Tickler: GOCC’s when they are governed by Corporation Law

Title: GSIS Family Bank Employees Union v. Sec. Cesar Villanueva, G.R. No. 210773, January
23, 2019

Doctrine:

The test in determining whether a government-owned or controlled corporation is subject to the

Civil Service Law is the manner of its creation such that government corporations created by
special charter are subject to its provisions while those incorporated under the general
Corporation Law are not within its coverage.

Facts:

Royal Savings Bank (RSB) applied for conservatorship with the Central Bank (CB). The
application was denied which prompted RSB to file complaints against the Central. To settle the
case, CB asked that RSB transfer all its shares of stock to Commercial Bank of Manila (CBM), a
wholly-owned subsidiary of GSIS. Both banks infused capital which gave birth to Comsavings
Bank (CSB). GSIS transferred its holdings from Commercial Bank of Manila to Boston Bank
making it the majority stockholder. Boston Bank took over CBM. Thus, GSIS owns 99% of CSB
outstanding shares of stock. Comsavings Bank changed its name to GSIS Family Bank (GFB).

CB in its pinion as per request classified GFB not as a government bank.

After that, the Governance Commission Law was passed which serves as an advisory body in
relation to GOCC’s. Governance Commission (GC) through a request clarified that GSIS Family
Bank was classified as a government financial institution under Republic Act No. 10149. GC
replied that as a government financial institution, GSIS Family Bank was unauthorized to enter
into a collective bargaining agreement with its employees "based on the principle that the
compensation and position classification system is provided for by law and not subject to private
bargaining.

GSIS Family Bank Employees Union filed a notice of strike to force the CBA but was not
granted by GFB because it is not governed by the Labor Code. GSIS Union then filed a Petition
for Certiorari, Prohibition, and Mandamus filed by the GSIS Union praying that GFB be declared
outside the coverage of Republic Act No. 10149 and, therefore, be directed to negotiate a new
collective bargaining agreement with its employees.

Issue/s:

1. Is GSIS Family Savings Bank considered as a Government owned controlled corporation?

2. Is it allowed to enter to a CBA with its employees?

Ruling:

1. YES. a government-owned or controlled corporation is:

(1) established by original charter or through the general corporation law;

(2) vested with functions relating to public need whether governmental or proprietary in nature;
and

(3) directly owned by the government or by its instrumentality, or where the government owns a
majority of the outstanding capital stock.

Possessing all three (3) attributes is necessary to be classified as a government-owned or

controlled corporation.

There is no doubt that GSIS Family Bank is a government-owned or controlled corporation since
99.55% of its outstanding capital stock is owned and controlled by the Government Service
Insurance System.

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 is the manner of its creation such that
government corporations created by special charter are subject to its provisions while those
incorporated under the general Corporation Law are not within its coverage.

2. NO. While the right to self-organization is absolute, the right of government employees to
collective bargaining and negotiation is subject to limitations. In Social Security System
Employees Association v. Court of Appeals, it explained that instead of a collective bargaining
agreement or negotiation, government employees must course their petitions for a change in the
terms and conditions of their employment through the Congress for the issuance of new laws,
rules, or regulations to that effect:

Government employees may, therefore, through their unions or associations, either petition the
Congress for the betterment of the terms and conditions of employment which are within the
ambit of legislation or negotiate with the appropriate government agencies for the improvement
of those which are not fixed by law

When it comes to collective bargaining agreements and collective negotiation agreements in

government-owned or controlled corporations, Executive Order No. 203 unequivocally stated
that while it recognized the right of workers to organize, bargain, and negotiate with their
employers, "the Governing Boards of all covered [government-owned or controlled
corporations], whether Chartered or Non-chartered, may not negotiate with their officers and
employees the economic terms of their [collective bargaining agreements]."
Thus, considering the existing law at the time, GSIS Family Bank could not be faulted for
refusing to enter into a new collective bargaining agreement with petitioner as it lacked the
authority to negotiate economic terms with its employees. Unless directly challenged in the
appropriate case and with a proper actual controversy, the constitutionality and validity of
Republic Act No. 10149, as it applies to fully government-owned and controlled non-chartered
corporations, prevail