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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 the private sector. In certain cases, they don’t have enough years of service in the government to qualify to any GSIS retirement program.

With the help of RA 7699, otherwise known as the Portability Law, government retirees who do not 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 by your 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 the SSS 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 reason for 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 provided by the SSS.

Republic Act No. 7699Print this Page

REPUBLIC ACT NO. 7699

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.

SECTION 1. 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 for their long years of contribution to the national economy. Towards this end, the State shall institute a scheme for totalization and portability of social security benefits with the view of establishing within a reasonable period a unitary social security system. 

Sec. 2. Definition of Terms. — As used in this Act, unless the context indicates otherwise, the following terms shall mean:

(a) "Contributions" shall refer to the contributions paid by the employee or worker to either 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 worker who 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, as amended 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 creditable services or contributions under each of the Systems, for purposes of eligibility and computation of benefits.

Sec. 3. Provisions of any general or special law or rules and regulations to the contrary notwithstanding, a covered worker who transfers employment from one sector to another or is employed in both sectors shall have his credible 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 member 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.

Sec. 4. All contributions paid by such member personally, and those that were paid by 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.

Sec. 5. Nothing in this Act shall be construed to diminish or reduce the benefits being enjoyed by a covered worker arising from existing laws, issuances, and company policies or practices or agreements between the employer and the employees.

Sec. 6. The Department of Labor and Employment for the private sector and the Civil Service Commission for the government sector, together with the SSS and the GSIS shall, within ninety (90) days from the effectivity of this Act, promulgate the rules and regulations necessary to implement the provisions hereof: Provided, That any conflict in the interpretation of the law and the implementing rules and regulations shall be resolved in favor of the workers.

Sec. 7. All laws, decrees, orders, rules and regulations, or parts thereof, which are inconsistent 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

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 theWorkersʹ Creditable 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 Workersʹ  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 worker members 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

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 workerʹs 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

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 self employed 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. Old age 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

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 worker member 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 worker member 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

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.

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 NDAVIDE, JR., C.J.:

The pivotal issue raised in the petition in this case is whether, for the purpose of computing an employee’s 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 controlled 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 22 February 1967, he was promoted to the position of Dentist 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 Stevedoring Corporation (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 dated 1 August 1979, Respondent assumed without interruption petitioner’s service credits with LUSTEVECO,[4] but it did not make reference to nor assumed petitioner’s service credits with the DOH.

On 10 June 1993, then President Fidel V. Ramos issued a memorandum[5] approving the privatization 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 whose respective positions have been classified as redundant as a result of Respondent’s 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 (first day of the month following his 60th birthday which was on 7 March 1995).

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, Repondent’s president, died of Dengue Fever 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, after petitioner’s 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 be

conducted. After a thorough study, Respondent’s 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 Respondent’s  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 have been 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 retirement plan and thus should have received at least P1,833,920.00.

The Labor Arbiter dismissed petitioner’s complaint.[11] On appeal, however, the NLRC reversed the decision of the Labor Arbiter.  In its decision[12] 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 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 respondent’s 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.

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 for certiorari 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 for GRANTED. 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-gamo’s 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] petitioner filed 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 retirement pay; 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 and tacked 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, petitioner’s length of service was considered continuous.  The effectivity of the 1987 Constitution did not interrupt his continuity of service.  He claims that he is supported by the opinion of 18 May 1993 of the Civil Service Commission in the case of Petron 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 months creditable service as basis for the computation of his retirement benefits.  Thus, pursuant to Respondent’s 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 under the 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 granted the 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 under the 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 in PNOC-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 also asserts 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 Service Insurance 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 and other 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 Reduction Program.  Petitioner was not qualified.  However in 1996, in order to solve the company’s business reversals, the new president, Dr. Nemesio Prudente, found it necessary to implement cost-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 petitioner’s service with the DOH should be included in the computation of his retirement benefits.

Respondent’s Retirement scheme[19] pertinently provides:

ARTICLE IV

RETIREMENT BENEFITS

SEC 4.1. Normal Retirement Date/Eligibility.   -- The normal retirement date of an employee shall be the first day of the month next following the employee’s 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 rendered less than ten (10) years of service with the Company, he shall be entitled to one (1) month’s 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 retiree’s final monthly basic salary (14/12) as follows:

(a) One (1) month’s 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 retiree’s 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 Respondent’s funds, it is but natural that Respondent shall disregard petitioner’s 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 over the shipping business of LUSTEVECO and agreed to assume without interruption all the service credits of petitioner with LUSTEVECO,[21] petitioner’s 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, petitioner’s creditable service is 17.3333  years.

We cannot uphold petitioner’s 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 the 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 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.  In Philippine National Oil Company-Energy Development Corporation v. National Labor Relations Commission,[23] we ruled:

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.

Petitioner’s contention that the principle of tacking of creditable service is mandated by Republic 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 paid by 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, petitioner’s fourteen years of service with the DOH may not remain uncompensated because it may be recognized by the GSIS pursuant to the aforequoted Section 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 and delivered to Respondent a Release and Undertaking wherein he waives all actions, causes of actions, debts, dues, monies and accounts in connection with his employment with Respondent.

[24] This quitclaim releases Respondent from any other obligation in favor of petitioner.  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 laborers’ claims which should be respected by the courts as the law between the parties. [25] Settled is the rule that not all quitclaims are per 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 record that 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 the company’s 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 was discriminated 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.[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 Worker’s 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].

Republic of the PhilippinesSUPREME COURT

Manila

FIRST 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 the purpose of computing an employee’s 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 controlled 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 22 February 1967, he was promoted to the position of Dentist 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 Stevedoring Corporation (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 dated 1 August 1979, Respondent assumed without interruption petitioner’s service credits with LUSTEVECO,4 but it did not make reference to nor assumed petitioner’s service credits with the DOH.

On 10 June 1993, then President Fidel V. Ramos issued a memorandum5 approving the privatization 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 whose respective positions have been classified as redundant as a result of Respondent’s 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 (first day of the month following his 60th birthday which was on 7 March 1995).

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, Repondent’s president, died of Dengue Fever 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, after petitioner’s 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 be conducted. After a thorough study, Respondent’s 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 Respondent’s 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 have been 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 retirement plan and thus should have received at least P1,833,920.00.

The Labor Arbiter dismissed petitioner’s complaint.11 On appeal, however, the NLRC reversed the decision of the Labor Arbiter. In its decision12 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 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 respondent’s 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.

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 for certiorari which 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 and the writ prayed for GRANTED. 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-gamo’s 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 petitioner filed 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 retirement pay; 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 and tacked 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, petitioner’s length of service was considered continuous. The effectivity of the 1987 Constitution did not interrupt his continuity of service. He claims that he is supported by the opinion of 18 May 1993 of the Civil Service Commission in the case of Petron 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 months creditable service as basis for the computation of his retirement benefits. Thus, pursuant to Respondent’s 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 under the 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 granted the 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 under the 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 in PNOC-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 also asserts 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 Service Insurance 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 and other 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 Reduction Program. Petitioner was not qualified. However in 1996, in order to solve the company’s business reversals, the new president, Dr. Nemesio Prudente, found it necessary to implement cost-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 petitioner’s service with the DOH should be included in the computation of his retirement benefits.

Respondent’s Retirement scheme19 pertinently provides:

ARTICLE IV

RETIREMENT BENEFITS

SEC 4.1. Normal Retirement Date/Eligibility.   -- The normal retirement date of an employee shall be the first day of the

month next following the employee’s 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 rendered less than ten (10) years of service with the Company, he shall be entitled to one (1) month’s 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 retiree’s final monthly basic salary (14/12) as follows:

(a) One (1) month’s 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 retiree’s 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 Respondent’s funds, it is but natural that Respondent shall disregard petitioner’s 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 over the shipping business of LUSTEVECO and agreed to assume without interruption all the service credits of petitioner with LUSTEVECO,21 petitioner’s creditable service must start from 9 November 1977 when he started working with LUSTEVECO22 until his day of retirement on 1 April 1995. Thus, petitioner’s creditable service is 17.3333 years.

We cannot uphold petitioner’s 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 the 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 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. In Philippine National Oil Company-Energy Development Corporation v. National Labor Relations Commission,23 we ruled:

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.

Petitioner’s contention that the principle of tacking of creditable service is mandated by Republic 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 paid by 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, petitioner’s fourteen years of service with the DOH may not remain uncompensated because it may be recognized by the GSIS pursuant to the aforequoted Section 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 and delivered to Respondent a Release and Undertaking wherein he waives all actions, causes of actions, debts, dues, monies and accounts in connection with his employment with Respondent.24 This quitclaim releases Respondent from any other obligation in favor of petitioner. 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 laborers’ claims which should be respected by the courts as the law between the parties.25 Settled is the rule that not all quitclaims are per 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 record that 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 the company’s 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 was discriminated 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.

Footnote1 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.

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 Worker’s 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].