Petitioner corporation is a government owned and controlled corporation (GOCC). Pursuant to Republic Act No. 6977, the board of directors of SB Corp. passed Board Resolution No. 1610 approving its Revised Organizational Structure, Staffing Patter, Qualification Standards and Salary Structure.
President Aquino III issued Executive Order No. 7 which provides a moratorium on increases in salaries, allowances, and other benefits of GOCC officers and employees. Later, Republic Act No. 10149 was enacted, creating the Governance Commission for GOCCs (GCG), the central advisory and oversight body concerning GOCCs.
SB Corp. approved Board Resolution No. 1863 setting the guidelines and procedures on the implementation of SB Corp.’s revised salary structure pursuant to BR No. 1610. One of the guidelines set forth in BR No. 1863 is the grant of step increment to qualified employees, which carries with it the corresponding adjustment to the qualified employee’s basic salary.
Step increment is defined as a lateral adjustment of an employee’s basic salary from one salary step to the next higher salary step. Meanwhile, a step increment based on merit or “merit increases” shall be given annually to deserving employees based on their individual performance and contribution to unit and corporate performance.
On April 2013, SB Corporation granted and paid merit increases to five officers occupying Job Level 6.
On June 2014, the President and CEO of SB Corp. wrote to GCG requesting confirmation to proceed with the grant of the merit increase.
On July 2014, GCG denied the request with finality, citing Sec. 9 of EO No. 7, and pointed out that the moratorium was still in effect.
On August 2014, the State Auditor disallowed the merit increases in its Notice of Disallowance, citing again Sec. 9 of EO No. 7. Both the COA Cluster Director and the COA en Banc upheld the validity of the Notice of Disallowance.
Issues:
- Whether or not the grant of merit increases to the five officers is not in contravention of the moratorium established in E.O. No. 7; and
- Whether or not the Commission on Audit en Banc committed grave abuse of discretion in disallowing the said merit increases
Ruling:
The petition was denied. The Court ruled that the moratorium is applicable and that SB Corp. did not have authority to grant merit increases.
