FACTS:

RA 6971, "An Act to Encourage Productivity and Maintain Industrial Peace by Providing Incentives to Both Labor and Capital" was approved on November 22, 1990 and took effect on December 9, 1990. On August 26, 1991, Undersecretary Salvador Enriquez of the DBM advised that all government-owned and controlled corporations (GOCCs) and governing financial institutions (GFIs) with original charters performing proprietary functions to defer payment of productivity incentive bonus to their employees, pending the issuance of a definite ruling by the Office of the President on the matter.

On November 21, 1991, HDMF granted Productivity Incentive Bonus (PIB) equivalent to one month salary plus allowance to all its personnel pursuant to RA 6971 and its Implementing Rules.

On December 27, 1991, the DOLE and the DOF issued the Supplemental Rules Implementing RA 6971, excluding from the coverage GOCCs created, maintained or acquired in pursuance of a policy of the state, enunciated in the constitution or by law, and those whose officers and employees are covered by the Civil Service.

On November 29, 1996, the grant of productivity incentive bonus to the HDMF personnel in the total amount of P5,136,710.91 was disallowed in audit based on COA Decision No. 96-288 dated June 4, 1996 stating that RA 6971 does not apply to GOCCs or to GFIs with original charters performing proprietary functions, such as the HDMF.

HDMF argued that RA 6971 applies to the employees of HDMF since the coverage of the said law includes GOCCs performing proprietary functions and the supplemental rules excluding HDMF from the coverage was issued after the HDMF had already granted the productivity bonus to its employees. Hence, the employees already acquired a vested right over the productivity bonus. HDMF further claims that it is covered by a memorandum, dated January 16, 992, which was allegedly issued by Sec. Estanislao, DOF stating that as authorized by the President, the GFIs are to pay traditional PI at year-end 1991, following the standard that have been observed by the GFIs over the years.

ISSUES:

1. What is the applicable rule at the time of the grant of the Productivity Incentive Bonus?

2. Whether the memorandum from the DOF signed by the Sec. Estanisalo constitutes appropriate authorization for the grant for 1991?

3. Whether the Supplemental Implementing Rules are valid? If so, whether it may be given retroactive effect?

RULING:

The Supreme Court affirmed the audit disallowance.

1. In ADEPT vs. COA, the Supreme Court held that the legislature intended R.A. 6971 to cover only GOCCs incorporated under the general corporation law. HDMF is a GOCC performing proprietary functions with original charter or created by special law, specifically PD No. 1752. As such, HDMF is covered by the Civil Service pursuant to Article IX, Section 2(1) of the 1987 Constitution, and therefore, excluded from the coverage of RA 6971.

2. The memorandum from the DOF signed by the Sec. Estanislao cannot prevail over the law.

3. The SC held in the case of ADEPT vs. COA, that the Supplemental Implementing Rules were in accord with the intendment and provisions of RA 6971. Even if HDMF granted the PIB before the Supplemental Rules, its employees did not acquire a vested right over said bonus because they were not entitled to it under RA 6971.