Published by rudy Date posted on September 4, 2008

If control of a private corporation is acquired by the government through one of its agencies, are its employees subject to civil service laws? This is the question answered in this case of Pablo.

Pablo worked with Philippine Air Lines (PAL) from September 1957. PAL was originally incorporated as a private corporation but in 1960 its controlling stocks were acquired by the GSIS. Pablo’s period of employment span 35 years when PAL was controlled by the government. In March 1992 or some 9 months before Pablo retired, PAL was privatized again.

Upon his retirement, PAL paid Pablo the amount of P5,163,325.64 representing his separation/retirement gratuity and accrued vacation leave pay. For the benefits thus received, Pablo signed a “Release and Quitclaim” but he reserved the right to claim for accumulated sick leave credits which he wanted converted to cash.

Under the company policy, an employee may accumulate sick leave with pay up to 230 days. Credits in excess of 230 days may be commuted to cash at the employees’ option and shall be paid in lump sum on or before May 31 of the following year they were earned. In case of Pablo, he commuted only 58 days of his sick leave credits from 1990-1992.

So Pablo filed a complaint in the NLRC for commutation of accrued sick leave totaling 392 days. Pablo alleged having accrued sick leave credits of 450 days commutable upon his retirement pursuant to E.O. 1077 which allows government employees to commute without limit all his vacation and sick leave credits. Since he converted to cash only 58 days, Pablo said he was still entitled to 392 days of accumulated sick leave credits. Pablo contended that at the time of the issuance of E.O 1077 in 1986 PAL was still government controlled while he had already 29 years of service by then. So E.O. 1077 should be applicable to him. Was Pablo correct?

No. Through the years PAL functioned as a private corporation and managed as such for profit. Their personnel were never considered government employees. Indeed when Pablo filed his complaint for commutation of sick leave credits, private interests already controlled, if not owned PAL. Be that as it may, he cannot even assert being covered by the civil service and hence entitled to the benefits attached to civil service employment, such as the right under E.O. 1077 to accumulate and commute leave credits without limit. Pablo, while with PAL, was never a government employee covered by the civil service law. As such he did not acquire any vested rights on the retirement benefits accorded by E.O. 1077.
Pablo’s entitlement to sick leave benefits is PAL’s company policy on the matter which took effect in 1990. Under that policy, accrued sick leave credits in excess of 230 days were not, if earned before 1990 when the above policy took effect, commutable to cash; they were simply forfeited.

Pablo had, as of 1990, more than 230 days of accrued sick leave credits. Following company policy, Pablo was deemed to have forfeited the monetary value of his leave credits in excess of 230 days.

The 230 days accrued sick leave credits cannot also be converted to cash. The company policy did not likewise provide for such commutation. Indeed no law provides for the commutation of unused or accrued sick leave credits in the private sector. Commutation is allowed by way of voluntary endowment by an employer through company policy or CBA. None of such medium presently obtains in this case. In fine absent any provision in the applicable company policy authorizing the commutation of the 230 days accrued sick leave credits existing upon retirement, Pablo may not, as a matter of enforceable right insist on the commutation of his sick leave credit to cash (Paloma vs. PAL and NLRC, G.R. 148415; PAL vs. Paloma G.R. 156764, July 14, 2008) –Jose C. Sison, Philippine Star

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call Tel. 7249445.
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