be any diminution of benefits under the separation plan until the full implementation of the restructuring and privatization. x x x (Emphasis supplied)cralawlibrary

A careful reading of Section 63 of the EPIRA affirms that said law did not authorize the grant of both separation pay and retirement benefits. Indeed, the option granted was either to "a separation pay and other benefits in accordance with existing laws, rules and regulations" or to "a separation plan which shall be one and one-half months' salary for every year of service in the government". The options were alternative, not cumulative. Having chosen the separation plan, they cannot now claim additional retirement benefits under CA No. 186.

This position finds further support in Section 3(f), Rule 33 of RA No. 9136's Implementing Rules and Regulations, which provides:

(f) likewise, "separation" or "displacement" refers to the severance of employment of any official or employee, who is neither qualified under existing laws, rules and regulations nor has opted to retire under existing laws, as a result of the restructuring of the electric power industry or privatization of NPC assets pursuant to the act.

As worded, Rule 33, Section 3(f) of the Implementing Rules and Regulations of RA No. 9136 precludes the receipt of both separation and retirement benefits. A separated or displaced employee, as defined by the implementing rules, does not include one who is qualified or has opted to retire under existing laws. Consequently, a separated employee must choose between retirement under applicable laws or separation pay under the EPIRA.

Within the context of reorganization, petitioners cannot claim a vested right over their retirement benefits.

Petitioners claim that having religiously paid their premiums, they have vested rights to their retirement gratuities which may not be revoked or impaired. However, petitioners fail to consider that under the retirement laws that they themselves invoke, separation from the service, whether voluntary or involuntary, is a distinct compensable event from retirement.²⁸ Nothing in said laws permits an employee to claim both separation pay and retirement benefits in the event of separation from the service due to reorganization.

Thus, absent an express provision of law to the contrary, separation due to reorganization gives rise to two possible scenarios: first, when the separated employee is not yet entitled to retirement benefits, second, when the employee is qualified to retire. In the first case, the employee's separation pay shall be computed based on the period of service rendered in the government prior to the reorganization. In the second case, where an employee is qualified to retire, he or she may opt to claim separation or retirement benefits.

Contradistinction with Lara�o v. Commission on Audit

We are, of course, aware that in Lara�o v. Commission on Audit²⁹ we held that employees, who were separated from the service because of the reorganization of the Metropolitan Waterworks and Sewerage System (MWSS) and Local Waterworks and Utilities Administration (LWUA) pursuant to RA No. 8041, were entitled to both a separation package and retirement benefits.³⁰ ???�r?bl?�

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