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Portability Law (RA 7699)Print this Page
Admittedly most of us move from one job to another in a move to find a higher
pay and better career. Many government retirees have had a history in theprivate sector. In certain cases, they dont have enough years of service in thegovernment to qualify to any GSIS retirement program.
With the help of RA 7699, otherwise known as the Portability Law, government retirees who donot meet the required number of years provided under PD 1146 and RA 8291 can still avail of
retirement and other benefits.
Under the scheme, you may combine your years of service in the private sector represented byyour contributions to the Social Security System (SSS) with your government service and
contributions to the GSIS to satisfy the required years of service under PD 1146 and RA 8291.
However, if you have satisfied the required years of service under the GSIS retirement option
you have chosen, you would not be allowed to incorporate your contributions to the SSS
anymore for availment of additional benefits.
In case of death, disability and old age, the periods of creditable services or contributions to theSSS and GSIS shall be summed up to entitle you to receive the benefits under either PD 1146 or
RA 8291.
If qualified under RA 8291, all the benefits shall apply EXCEPT the cash payment. The reasonfor this is that the Portability Law or RA 7699 provides that only benefits common to both
Systems (GSIS and SSS) shall be paid. Cash payment is NOT included in the benefits providedby the SSS.
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Republic Act No. 7699Print this Page
REPUBLIC ACT NO. 7699
AN ACT INSTITUTING LIMITED PORTABILITY SCHEME IN THE SOCIALSECURITY INSURANCE SYSTEMS BY TOTALIZING THE WORKERS'
CREDITABLE SERVICES OR CONTRIBUTIONS IN EACH OF THE SYSTEMS.
SECTION 1. It is hereby declared the policy of the State to promote the welfareof our workers by recognizing their efforts in productive endeavors and to further
improve their conditions by providing benefits for their long years of contributionto the national economy. Towards this end, the State shall institute a scheme fortotalization and portability of social security benefits with the view of establishingwithin a reasonable period a unitary social security system.
Sec. 2. Definition of Terms. As used in this Act, unless the context indicatesotherwise, the following terms shall mean:
(a) "Contributions" shall refer to the contributions paid by the employee or worker toeither the Government Service Insurance System (GSIS) or the Social Security System(SSS) on account of the worker's membership;
(b) "Portability" shall refer to the transfer of funds for the account and benefit of a workerwho transfers from one system to the other;
(c) "Sector" shall refer to employment either in the public or private sector;
(d) "System" shall refer to either the SSS as created under Republic Act No. 1161, asamended or the GSIS as created under Presidential Decree No. 1146, as amended;and
(e) "Totalization" shall refer to the process of adding up the periods of creditableservices or contributions under each of the Systems, for purposes of eligibility andcomputation of benefits.
Sec. 3. Provisions of any general or special law or rules and regulations to the contrarynotwithstanding, a covered worker who transfers employment from one sector toanother or is employed in both sectors shall have his credible services or contributionsin both Systems credited to his service or contribution record in each of the Systems
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and shall be totalized for purposes of old-age, disability, survivorship and other benefitsin case the covered member does not qualify for such benefits in either or both Systemswithout totalization: Provided, however, That overlapping periods of membership shallbe credited only once for purposes of totalization.
Sec. 4. All contributions paid by such member personally, and those that were paid byhis employers to both Systems shall be considered in the processing of benefits whichhe can claim from either or both Systems: Provided, however, That the amount ofbenefits to be paid by one System shall be in proportion to the number of contributionsactually remitted to that System.
Sec. 5. Nothing in this Act shall be construed to diminish or reduce the benefits beingenjoyed by a covered worker arising from existing laws, issuances, and companypolicies or practices or agreements between the employer and the employees.
Sec. 6. The Department of Labor and Employment for the private sector and the CivilService Commission for the government sector, together with the SSS and the GSISshall, within ninety (90) days from the effectivity of this Act, promulgate the rules andregulations necessary to implement the provisions hereof: Provided, That any conflict inthe interpretation of the law and the implementing rules and regulations shall beresolved in favor of the workers.
Sec. 7. All laws, decrees, orders, rules and regulations, or parts thereof, which areinconsistent with the provisions of this Act are hereby repealed or modified accordingly.
Sec. 8. This Act shall take effect fifteen (15) days after its complete publication in the
Official Gazette or in at least two (2) national newspapers of general circulation,whichever comes earlier.
Approved: May 1, 1994
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Rules & Regulations Implementing
Republic Act No. 7699
Or Portability Law
For Social Security Insurance Systems
Date of effectivity: 5/20/1994Republic Act No. 7699
An ActInstituting Limited Portability Scheme in the Social Security Insurance Systems
byTotalizing theWorkersCreditable Services or Contributions in each ofthe Systems
Pursuant to Section 6 of RepublicAct No. 7699 entitled AnAct Instituting Limited Portability
Scheme in the Social Security Insurance Systems by Totalizing the Workers Creditable
Services or Contributions in each of the Systems the following Rules and Regulations are
hereby promulgated to effectively implement the provisions of theAct.
RULE I: COVERAGE
Section 1. These rules and regulations shall apply to all workermembers of the Government
Service Insurance System (GSIS) and/or Social Security System (SSS) who transfer from one
sectorto another, and who wish to retain their membership in both Systems.
RULE II:INTERPRETATION
Section 1. These rules shall be interpreted in the light of the Declaration of Policy found in
Section I of theAct:
It is hereby declared the policy of the State to promote the welfare of our workers by
recognizing their efforts in productive endeavors and to further improve their conditions by
providing benefits fortheirlong years of contribution to the national economy.
Toward this end, nothing in the Act shall be construed to diminish or reduce the
benefits being enjoyed by a cover worker arising from existing laws, issuances and company
policies or practices or agreements between the employer and the employees and any
conflicting interpretation of the law and the implementing rules and regulations shall be
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resolved in favor of the workers.
RULE III. DEFINITION OF TERMS
Section 1. As used in these rules, the following terms shall mean:
a) Contributions shall refer to the contributions paid by the employer or worker to
either the Government Service Insurance System (GSIS) or the Social Security System
(SSS) on account of the workers membership.b) Portability shallreferto the transfer of funds forthe
account and benefit of a worker
who transfers from one system to the other.
c) Sector shallreferto employment eitherin the public or private sector.
d) System shallreferto eitherthe GSIS as created under Commonwealth Act No. 186 as
amended by Presidential Decree No. 1146 orthe SSS as created under RepublicAct No.
1161, as amended.
e) Totalization shall refer to the process of adding up the period of creditable services
or contributions under each of the Systems, for purposes of eligibility and computation
of benefits.
f) Creditable services forthe public sector, the following shall be considered creditable
services:
1.1 All previous services rendered by an official/employee pursuant to an
appointment whether permanent, provisional ortemporary.
1.2 All previous services rendered by an official/employee pursuant to a duly
approved appointment to a position in the Civil Service with compensation or
salary;
1.3 The period during which an official/employee was on authorized sick leave of
absence without pay not exceeding one year;
1.4 The period during which an official or employee was out of the service as a
result of illegal termination of his service as finally decided by the proper
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authorities; and
1.5 All previous services with compensation or salary rendered by elective officials.
g) Period of contribution forthe private sector, the periods of contribution shallreferto
the periods during which a person renders services for an employer with
compensation or salary and during which contributions were paid to SSS. For the
purpose of this Section, a selfemployed person shall be considered an employee and
employer at the same time.
h) Eligibility means the workers has satisfied the requirements for entitlement to the
benefits provided for undertheAct.
i) Overlapping of periods shall refer to the periods during which a worker
simultaneously contributes to both Systems.
j) Benefits shallrefertot he following:
1. Oldage benefit2. Disability benefit
3. Survivorship benefit
4. Sickness benefit
5. Medicare benefit, provided that the member shall claim said benefit from the
System where he was last a member, and
6. Such other benefits common to both System that may be availed of through
totalization.
RULE IV : LIMITED PORTABILITY OF FUNDS
Section 1. The process involved in the prompt payment of money benefits to eligible
members shall be the jointresponsibility of the GSIS and SSS.
Section 2. The System or Systems responsible for the payment of money benefits due a
covered worker shall release the same within fifteen (15) working days from receipt of the
claim, subject to the submission of the required documents and availability of the complete
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employee/employerrecords in the System.
RULE V :TOTALIZATION
Section 1. All creditable services or periods of contributions made continuously or in the
aggregate of a worker under either of the Sectors shall be added up and considered for
purposes of eligibility and computation of benefits.
Section 2. All services rendered or contributions paid by a member personally and those that
were paid by the employers to either System shall be considered in the computation of
benefits, which may be claimed from either or both Systems. However, the amount of benefits
to be paid by one System shall be in proportion to the services rendered/periods of
contributions made to that System.
Section 3. Totalization shall apply in the following instances:
a) If a workeris not qualified for any benefits from both Systems;
b) If a workerin the public sectoris not qualified for any benefits in the GSIS; or
c) If a workerin the private sectoris not qualified for any benefits from the SSS.
For the purpose of computation of benefits, totalization shall apply in all cases so that
the contributions made by the workermember in both Systems shall provide maximum
benefits which otherwise will not be available. In no case shall the contribution be lost or
forfeited.
Section 4. If after totalization the workermember still does not qualify for any benefit listedin Rule III,
Section 1 (j), the member will then get whatever benefits correspond to his/her
contributions in either or both Systems.
Section 5.If a worker qualifies for benefits in both Systems, totalization shall not apply.
Section 6. The process of totalization of creditable services or periods of contributions and
computation of benefits provided for under the Act shall be the joint responsibility of the
GSIS and the SSS.
Section 7. Overlapping periods of creditable services or contributions in both Systems shall
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be credited only once for purposes of totalization.
RULE VI: RESPONSIBILITY
Section 1. The GSIS and the SSS shall be responsible for the recording and documentation of
the creditable services and/or periods of contributions of the members respectively.
Section 2. For purposes of the Act, accreditation of services or periods of contributions of the
members shall be undertaken by the GSIS forthe public sector and by the SSS forthe private
sector.
Section 3. Complaints and questions relative to the creditable services or periods of
contributions as well as computation of benefits shall be brought before the System concerned
and shall be resolved in accordance with the policies and procedures adopted by the said
System.
RULE VII: APPLICABILITY
Section 1. The benefits herein provided shall apply to active or inactive members of either
System as of date of effectivity of theAct which is May 20, 1994.
EFFECTIVITY
Section 1. These implementing rules and regulations shall take effect immediately.
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FIRST DIVISION
[G.R. No. 141707. May 7, 2002]
CAYO G. GAMOGAMO, petitioner, vs. PNOC SHIPPING AND
TRANSPORT CORP., respondent.
D E C I S I O N
DAVIDE, JR., C.J.:
The pivotal issue raised in the petition in this case is whether, for the purpose of computing
an employees retirement pay, prior service rendered in a government agency can be tacked in
and added to the creditable service later acquired in a government-owned and controlledcorporation without original charter.
On 23 January 1963, Petitioner Cayo F. Gamogamo was first employed with the Department
of Health (DOH) as Dental Aide. On 22 February 1967, he was promoted to the position ofDentist 1. He remained employed at the DOH for fourteen years until he resigned on 2
November 1977.[1]
On 9 November 1977, petitioner was hired as company dentist by Luzon StevedoringCorporation (LUSTEVECO), a private domestic corporation.[2]Subsequently, respondent PNOC
Shipping and Transport Corporation (hereafter Respondent) acquired and took over the shipping
business of LUSTEVECO, and on 1 August 1979, petitioner was among those who opted to be
absorbed by the Respondent.[3]
Thus, he continued to work as company dentist. In a letter dated1 August 1979, Respondent assumed without interruption petitioners service credits with
LUSTEVECO,[4]but it did not make reference to nor assumed petitioners service credits with
the DOH.
On 10 June 1993, then President Fidel V. Ramos issued a memorandum [5]approving theprivatization of PNOC subsidiaries, including Respondent, pursuant to the provisions of Section
III(B) of the Guidelines and Regulations to implement Executive Order No. 37.[6]Accordingly,
Respondent implemented a Manpower Reduction Program to govern employees whoserespective positions have been classified as redundant as a result of Respondents decrease in
operations and the downsizing of the organization due to lay-up and sale of its vessels pursuant
to its direction towards privatization.[7]Under this program, retrenched employees shall receive a
two-month pay for every year of service.
Sometime in 1995, petitioner requested to be included in the next retrenchment
schedule. However, his request was turned down for the following reasons:[8]
1. As a company dentist he was holding a permanent position;
2. He was already due for mandatory retirement in April 1995 under his retirement plan (firstday of the month following his 60th birthday which was on 7 March 1995).
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Eventually, petitioner retired after serving the Respondent and LUSTEVECO for 17 years
and 4 months upon reaching his 60th birthday, on 1 April 1995. He received a retirement pay of
P512,524.15,[9]which is equivalent to one month pay for every year of service and other benefits.
On 30 August 1995, Admiral Carlito Y. Cunanan, Repondents president, died of DengueFever and was forthwith replaced by Dr. Nemesio E. Prudente who assumed office in December
1995. The new president implemented significant cost-saving measures. In 1996, afterpetitioners retirement, the cases of Dr. Rogelio T. Buena (company doctor) and Mrs. Luz C.Reyes (telephone operator), who were holding permanent/non-redundant positions but were
willing to be retrenched under the program were brought to the attention of the new president
who ordered that a study on the cost-effect of the retrenchment of these employees beconducted. After a thorough study, Respondents Board of Directors recommended the approval
of the retrenchment. These two employees were retrenched and paid a 2-month separation pay
for every year of service under Respondents Manpower Reduction Program.[10]
In view of the action taken by Respondent in the retrenchment of Dr. Buena and Mrs. Reyes,petitioner filed a complaint at the National Labor Relations Commission (NLRC) for the full
payment of his retirement benefits. Petitioner argued that his service with the DOH should havebeen included in the computation of his years of service. Hence, with an accumulated service of
32 years he should have been paid a two-month pay for every year of service per the retirementplan and thus should have received at least P1,833,920.00.
The Labor Arbiter dismissed petitioners complaint.[11]On appeal, however, the NLRC
reversed the decision of the Labor Arbiter. In its decision[12]of 28 November 1997, the NLRCruled:
WHEREFORE, the Decision of the Labor Arbiter dated May 30, 1997 is hereby SET
ASIDE and another judgment is hereby rendered to wit:
(1) the government service of the complainant with the Department of Health
numbering fourteen (14) years is hereby considered creditable service for
purposes of computing his retirement benefits;
(2) crediting his fourteen (14) years service with the Department of Health,
together with his nearly eighteen (18) years of service with the respondent,
complainant therefore has almost thirty-two (32) years service upon which
his retirement benefits would be computed or based on;
(3) complainant is entitled to the full payment of his retirement benefits
pursuant to the respondents Retirement Law or the retrenchment program
(Manpower Reduction Program). In any case, he is entitled to two (2)
months retirement/separation pay for every year of service.
(4) all other claims are DISMISSED.
SO ORDERED.
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Respondent filed a motion for reconsideration but it was denied.[13]
Unsatisfied with the reversal, Respondent filed with the Court of Appeals a special civil
action forcertiorari which was docketed as CA-G.R. SP No. 51152. In its decision[14]of 8
November 1999, the Court of Appeals set aside the NLRC judgment and decreed:
WHEREFORE, the petition is hereby GIVEN DUE COURSE and the writ prayed forGRANTED. Consequently, the Decision and Resolution of the National Labor
Relations Commission (Second Division) dated November 28, 1997 and May 15,
1998, respectively, are hereby SET ASIDE AND NULLIFIED, without prejudice to
private respondent Cayo F. Gamo-gamos recovery of whatever benefits he may have
been entitled to receive by reason of his fourteen (14) years of service with the
Department of Health.
No pronouncement as to costs.
His motion for reconsideration having been denied by the Court of Appeals,[15]petitionerfiled with us the petition in the case at bar. Petitioner contends that: (1) his years of service with
the DOH must be considered as creditable service for the purpose of computing his retirementpay; and (2) he was discriminated against in the application of the Manpower Reduction
Program.[16]
Petitioner maintains that his government service with the DOH should be recognized andtacked in to his length of service with Respondent because LUSTEVECO, which was later
bought by Respondent, and Respondent itself, were government-owned and controlled
corporations and were, therefore, under the Civil Service Law. Prior to the separation of
Respondent from the Civil Service by virtue of the 1987 Constitution, petitioners length of
service was considered continuous. The effectivity of the 1987 Constitution did not interrupt hiscontinuity of service. He claims that he is supported by the opinion of 18 May 1993 of the Civil
Service Commission in the case ofPetron Corporation, where the Commission allegedly opined:
that all government services rendered by employees of the Petron prior to 1987
Constitution are considered creditable services for purposes of computation of
retirement benefits. This must necessarily be so considering that in the event that
Petron would consider only those services of an employee with Petron when it was
excluded from the civil service coverage (that is after the 1987 Constitution), it would
render nugatory his government agencies prior to his transfer to Petron. Hence,
Petron or any other PNOC subsidiary has to include in its retirement scheme or in its
Collective Bargaining Agreement a provision of the inclusion of the other government
services of its employees rendered outside Petron, otherwise, it would be prejudicial
to the interest of the retireable employee concerned.
Petitioner asserts that with the tacking in of his 14 years of service with the DOH to his 17
years and 4 months service with LUSTEVECO and Respondent, he had 31 years and 4 monthscreditable service as basis for the computation of his retirement benefits. Thus, pursuant to
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Respondents Manpower Reduction Program, he should have been paid two months pay for
every year of his 31 years of service.
Petitioner likewise asserts that the principle of tacking is anchored on Republic Act No.
7699.[17]
Petitioner concludes that there was discrimination when his application for coverage underthe Manpower Reduction Program was disapproved. His application was denied because he was
holding a permanent position and that he was due for retirement. However, Respondent grantedthe application of Dr. Rogelio Buena, who was likewise holding a permanent position and was
also about to retire. Petitioner was only given one-month pay for every year of service under the
regular retirement plan while Dr. Buena was given a 2-month pay for every year of service underthe Manpower Reduction Program.
In its Comment to the petition, Respondent maintains that although it is a government-
owned and controlled corporation, it has no original charter. Hence, it is not within the coverage
of the Civil Service Law. It cites the decision inPNOC-EDC v. Leogardo,[18]wherein we held
that only corporations created by special charters are subject to the provisions of the Civil
Service Law. Those without original charters are covered by the Labor Code. Respondent alsoasserts that R.A. No. 7699 is not applicable. Under this law an employee who has worked in
both the private and public sectors and has been covered by both the Government ServiceInsurance System (GSIS) and the Social Security System (SSS), shall have his creditable
services or contributions in both Systems credited to his service or contribution record in each of
the Systems, which shall be summed up for purposes of old age, disability, survivorship andother benefits in case the covered member does not qualify for such benefits in either or both
Systems without the totalization.
Respondent further contends that petitioner was not discriminated upon when his application
under the Manpower Reduction Program was denied. At the time of his retirement in 1995,
redundancy was the main consideration for qualification for the Manpower ReductionProgram. Petitioner was not qualified. However in 1996, in order to solve the companys
business reversals, the new president, Dr. Nemesio Prudente, found it necessary to implementcost-saving strategies, among which was the retrenchment of willing employees. Thus, the
applications for retrenchment of Dr. Buena and Mrs. Reyes were approved. Respondent had the
prerogative to amend its policies to meet the contingencies of the business for self-preservation.
We rule in the negative the issue of whether petitioners service with the DOH should beincluded in the computation of his retirement benefits.
Respondents Retirement scheme[19]pertinently provides:
ARTICLE IV
RETIREMENT BENEFITS
SEC 4.1.Normal Retirement Date/Eligibility. -- The normal retirement date of an employee shallbe the first day of the month next following the employees sixtieth (60th) birthday. To be
eligible for the retirement benefit described under Sec. 4.2, the employee must have rendered at
least ten (10) years of continuous service with the Company. In case the retiring employee has
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rendered less than ten (10) years of service with the Company, he shall be entitled to one (1)
months final monthly basic salary (12/12) for every year of service.
SEC. 4.2.Normal Retirement Benefit. -- The retirement benefit shall be payable in
lump sum upon retirement which shall be determined on the basis of the retirees final
monthly basic salary (14/12) as follows:
(a) One (1) months pay for every year of service for those who have completed at
least twenty (20) years of continuous service with the Company.
(b) One and one-half (1 1/2) months pay for every year of service for those who have
completed twenty-one (21) to thirty (30) continuous years of service with the
Company.
(c) Two (2) months pay for every year of service for those who have completed at
least thirty-one (31) years of service with the Company.
It is clear therefrom that the creditable service referred to in the Retirement Plan is the
retirees continuous years of service with Respondent.
Retirement results from a voluntary agreement between the employer and the employee
whereby the latter after reaching a certain age agrees to sever his employment with the former.[20]
Since the retirement pay solely comes from Respondents funds, it is but natural thatRespondent shall disregard petitioners length of service in another company for the computation
of his retirement benefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1 August 1979. Ordinarily,
his creditable service shall be reckoned from such date. However, since Respondent took overthe shipping business of LUSTEVECO and agreed to assume without interruption all the service
credits of petitioner with LUSTEVECO,[21]petitioners creditable service must start from 9
November 1977 when he started working with LUSTEVECO[22]until his day of retirement on 1
April 1995. Thus, petitioners creditable service is 17.3333 years.
We cannot uphold petitioners contention that his fourteen years of service with the DOH
should be considered because his last two employers were government-owned and controlled
corporations, and fall under the Civil Service Law. Article IX(B), Section 2 paragraph 1 of the1987 Constitution states --
Sec. 2. (1) The civil service embraces all branches, subdivisions, instrumentalities,and agencies of the Government, including government-owned or controlled
corporations with original charters.
It is not at all disputed that while Respondent and LUSTEVECO are government-owned and
controlled corporations, they have no original charters; hence they are not under the Civil
Service Law. InPhilippine National Oil Company-Energy Development Corporation v.
National Labor Relations Commission,[23]we ruled:
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xxx Thus under the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the Civil Service Law are
[sic] the manner of its creation, such that government corporations created by special
charter(s) are subject to its provisions while those incorporated under the General
Corporation Law are not within its coverage.
Consequently, Respondent was not bound by the opinion of the Civil Service Commission of 18
May 1993.
Petitioners contention that the principle of tacking of creditable service is mandated byRepublic Act No. 7699 is baseless. Section 3 of Republic Act No. 7699 reads:
SEC 3. Provisions of any general or special law or rules and regulations to the
contrary notwithstanding, a covered worker who transfer(s) employment from one
sector to another or is employed in both sectors, shall have his creditable services or
contributions in both systems credited to his service or contribution record in each of
the Systems and shall be totalized for purposes of old-age, disability, survivorship,and other benefits in case the covered employee does not qualify for such benefits in
either or both Systems without totalization:Provided, however, That overlapping
periods of membership shall be credited only once for purposes of totalization
(underscoring, ours).
Obviously, totalization of service credits is only resorted to when the retiree does not qualify
for benefits in either or both of the Systems. Here, petitioner is qualified to receive benefits
granted by the Government Security Insurance System (GSIS), if such right has not yet been
exercised. The pertinent provisions of law are:
SEC. 12 Old Age Pension. -- (a) xxx
(b) A member who has rendered at least three years but less than fifteen years of
service at the time of separation shall, upon reaching sixty years of age or upon
separation after age sixty, receive a cash payment equivalent to one hundred percent
of his average monthly compensation for every year of service with an employer
(Presidential Decree No, 1146, as amended, otherwise known as the Government
Service Insurance Act of 1977).
SEC. 4. All contributions paid by such member personally, and those that were paidby his employers to both Systems shall be considered in the processing of benefits
which he can claim from either or both Systems:Provided, however, That the amount
of benefits to be paid by one System shall be in proportion to the number of
contributions actually remitted to that System (Republic Act No. 7699).
In any case, petitioners fourteen years of service with the DOH may not remain
uncompensated because it may be recognized by the GSIS pursuant to the aforequoted Section
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12, as may be determined by the GSIS. Since petitioner may be entitled to some benefits from
the GSIS, he cannot avail of the benefits under R.A. No. 7699.
It may also be pointed out that upon his receipt of the amount of P512,524.15 from
Respondent as retirement benefit pursuant to its retirement scheme, petitioner signed anddelivered to Respondent a Release and Undertaking wherein he waives all actions, causes of
actions, debts, dues, monies and accounts in connection with his employment withRespondent.[24]This quitclaim releases Respondent from any other obligation in favor ofpetitioner. While quitclaims executed by employees are commonly frowned upon as contrary to
public policy and are ineffective to bar claims for the full measure of the employees legal rights,
there are legitimate waivers that represent a voluntary and reasonable settlement of laborersclaims which should be respected by the courts as the law between the parties .[25]Settled is the
rule that not all quitclaims areper se invalid or against public policy, except (1) where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person; and (2) where
the terms of settlement are unconscionable on their face.[26]We discern nothing from the recordthat would suggest that petitioner was coerced, intimidated or deceived into signing the Release
and Undertaking. Neither are we convinced that the consideration for the quitclaim is
unconscionable because it is actually the full amount of the retirement benefit provided for in thecompanys retirement plan.
In light of the foregoing, we need not discuss any further the issue of whether petitioner was
discriminated by Respondent in the implementation of the Manpower Reduction Program. In
any event, that issue is factual and petitioner has failed to demonstrate that, indeed, he wasdiscriminated upon.
WHEREFORE, no reversible error on the part of the Respondent Court of Appeals having
been shown, the petition in this case is DENIED and the appealed decision in CA-G.R. SP No.
51152 is hereby AFFIRMED.
Costs against petitioner.SO ORDERED.
Puno, Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.
[1]Annex E,Rollo, CA-G.R. SP No. 51152, 77.
[2]Annex F,Rollo, CA-G.R. SP No. 51152, 78.
[3]Annex G,Id., 79.
[4]Ibid.
[5]Annex C,Id., 64.
[6]Entitled Restating the Privatization Policy of the Government.
[7]Annex D,Id., 65-76.
[8]Petition in the Court of Appeals,Id., 10.
[9]Annex I,Rollo, CA-G.R. SP No. 51152, 81.
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[10]Petition in the Court of Appeals, Rollo, CA-G.R. SP No. 51152, 12-14.
[11]Rollo, CA-G.R. SP No. 51152, 90-97.
[12]Id., 60-61.
[13]Rollo, C.A.-G.R. SP No. 51152, 45-46.
[14]
Rollo, 22.[15]Rollo, CA-G.R. SP No. 51152, 232.
[16]Rollo, 6-12.
[17]An Act Instituting Limited Portability Scheme in the Social Security Insurance Systems by Totalizing the
Workers Creditable Services or Contributions in Each of the Systems.
[18]175 SCRA 26 [1989].
[19]Annex H,Rollo, CA-G.R. SP No. 51152, 80.
[20]Producers Bank of the Philippines v. National Labor Relations Commission, 298 SCRA 517, 524 [1998].
[21]Annex G,Rollo, CA-G.R. SP No. 51152, 79.
[22]Annex F,Rollo, CA-G.R. SP No. 51152, 78.
[23]201 SCRA 487, 493 [1991].
[24]Annex J,Rollo, CA-G.R. SP No. 51152, 82-83.
[25]Alcosero v. National Labor Relations Commission, 288 SCRA 129, 143 [1998].
[26]Bogo-Medellin Sugarcane Planters Association, Inc. v. National Labor Relations Commission, 296 SCRA 108,
125 [1998].
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Republic of the PhilippinesSUPREME COURT
ManilaFIRST DIVISION
G.R. No. 141707 May 7, 2002
CAYO G. GAMOGAMO, petitioner,vs.PNOC SHIPPING AND TRANSPORT CORP., respondent.
DAVIDE, JR., C.J.:
The pivotal issue raised in the petition in this case is whether, for thepurpose of computing an employees retirement pay, prior servicerendered in a government agency can be tacked in and added to thecreditable service later acquired in a government-owned andcontrolled corporation without original charter.
On 23 January 1963, Petitioner Cayo F. Gamogamo was first
employed with the Department of Health (DOH) as Dental Aide. On 22February 1967, he was promoted to the position of Dentist 1. Heremained employed at the DOH for fourteen years until he resigned on2 November 1977.1
On 9 November 1977, petitioner was hired as company dentist byLuzon Stevedoring Corporation (LUSTEVECO), a private domesticcorporation.2 Subsequently, respondent PNOC Shipping andTransport Corporation (hereafter Respondent) acquired and took over
the shipping business of LUSTEVECO, and on 1 August 1979,petitioner was among those who opted to be absorbed by theRespondent.3 Thus, he continued to work as company dentist. In aletter dated 1 August 1979, Respondent assumed without interruptionpetitioners service credits with LUSTEVECO,4 but it did not makereference to nor assumed petitioners service credits with the DOH.
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On 10 June 1993, then President Fidel V. Ramos issued amemorandum5 approving the privatization of PNOC subsidiaries,including Respondent, pursuant to the provisions of Section III(B) ofthe Guidelines and Regulations to implement Executive Order No.
37.6
Accordingly, Respondent implemented a Manpower ReductionProgram to govern employees whose respective positions have beenclassified as redundant as a result of Respondents decrease inoperations and the downsizing of the organization due to lay-up andsale of its vessels pursuant to its direction towardsprivatization.7 Under this program, retrenched employees shall receivea two-month pay for every year of service.
Sometime in 1995, petitioner requested to be included in the next
retrenchment schedule. However, his request was turned down for thefollowing reasons:8
1. As a company dentist he was holding a permanent position;
2. He was already due for mandatory retirement in April 1995under his retirement plan (first day of the month following his60th birthday which was on 7 March 1995).
Eventually, petitioner retired after serving the Respondent andLUSTEVECO for 17 years and 4 months upon reaching his60th birthday, on 1 April 1995. He received a retirement pay ofP512,524.15,9 which is equivalent to one month pay for every year ofservice and other benefits.
On 30 August 1995, Admiral Carlito Y. Cunanan, Repondentspresident, died of Dengue Fever and was forthwith replaced by Dr.Nemesio E. Prudente who assumed office in December 1995. Thenew president implemented significant cost-saving measures. In 1996,
after petitioners retirement, the cases of Dr. Rogelio T. Buena(company doctor) and Mrs. Luz C. Reyes (telephone operator), whowere holding permanent/non-redundant positions but were willing tobe retrenched under the program were brought to the attention of thenew president who ordered that a study on the cost-effect of theretrenchment of these employees be conducted. After a thorough
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study, Respondents Board of Directors recommended the approval ofthe retrenchment. These two employees were retrenched and paid a2-month separation pay for every year of service under RespondentsManpower Reduction Program.10
In view of the action taken by Respondent in the retrenchment of Dr.Buena and Mrs. Reyes, petitioner filed a complaint at the NationalLabor Relations Commission (NLRC) for the full payment of hisretirement benefits. Petitioner argued that his service with the DOHshould have been included in the computation of his years of service.Hence, with an accumulated service of 32 years he should have beenpaid a two-month pay for every year of service per the retirement planand thus should have received at least P1,833,920.00.
The Labor Arbiter dismissed petitioners complaint.11 On appeal,however, the NLRC reversed the decision of the Labor Arbiter. In itsdecision12 of 28 November 1997, the NLRC ruled:
WHEREFORE, the Decision of the Labor Arbiter dated May 30,1997 is hereby SET ASIDE and another judgment is herebyrendered to wit:
(1) the government service of the complainant with theDepartment of Health numbering fourteen (14) years ishereby considered creditable service for purposes ofcomputing his retirement benefits;
(2) crediting his fourteen (14) years service with theDepartment of Health, together with his nearly eighteen(18) years of service with the respondent, complainanttherefore has almost thirty-two (32) years service uponwhich his retirement benefits would be computed or based
on;
(3) complainant is entitled to the full payment of hisretirement benefits pursuant to the respondentsRetirement Law or the retrenchment program (Manpower
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Reduction Program). In any case, he is entitled to two (2)months retirement/separation pay for every year of service.
(4) all other claims are DISMISSED.
SO ORDERED.
Respondent filed a motion for reconsideration but it was denied.13
Unsatisfied with the reversal, Respondent filed with the Court ofAppeals a special civil action forcertiorariwhich was docketed as CA-G.R. SP No. 51152. In its decision14 of 8 November 1999, the Court of
Appeals set aside the NLRC judgment and decreed:
WHEREFORE, the petition is hereby GIVEN DUE COURSE andthe writ prayed for GRANTED. Consequently, the Decision andResolution of the National Labor Relations Commission (SecondDivision) dated November 28, 1997 and May 15, 1998,respectively, are hereby SET ASIDE AND NULLIFIED, withoutprejudice to private respondent Cayo F. Gamo-gamos recoveryof whatever benefits he may have been entitled to receive byreason of his fourteen (14) years of service with the Departmentof Health.
No pronouncement as to costs.
His motion for reconsideration having been denied by the Court ofAppeals,15 petitioner filed with us the petition in the case at bar.Petitioner contends that: (1) his years of service with the DOH must beconsidered as creditable service for the purpose of computing hisretirement pay; and (2) he was discriminated against in the applicationof the Manpower Reduction Program.16
Petitioner maintains that his government service with the DOH shouldbe recognized and tacked in to his length of service with Respondentbecause LUSTEVECO, which was later bought by Respondent, andRespondent itself, were government-owned and controlledcorporations and were, therefore, under the Civil Service Law. Prior tothe separation of Respondent from the Civil Service by virtue of the
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1987 Constitution, petitioners length of service was consideredcontinuous. The effectivity of the 1987 Constitution did not interrupt hiscontinuity of service. He claims that he is supported by the opinion of18 May 1993 of the Civil Service Commission in the case ofPetron
Corporation, where the Commission allegedly opined:
that all government services rendered by employees of thePetron prior to 1987 Constitution are considered creditableservices for purposes of computation of retirement benefits. Thismust necessarily be so considering that in the event that Petronwould consider only those services of an employee with Petronwhen it was excluded from the civil service coverage (that is afterthe 1987 Constitution), it would render nugatory his government
agencies prior to his transfer to Petron. Hence, Petron or anyother PNOC subsidiary has to include in its retirement scheme orin its Collective Bargaining Agreement a provision of theinclusion of the other government services of its employeesrendered outside Petron, otherwise, it would be prejudicial to theinterest of the retireable employee concerned.
Petitioner asserts that with the tacking in of his 14 years of servicewith the DOH to his 17 years and 4 months service with LUSTEVECO
and Respondent, he had 31 years and 4 months creditable service asbasis for the computation of his retirement benefits. Thus, pursuant toRespondents Manpower Reduction Program, he should have beenpaid two months pay for every year of his 31 years of service.
Petitioner likewise asserts that the principle of tacking is anchored onRepublic Act No. 7699.17
Petitioner concludes that there was discrimination when hisapplication for coverage under the Manpower Reduction Program wasdisapproved. His application was denied because he was holding apermanent position and that he was due for retirement. However,Respondent granted the application of Dr. Rogelio Buena, who waslikewise holding a permanent position and was also about to retire.Petitioner was only given one-month pay for every year of serviceunder the regular retirement plan while Dr. Buena was given a 2-
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month pay for every year of service under the Manpower ReductionProgram.
In its Comment to the petition, Respondent maintains that although it
is a government-owned and controlled corporation, it has no originalcharter. Hence, it is not within the coverage of the Civil Service Law. Itcites the decision in PNOC-EDC v. Leogardo,18 wherein we held thatonly corporations created by special charters are subject to theprovisions of the Civil Service Law. Those without original charters arecovered by the Labor Code. Respondent also asserts that R.A. No.7699 is not applicable. Under this law an employee who has worked inboth the private and public sectors and has been covered by both theGovernment Service Insurance System (GSIS) and the Social
Security System (SSS), shall have his creditable services orcontributions in both Systems credited to his service or contributionrecord in each of the Systems, which shall be summed up forpurposes of old age, disability, survivorship and other benefits in casethe covered member does not qualify for such benefits in either orboth Systems without the totalization.
Respondent further contends that petitioner was not discriminatedupon when his application under the Manpower Reduction Program
was denied. At the time of his retirement in 1995, redundancy was themain consideration for qualification for the Manpower ReductionProgram. Petitioner was not qualified. However in 1996, in order tosolve the companys business reversals, the new president, Dr.Nemesio Prudente, found it necessary to implement cost-savingstrategies, among which was the retrenchment of willing employees.Thus, the applications for retrenchment of Dr. Buena and Mrs. Reyeswere approved. Respondent had the prerogative to amend its policiesto meet the contingencies of the business for self-preservation.
We rule in the negative the issue of whether petitioners service withthe DOH should be included in the computation of his retirementbenefits.
Respondents Retirement scheme19 pertinently provides:
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ARTICLE IV
RETIREMENT BENEFITS
SEC 4.1. Normal Retirement Date/Eligibility. -- The normalretirement date of an employee shall be the first day of themonth next following the employees sixtieth (60th) birthday. Tobe eligible for the retirement benefit described under Sec. 4.2,the employee must have rendered at least ten (10) years ofcontinuous service with the Company. In case the retiringemployee has rendered less than ten (10) years of service withthe Company, he shall be entitled to one (1) months finalmonthly basic salary (12/12) for every year of service.
SEC. 4.2. Normal Retirement Benefit. -- The retirement benefitshall be payable in lump sum upon retirement which shall bedetermined on the basis of the retirees final monthly basic salary(14/12) as follows:
(a) One (1) months pay for every year of service for thosewho have completed at least twenty (20) years ofcontinuous service with the Company.
(b) One and one-half (1 1/2) months pay for every year ofservice for those who have completed twenty-one (21) tothirty (30) continuous years of service with the Company.
(c) Two (2) months pay for every year of service for thosewho have completed at least thirty-one (31) years ofservice with the Company.
It is clear therefrom that the creditable service referred to in the
Retirement Plan is the retirees continuous years of service withRespondent.
Retirement results from a voluntary agreement between the employerand the employee whereby the latter after reaching a certain ageagrees to sever his employment with the former.20
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Since the retirement pay solely comes from Respondents funds, it isbut natural that Respondent shall disregard petitioners length ofservice in another company for the computation of his retirementbenefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1August 1979. Ordinarily, his creditable service shall be reckoned fromsuch date. However, since Respondent took over the shippingbusiness of LUSTEVECO and agreed to assume without interruptionall the service credits of petitioner with LUSTEVECO,21petitionerscreditable service must start from 9 November 1977 when he startedworking with LUSTEVECO22 until his day of retirement on 1 April 1995.Thus, petitioners creditable service is 17.3333 years.
We cannot uphold petitioners contention that his fourteen years ofservice with the DOH should be considered because his last twoemployers were government-owned and controlled corporations, andfall under the Civil Service Law. Article IX(B), Section 2 paragraph 1 ofthe 1987 Constitution states --
Sec. 2. (1) The civil service embraces all branches, subdivisions,instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with originalcharters.
It is not at all disputed that while Respondent and LUSTEVECO aregovernment-owned and controlled corporations, they have no originalcharters; hence they are not under the Civil Service Law. In PhilippineNational Oil Company-Energy Development Corporation v. NationalLabor Relations Commission,23 we ruled:
xxx "Thus under the present state of the law, the test in
determining whether a government-owned or controlledcorporation is subject to the Civil Service Law are [sic] themanner of its creation, such that government corporationscreated by special charter(s) are subject to its provisions whilethose incorporated under the General Corporation Law are notwithin its coverage."
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Consequently, Respondent was not bound by the opinion of the CivilService Commission of 18 May 1993.
Petitioners contention that the principle of tacking of creditable service
is mandated by Republic Act No. 7699 is baseless. Section 3 ofRepublic Act No. 7699 reads:
SEC 3. Provisions of any general or special law or rules andregulations to the contrary notwithstanding, a covered workerwho transfer(s) employment from one sector to another or isemployed in both sectors, shall have his creditable services orcontributions in both systems credited to his service orcontribution record in each of the Systems and shall be totalized
for purposes of old-age, disability, survivorship, and otherbenefits in case the covered employee does not qualify for suchbenefits in either or both Systems without totalization: Provided,however, That overlapping periods of membership shall becredited only once for purposes of totalization (underscoring,ours).
Obviously, totalization of service credits is only resorted to when theretiree does not qualify for benefits in either or both of the Systems.
Here, petitioner is qualified to receive benefits granted by theGovernment Security Insurance System (GSIS), if such right has notyet been exercised. The pertinent provisions of law are:
SEC. 12 Old Age Pension. -- (a) xxx
(b) A member who has rendered at least three years but lessthan fifteen years of service at the time of separation shall, uponreaching sixty years of age or upon separation after age sixty,receive a cash payment equivalent to one hundred percent of his
average monthly compensation for every year of service with anemployer (Presidential Decree No, 1146, as amended, otherwiseknown as the Government Service Insurance Act of 1977).
SEC. 4. All contributions paid by such member personally, andthose that were paid by his employers to both Systems shall be
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considered in the processing of benefits which he can claim fromeither or both Systems: Provided, however, That the amount ofbenefits to be paid by one System shall be in proportion to thenumber of contributions actually remitted to that System
(Republic Act No. 7699).
In any case, petitioners fourteen years of service with the DOH maynot remain uncompensated because it may be recognized by theGSIS pursuant to the aforequoted Section 12, as may be determinedby the GSIS. Since petitioner may be entitled to some benefits fromthe GSIS, he cannot avail of the benefits under R.A. No. 7699.
It may also be pointed out that upon his receipt of the amount of
P512,524.15 from Respondent as retirement benefit pursuant to itsretirement scheme, petitioner signed and delivered to Respondent aRelease and Undertaking wherein he waives all actions, causes ofactions, debts, dues, monies and accounts in connection with hisemployment with Respondent.24 This quitclaim releases Respondentfrom any other obligation in favor of petitioner. While quitclaimsexecuted by employees are commonly frowned upon as contrary topublic policy and are ineffective to bar claims for the full measure ofthe employees legal rights, there are legitimate waivers that represent
a voluntary and reasonable settlement of laborers claims whichshould be respected by the courts as the law between theparties.25 Settled is the rule that not all quitclaims areper se invalid oragainst public policy, except (1) where there is clear proof that thewaiver was wangled from an unsuspecting or gullible person; and (2)where the terms of settlement are unconscionable on their face.26 Wediscern nothing from the record that would suggest that petitioner wascoerced, intimidated or deceived into signing the Release andUndertaking. Neither are we convinced that the consideration for the
quitclaim is unconscionable because it is actually the full amount ofthe retirement benefit provided for in the companys retirement plan.
In light of the foregoing, we need not discuss any further the issue ofwhether petitioner was discriminated by Respondent in theimplementation of the Manpower Reduction Program. In any event,
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that issue is factual and petitioner has failed to demonstrate that,indeed, he was discriminated upon.
WHEREFORE, no reversible error on the part of the Respondent
Court of Appeals having been shown, the petition in this caseis DENIED and the appealed decision in CA-G.R. SP No. 51152 ishereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
Puno, Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.
Footnote
1 Annex "E," Rollo, CA-G.R. SP No. 51152, 77.
2 Annex "F," Rollo, CA-G.R. SP No. 51152, 78.
3 Annex "G," Id., 79.
4Ibid.
5 Annex "C," Id., 64.
6 Entitled "Restating the Privatization Policy of the Government."
7 Annex "D," Id., 65-76.
8 Petition in the Court of Appeals, Id., 10.
9 Annex "I," Rollo, CA-G.R. SP No. 51152, 81.
10 Petition in the Court of Appeals, Rollo, CA-G.R. SP No. 51152,12-14.
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11 Rollo, CA-G.R. SP No. 51152, 90-97.
12Id., 60-61.
13 Rollo, C.A.-G.R. SP No. 51152, 45-46.
14 Rollo, 22.
15 Rollo, CA-G.R. SP No. 51152, 232.
16 Rollo, 6-12.
17 An Act Instituting Limited Portability Scheme in the SocialSecurity Insurance Systems by Totalizing the Workers
Creditable Services or Contributions in Each of the Systems.18 175 SCRA 26 [1989].
19 Annex "H," Rollo, CA-G.R. SP No. 51152, 80.
20 Producers Bank of the Philippines v. National Labor RelationsCommission, 298 SCRA 517, 524 [1998].
21 Annex "G," Rollo, CA-G.R. SP No. 51152, 79.
22 Annex "F," Rollo, CA-G.R. SP No. 51152, 78.
23 201 SCRA 487, 493 [1991].
24 Annex "J," Rollo, CA-G.R. SP No. 51152, 82-83.
25 Alcosero v. National Labor Relations Commission, 288 SCRA129, 143 [1998].
26 Bogo-Medellin Sugarcane Planters Association, Inc. v.National Labor Relations Commission, 296 SCRA 108, 125[1998].
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