22 February 2013

The issue that was brought us is whether or not utility workers of the Armed Forces of the Philippines
are entitled to separation benefits. The following are our legal opinion on this matter.

1. We opine that there are two types of employees that work for a specific period under the Civil
Service Rules that are applicable in the given issue. They are as follows:

(a) Provisionally appointed employees are those which may be issued, upon the prior
authorization of the Commissioner of the Civil Service Commission in accordance with the
provisions of the Civil Service Law and the rules and standard promulgated thereunder, to a
person who has not qualified in an appropriate examination but who otherwise meets the
requirements for appointment to a regular position in the competitive service, whenever a
vacancy occurs and the filling thereof is necessary in the interest of eligible at the time of
appointment.

(b) Contractual personnel or those whose employment in the government is in

accordance with a special contract to undertake a specific work or job, requiring
special or technical skills not available in the employing agency, to be accomplished
within a specific period, which in no case shall exceed one year, and performs or
accomplishes the specific work or job, under his own responsibility with a minimum of
direction and supervision from the hiring agency; (P.D. 807 Sec. 6, No. 5)

2. We opine that the provisionally appointed employees may receive benefits under the law while
the contract of service employees is not entitled to such benefits. This is because the latter is
considered an independent job contractor.

3. We opine that the utility workers are considered independent job contractors. They are as such
because:
(a) They work for a specific period, that is their contact is on a per semester
basis; and
(b) They undertakes to perform the job on their own account and
responsibility; free from the principal’s control.

4. Hence, we opine that there is no employer-employee relation between the utility workers and
the Armed Forces of the Philippines.

5. We also opine that the absence of employer-employee relation is also the reason why the
salaries of the utility workers are not being deducted with the mandatory GSIS contributions.
6. Corollarily, we opine that they are not entitled to separation benefits either from GSIS or from
the Armed Forces of the Philippines. The utility workers are independent job contractors and
will not therefore maintain the regular status despite the fact the they stayed with the AFP for a
long period of time through contract renewal.
7. Attached is the xxxxxregarding contract of service.????
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 88979 February 7, 1992

LYDIA O. CHUA, petitioner,

vs.
THE CIVIL SERVICE COMMISSION, THE NATIONAL IRRIGATION ADMINISTRATION and THE
DEPARTMENT OF BUDGET AND MANAGEMENT, respondents.

PADILLA, J.:

Pursuant to the policy of streamlining and trimming the bureaucracy, Republic Act No. 6683 was
approved on 2 December 1988 providing for benefits for early retirement and voluntary separation
from the government service as well as for involuntary separation due to reorganization. Deemed
qualified to avail of its benefits are those enumerated in Sec. 2 of the Act, as follows:

Sec. 2. Coverage. — This Act shall cover all appointive officials and employees of
the National Government, including government-owned or controlled corporations
with original charters, as well as the personnel of all local government units. The
benefits authorized under this Act shall apply to all regular, temporary, casual and
emergency employees, regardless of age, who have rendered at least a total of two
(2) consecutive years of government service as of the date of separation. Uniformed
personnel of the Armed Forces of the Philippines including those of the PC-INP are
excluded from the coverage of this Act.

Petitioner Lydia Chua believing that she is qualified to avail of the benefits of the program, filed an
application on 30 January 1989 with respondent National Irrigation Administration (NIA) which,
however, denied the same; instead, she was offered separation benefits equivalent to one half (1/2)
month basic pay for every year of service commencing from 1980. A recourse by petitioner to the
Civil Service Commission yielded negative results. 1 Her letter for reconsideration dated 25 April
1989 pleaded thus:

xxx xxx xxx

With due respect, I think the interpretation of the Honorable Commissioner of RA

6683 does not conform with the beneficent purpose of the law. The law merely
requires that a government employee whether regular, temporary, emergency, or
casual, should have two consecutive years of government service in order to be
entitled to its benefits. I more than meet the requirement. Persons who are not
entitled are consultants, experts and contractual(s). As to the budget needed, the law
provides that the Department of Budget and Management will shoulder a certain
 portion of the benefits to be allotted to government corporations. Moreover,
personnel of these NIA special projects art entitled to the regular benefits, such (sic)
leaves, compulsory retirement and the like. There is no reason why we should not be
entitled to RA 6683.

xxx xxx xxx 2

Denying the plea for reconsideration, the Civil Service Commission (CSC) emphasized:

xxx xxx xxx

We regret to inform you that your request cannot be granted. The provision of
Section 3.1 of Joint DBM-CSC Circular Letter No. 89-1 does not only require an
applicant to have two years of satisfactory service on the date of
separation/retirement but further requires said applicant to be on a casual,
emergency, temporary or regular employment status as of December 2, 1988, the
date of enactment of R.A. 6683. The law does not contemplate contractual
employees in the coverage.

Inasmuch as your employment as of December 31, 1988, the date of your separation
from the service, is co-terminous with the NIA project which is contractual in nature,
this Commission shall sustain its original decision.

xxx xxx xxx 3

In view of such denial, petitioner is before this Court by way of a special civil action for certiorari,
insisting that she is entitled to the benefits granted under Republic Act No. 6683. Her arguments:

It is submitted that R.A. 6683, as well as Section 3.1 of the Joint DBM-CSC Circular
Letter No. 89-1 requires an applicant to be on a casual, emergency, temporary or
regular employment status. Likewise, the provisions of Section 23 (sic) of the Joint
DBM-CSC Circular Letter No. 88-1, implementing guidelines of R.A. No. 6683,
provides:

"2.3 Excluded from the benefits under R.A. No. 6683 are the
following:

a) Experts and Consultants hired by agencies for a limited period to

perform specific activities or services with a definite expected
output: i.e. membership in Task Force, Part-Time,
Consultant/Employees.

b) Uniformed personnel of the Armed Forces of the Philippines

including those of the Philippine Constabulary and Integrated
National Police (PC-INP).

c) Appointive officials and employees who retire or elect to be

separated from the service for optional retirement with gratuity under
R.A. No. 1616, 4968 or with pension under R.A. No. 186, as
amended by R.A. No. 6680 or P.D. No. 1146, an amended, or vice-
versa.
 d) Officials and employees who retired voluntarily prior to the
enactment of this law and have received the corresponding benefits
of that retirement/separation.

e) Officials and employees with pending cases punishable by

mandatory separation from the service under existing civil service
laws, rules and regulations; provided that if such officials and
employees apply in writing within the prescriptive period for the
availment of the benefits herein authorized, shall be allowed only if
acquitted or cleared of all charges and their application accepted and
approved by the head of office concerned."

Based on the above exclusions, herein petitioner does not belong to any one of them.
Ms. Chua is a full time employee of NIA entitled to all the regular benefits provided for by
the Civil Service Commission. She held a permanent status as Personnel Assistant A, a
position which belongs to the Administrative Service. . . . If casuals and emergency
employees were given the benefit of R.A. 6683 with more reason that this petitioner who
was holding a permanent status as Personnel Assistant A and has rendered almost 15
years of faithful, continuous service in the government should be similarly rewarded by
the beneficient (sic) purpose of the law. 4

The NIA and the Civil Service Commission reiterate in their comment petitioner's exclusion from the
benefits of Republic Act No. 6683, because:

1. Petitioner's employment is co-terminous with the project per appointment papers kept by the
Administrative Service in the head office of NIA (the service record was issued by the Watershed
Management and Erosion Control Project (WMECP), Pantabangan, Nueva Ecija). The project,
funded by the World Bank, was completed as of 31 December 1988, after which petitioner's position
became functus officio.

2. Petitioner is not a regular and career employee of NIA — her position is not included in its regular
plantilla. She belongs to the non-career service (Sec. 6, P.D. No. 807) which is inherently short-lived,
temporary and transient; on the other hand, retirement presupposes employment for a long period.
The most that a non-career personnel can expect upon the expiration of his employment is financial
assistance. Petitioner is not even qualified to retire under the GSIS law.

3. Assuming arguendo that petitioner's appointment is permanent, security of tenure is available only
for the term of office (i.e., duration of project).

4. The objective of Republic Act No. 6683 is not really to grant separation or retirement benefits but
reorganization5 to streamline government functions. The application of the law must be made
consistent with the purpose for which it was enacted. Thus, as the expressed purpose of the law is
to reorganize the government, it will not have any application to special projects such as the
WMECP which exists only for a short and definite period. This being the nature of special projects,
there is no necessity for offering its personnel early retirement benefits just to induce voluntary
separation as a step to reorganization. In fact, there is even no need of reorganizing the WMECP
considering its short and limited life-span. 6

5. The law applies only to employees of the national government, government-owned or controlled
corporations with original charters and local government units.
Due to the impossibility of reconciling the conflicting interpretations of the parties, the Court is called
upon to define the different classes of employees in the public sector (i.e. government civil servants).

Who are regular employees? The Labor Code in Art. 280 (P.D. No. 492, as amended) deems an
employment regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer. No equivalent definition can
be found in P.D.No. 807 (promulgated on 6 October 1975, which superseded the Civil Service Act of
1965 — R.A. No. 2260) or in the Administrative Code of 1987 (Executive Order No. 292 promulgated
on 25 July 1987). The Early Retirement Law itself (Rep. Act No. 6683) merely includes such class of
employees (regular employees) in its coverage, unmindful that no such specie is employed in the
public sector.

The appointment status of government employees in the career service is classified as follows:

1. permanent — one issued to a person who has met the requirements of the position to which
appointment is made, in accordance with the provisions of the Civil Service Act and the Rules and
Standards promulgated in pursuance thereof; 7

2. temporary — In the absence of appropriate eligibles and it becomes necessary in the public
interest to fill a vacancy, a temporary appointment should be issued to a person who meets all the
requirements for the position to which he is being appointed except the appropriate civil service
eligibility: Provided, That such temporary appointment shall not exceed twelve months, but the
appointee may be replaced sooner if a qualified civil service eligible becomes available. 8

The Administrative Code of 1987 characterizes the Career Service as:

(1) Open Career positions for appointment to which prior qualification in an

appropriate examination is required;

(2) Closed Career positions which are scientific, or highly technical in nature; these
include the faculty and academic staff of state colleges and universities, and
scientific and technical positions in scientific or research institutions which shall
establish and maintain their own merit systems;

(3) Positions in the Career Executive Service; namely, Undersecretary, Assistant

Secretary, Bureau Director, Assistant Bureau Director, Regional Director, Assistant
Regional Director, Chief of Department Service and other officers of equivalent rank
as may be identified by the Career Executive Service Board, all of whom are
appointed by the President.

(4) Career officers, other than those in the Career Executive Service, who are
appointed by the President, such as the Foreign Service Officers in the Department
of Foreign Affairs;

(5) Commission officers and enlisted men of the Armed Forces which shall maintain
a separate merit system;

(6) Personnel of government-owned or controlled corporations, whether performing

governmental or proprietary functions, who do not fall under the non-career service;
and
 (7) Permanent laborers, whether skilled, semi-skilled, or unskilled. 9

The Non-Career Service, on the other hand, is characterized by:

. . . (1) entrance on bases other than those of the usual tests of merit and fitness
utilized for the career service; and (2) tenure which is limited to a period specified by
law, or which is coterminous with that of the appointing authority or subject to his
pleasure, or which is limited to the duration of a particular project for which purpose
employment was made.

Included in the non-career service are:

1. elective officials and their personal or confidential staff;

2. secretaries and other officials of Cabinet rank who hold their positions at the
pleasure of the President and their personal confidential staff(s);

3. Chairman and Members of Commissions and boards with fixed terms of office and
their personal or confidential staff;

4. contractual personnel or those whose employment in the government is in

accordance with a special contract to undertake a specific work or job requiring
special or technical skills not available in the employing agency, to be accomplished
within a specific period, which in no case shall exceed one year and performs or
accomplishes the specific work or job, under his own responsibility with a minimum of
direction and supervision from the hiring agency.

5. emergency and seasonal personnel. 10

There is another type of non-career employee:

Casual — where and when employment is not permanent but occasional,

unpredictable, sporadic and brief in nature (Caro v. Rilloroza, 102 Phil. 70; Manuel v.
P.P. Gocheco Lumber Co., 96 Phil. 945)

Consider petitioner's record of service:

Service with the government commenced on 2 December 1974 designated as a laborer

holding emergencystatus with the NIA — Upper Pampanga River Project, R & R
Division. 11 From 24 March 1975 to 31 August 1975, she was a research aide
with temporary status on the same project. On 1 September 1975 to 31 December 1976,
she was with the NIA-FES III; R & R Division, then on 1 January 1977 to 31 May 1980,
she was with NIA — UPR IIS (Upper Pampanga River Integrated Irrigation Systems)
DRD. On 1 June 1980, she went to NIA — W.M.E.C.P. (Watershed Management &
Erosion Control Project) retaining the status oftemporary employee. While with this
project, her designation was changed to personnel assistant on 5 November 1981;
starting 9 July 1982, the status became permanent until the completion of the project on
31 December 1988. The appointment paper 12 attached to the OSG's comment lists her
status as co-terminus with the Project.
The employment status of personnel hired under foreign — assisted projects is considered co-
terminous, that is, they are considered employees for the duration of the project or until the
completion or cessation of said project (CSC Memorandum Circular No. 39, S. 1990, 27 June 1990).

Republic Act No. 6683 seeks to cover and benefits regular, temporary,
casual and emergency employees who have rendered at least a total of two (2) consecutive years
government service.

Resolution No. 87-104 of the CSC, 21 April 1987, provides:

WHEREAS, pursuant to Executive Order No. 966 dated June 22, 1984, the Civil
Service Commission is charged with the function of determining creditable services
for retiring officers and employees of the national government;

WHEREAS, Section 4 (b) of the same Executive Order No. 966 provides that all
previous services by an officer/employee pursuant to a duly approved appointment to
a position in the Civil Service are considered creditable services, while Section 6 (a)
thereof states that services rendered oncontractual, emergency or casual status are
non-creditable services;

WHEREAS, there is a need to clarify the aforesaid provisions inasmuch as some

contractual, emergency or casual employment are covered by contracts or
appointments duly approved by the Commission.

NOW, therefore, the Commission resolved that services rendered on contractual,

emergency or casual status, irrespective of the mode or manner of payment therefor
shall be considered as creditable for retirement purposes subject to the following
conditions: (emphasis provided)

1. These services are supported by approved appointments, official

records and/or other competent evidence. Parties/agencies
concerned shall submit the necessary proof of said services;

2. Said services are on full time basis and rendered prior to June 22,
1984, the effectivity date of Executive Order No. 966; and

3. The services for the three (3) years period prior to retirement are
continuous and fulfill the service requirement for retirement.

What substantial differences exist, if any, between casual, emergency, seasonal, project, co-
terminous or contractual personnel? All are tenurial employees with no fixed term, non-career, and
temporary. The 12 May 1989 CSC letter of denial 13 characterized herein petitioner's employment
as co-terminous with the NIA projectwhich in turn was contractual in nature. The OSG says
petitioner's status is co-terminous with the Project. CSC Memorandum Circular No. 11, series of
1991 (5 April 1991) characterizes the status of a co-terminous employee—

(3) Co-terminous status shall be issued to a person whose entrance in the service is
characterized by confidentiality by the appointing authority or that which is subject to
his pleasure or co-existent with his tenure.

The foregoing status (co-terminous) may be further classified into the following:
 a) co-terminous with the project — When the appointment is co-
existent with the duration of a particular project for which purpose
employment was made or subject to the availability of funds for the
same;

b) co-terminous with the appointing authority — when appointment is

co-existent with the tenure of the appointing authority.

c) co-terminous with the incumbent — when appointment is co-

existent with the appointee, in that after the resignation, separation or
termination of the services of the incumbent the position shall be
deemed automatically abolished; and

d) co-terminous with a specific period, e.g. "co-terminous for a period

of 3 years" — the appointment is for a specific period and upon
expiration thereof, the position is deemed abolished.

It is stressed, however, that in the last two classifications (c) and (d), what is termed
co-terminous is the position, and not the appointee-employee. Further, in (c) the
security of tenure of the appointee is guaranteed during his incumbency; in (d) the
security of tenure is limited to a specific period.

A co-terminous employee is a non-career civil servant, like casual and emergency employees. We
see no solid reason why the latter are extended benefits under the Early Retirement Law but the
former are not. It will be noted that Rep. Act No. 6683 expressly extends its benefits for early
retirement to regular, temporary, casual andemergency employees. But specifically excluded from
the benefits are uniformed personnel of the AFP including those of the PC-INP. It can be argued
that, expressio unius est exclusio alterius. The legislature would not have made a specific
enumeration in a statute had not the intention been to restrict its meaning and confine its terms and
benefits to those expressly mentioned 14 or casus omissus pro omisso habendus est — A person,
object or thing omitted from an enumeration must be held to have been omitted intentionally. 15 Yet
adherence to these legal maxims can result in incongruities and in a violation of the equal protection
clause of the Constitution.

The case of Fegurin, et al. v. NLRC, et al., 16 comes to mind where, workers belonging to a work
pool, hired and re-hired continuously from one project to another were considered non-project-
regular and permanent employees.

Petitioner Lydia Chua was hired and re-hired in four (4) successive projects during a span of fifteen
(15) years. Although no proof of the existence of a work pool can be assumed, her service record
cannot be disregarded.

Art. III, Sec. 1 of the 1987 Constitution guarantees: "No person shall be deprived of life, liberty, or
property without due process of law, nor shall any person be denied the equal protection of the
laws."

. . . In Felwa vs. Salas, L-26511, Oct. 29, 1966, We ruled that the equal protection clause
applies only to persons or things identically situated and does not bar a reasonable
classification of the subject of legislation, and a classification is reasonable where (1) it is
based on substantial distinctions which make real differences; (2) these are germane to
the purpose of the law; (3) the classification applies not only to present conditions but
 also to future conditions which are substantially identical to those of the present; (4) the
classification applies only to those who belong to the same class. 17

Applying the criteria set forth above, the Early Retirement Law would violate the equal protection
clause were we to sustain respondents' submission that the benefits of said law are to be denied a
class of government employees who are similarly situated as those covered by said law. The maxim
of Expressio unius est exclusio alterius should not be the applicable maxim in this case but the
doctrine of necessary implication which holds that:

No statute can be enacted that can provide all the details involved in its application.
There is always an omission that may not meet a particular situation. What is thought, at
the time of enactment, to be an all-embracing legislation may be inadequate to provide
for the unfolding events of the future. So-called gaps in the law develop as the law is
enforced. One of the rules of statutory construction used to fill in the gap is the doctrine of
necessary implication. The doctrine states that what is implied in a statute is as much a
part thereof as that which is expressed. Every statute is understood, by implication, to
contain all such provisions as may be necessary to effectuate its object and purpose, or
to make effective rights, powers, privileges or jurisdiction which it grants, including all
such collateral and subsidiary consequences as may be fairly and logically inferred from
its terms. Ex necessitate legis. And every statutory grant of power, right or privilege is
deemed to include all incidental power, right or privilege. This is so because the greater
includes the lesser, expressed in the Maxim, in eo plus sit, simper inest et minus. 18

During the sponsorship speech of Congressman Dragon (re: Early Retirement Law), in response to
Congressman Dimaporo's interpellation on coverage of state university employees who are
extended appointments for one (1) year, renewable for two (2) or three (3) years, 19 he explained:

This Bill covers only those who would like to go on early retirement and voluntary
separation. It is irrespective of the actual status or nature of the appointment one
received, but if he opts to retire under this, then he is covered.

It will be noted that, presently Pending in Congress, is House Bill No. 33399 (a proposal to extend
the scope of the Early Retirement Law). Its wording supports the submission that Rep. Act No. 6683
indeed overlooked a qualified group of civil servants. Sec. 3 of said House bill, on coverage of early
retirement, would provide:

Sec. 3. Coverage. — It will cover all employees of the national government, including
government-owned or controlled corporations, as well as the personnel of all local
government units. The benefits authorized under this Act shall apply to all regular,
temporary, casual, emergency and contractual employees, regardless of age, who
have rendered at least a total of two (2) consecutive years government service as of
the date of separation. The term "contractual employees" as used in this Act does
not include experts and consultants hired by agencies for a limited period to perform
specific activities or services with definite expected output.

Uniformed personnel of the Armed Forces of the Philippines, including those of the
PC-INP are excluded from the coverage of this Act. (emphasis supplied)

The objective of the Early Retirement or Voluntary Separation Law is to trim the bureaucracy, hence,
vacated positions are deemed abolished upon early/voluntary retirement of their occupants. Will the
inclusion of co-terminous personnel (like the petitioner) defeat such objective? In their case, upon
termination of the project and separation of the project personnel from the service, the term of
employment is considered expired, the officefunctus officio. Casual, temporary and contractual
personnel serve for shorter periods, and yet, they only have to establish two (2) years of continuous
service to qualify. This, incidentally, negates the OSG's argument that co-terminous or project
employment is inherently short-lived, temporary and transient, whereas, retirement presupposes
employment for a long period. Here, violation of the equal protection clause of the Constitution
becomes glaring because casuals are not even in the plantilla, and yet, they are entitled to the
benefits of early retirement. How can the objective of the Early Retirement Law of trimming the
bureaucracy be achieved by granting early retirement benefits to a group of employees (casual)
without plantilla positions? There would, in such a case, be no abolition of permanent positions or
streamlining of functions; it would merely be a removal of excess personnel; but the positions
remain, and future appointments can be made thereto.

Co-terminous or project personnel, on the other hand, who have rendered years of continuous
service should be included in the coverage of the Early Retirement Law, as long as they file their
application prior to the expiration of their term, and as long as they comply with CSC regulations
promulgated for such purpose. In this connection, Memorandum Circular No. 14, Series of 1990 (5
March 1990) implementing Rep. Act No. 6850, 20 requires, as a condition to qualify for the grant of
eligibility, an aggregate or total of seven (7) years of government service which need not be
continuous, in the career or non-career service, whether appointive, elective, casual, emergency,
seasonal, contractual or co-terminous including military and police service, as evaluated and
confirmed by the Civil Service Commission. 21 A similar regulation should be promulgated for the
inclusion in Rep. Act No. 6683 of co-terminous personnel who survive the test of time. This would be
in keeping with the coverage of "all social legislations enacted to promote the physical and mental
well-being of public servants" 22 After all, co-terminous personnel, are also obligated to the
government for GSIS contributions, medicare and income tax payments, with the general
disadvantage of transience.

In fine, the Court believes, and so holds, that the denial by the respondents NIA and CSC of
petitioner's application for early retirement benefits under Rep. Act No. 6683 is unreasonable,
unjustified, and oppressive, as petitioner had filed an application for voluntary retirement within a
reasonable period and she is entitled to the benefits of said law. While the application was filed after
expiration of her term, we can give allowance for the fact that she originally filed the application on
her own without the assistance of counsel. In the interest of substantial justice, her application must
be granted; after all she served the government not only for two (2) years — the minimum
requirement under the law but for almost fifteen (15) years in four (4) successive governmental
projects.

WHEREFORE, the petition is GRANTED.

Let this case be remanded to the CSC-NIA for a favorable disposition of petitioner's application for
early retirement benefits under Rep. Act No. 6683, in accordance with the pronouncements in this
decision.

SO ORDERED.

Narvasa, C.J., Melencio-Herrera, Cruz, Paras, Feliciano, Bidin, Griño-Aquino, Medialdea, Regalado,
Davide, Jr., Romero and Nocon, JJ., concur.
 Separate Opinions

GUTIERREZ, JR., J., concurring:

I concur but only insofar as our rulings are applied to RA 6683 applicants.

Separate Opinions

GUTIERREZ, JR., J., concurring:

I concur but only insofar as our rulings are applied to RA 6683 applicants.

Footnotes

1 Letter of Commissioner Samilo Borlongay, 17 March 1989.

2 Annex "E", Rollo, P. 11

3 Annex "F", Rollo, p. 14.

4 Rollo, p. 24-25.

5 AN ACT PROVIDING BENEFITS FOR EARLY, RETIREMENT AND VOLUNTARY

SEPARATION FROM THE GOVERNMENT SERVICE, AS WELL AS
INVOLUNTARY SEPARATION OF CIVIL SERVICE OFFICERS AND EMPLOYEES
PURSUANT TO VARIOUS EXECUTIVE ORDERS AUTHORIZING GOVERNMENT
REORGANIZATION AFTER THE RATIFICATION OF THE 1987 CONSTITUTION
APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES.

6 See Joint DBM-CSC Circular Letter No. 88-1, 12 December 1988, Rollo, 61.

7 Sec. 25, a and b, P.D. No. 807; see also CSC Memorandum Circular No. 11, S. of
1991, 5 April 1991.

8 Ibid., also Perez v. City of San Carlos, G.R. No. L-48196-R, 11 July 1978; Ata v.
Namocatcat, G.R. No. L-35703, 30 October 1972, 47 SCRA 320.

9 Executive Order No. 292, Section 7, 83 O.G. No. 39, 75 (September 1987)

10 Ibid, Section 9, p. 77.

11 Per Service Record, Rollo, p. 7.

12 Rollo, p. 70.

13 Page 3, this decision.

 14 See Agpalo, Ruben. Statutory Construction, 1986 ed. p. 161.

15 People v. Manantan, 115 Phil. 664.

16 G.R. No. 54083, 28 February 1983, 120 SCRA 910.

17 Ormoc Sugar Co. v. Treasurer of Ormoc City, L-23794, 17 February 1968.

18 Statutory Construction by Ruben E. Agpalo, 1986 ed., p. 118-119 citing In re Dick,

38 Phil. 41 (1918); City of Manila v. Gomez, G.R. No. L-37251, August 31, 1981, 107
SCRA 98; Escribano v. Ovila, G.R. No. L-30375, September 12, 1978, 85 SCRA 245
(1978), also Go Chico v. Martinez, 45 Phil. 256 (1923); Gatchalian v. COMELEC,
G.R. No. L-32560, October 22, 1970, 35 SCRA 435 (1970); People v. Uy Jui Pio, 102
Phil. 679 (1957) and People v. Aquino, 83 Phil. 614 (1949).

19 Deliberations House Bill No. 4942 — 8 March 1988, 6:30. p.m.

20 An Act to Grant Civil Service Eligibility Under Certain Conditions to Government

Employees Under Provisional or Temporary Status Who have rendered a Total of
Seven (7) Years of Efficient Service and for other Purposes.

21 Rule 1, Sec. 2(c) as amended by Memorandum Circular No. 25, series of 1990,
21 May 1990.

22 See Joint CSC-DBM Circular No. 1, series of 1991, 27 June 1991.

June 24, 2002

CSC MEMORANDUM CIRCULAR NO. 17-02

TO : All Heads of Departments, Bureaus and Agencies of the National/Local

Governments, Including Government-Owned and/or Controlled Corporations with
Original Charters, and State Universities and Colleges

SUBJECT : Policy Guidelines for Contract of Services

In Section 1, Rule IX of the Revised Omnibus Rules on Appointments and Other

Personnel Actions (CSC Memorandum Circular No. 40, s. 1998 as amended by CSC
Memorandum Circular No. 15, s. of 1999), contracts of services and job orders need not
be submitted to the Commission since services to be rendered thereunder are not
considered as government service.

However, the Commissioner has been made aware that the practice of hiring under
contracts of services and job orders entered into between government agencies and
individuals has been used to circumvent Civil Service rules and regulations particularly
its mandate on merit and fitness.
In CSC Resolution No. 02-0790 dated June 5, 2002, the Commission adopted the
attached Policy Guidelines for Contract of Services. Said resolution was published on
June 7, 2002 in Today and shall be effective fifteen (15) days thereafter or on June 22,
2002. Following its effectivity, said policies and guidelines shall govern contracts of
services and job orders entered into by all agencies of the government.

In view hereof, all existing Civil Service rules and regulations, circulars and memoranda
inconsistent herewith are hereby repealed or amended accordingly.

(SGD.) KARINA CONSTANTINO-DAVID

Chairperson
Re: Policy Guidelines for Contract of Services
RESOLUTION NO. 020790

WHEREAS, Section 2(1), Article IX-B of the 1987 Constitution provides that the Civil Service
embraces all branches, subdivisions, instrumentalities and agencies of the Government, including
government-owned or controlled corporations with original charters;

WHEREAS, Section 12(3), Chapter 3, Title I(A), Book V of the Administrative Code of 1987
provides that the Commission shall promulgate policies, standards and guidelines for the Civil
Service and adopt plans and programs to promote economical, efficient and effective personnel
administration in the government;

WHEREAS, Section 12(14), Chapter 3, Title I(A), Book V of the Administrative Code of 1987
provides that the Commission shall take appropriate action on all appointments and other
personnel matters in the Civil Service;

WHEREAS, Section 1, Rule XI of the Revised Omnibus Rules on Appointments and other
Personnel Actions, CSC Memorandum Circular No. 40, series of 1998, as amended by CSC
Memorandum Circular No. 15, series of 1999, provides that contracts of services need not be
submitted to the Commission as services rendered thereunder are not considered government
service;SETaHC

WHEREAS, the Commission has been made aware that the practice of hiring personnel under
contracts of services and job orders entered into between government agencies and individuals
has been used to circumvent Civil Service rules and regulations particularly its mandate on merit
and fitness in public service;

NOW, THEREFORE, the Commission resolves to adopt the following policies and guidelines
regarding contracts of services and job orders entered into by all branches, subdivisions,
instrumentalities and agencies of the Government, including government-owned or controlled
corporations with original charters.

Section 1. Definitions. — The terms hereunder shall be construed, as follows:

a. Individual Contract of Services/Job Order — refers to
employment described as follows:
1. The contract covers lump sum work or services such as
janitorial, security, or consultancy where no employer-
employee relationship exists between the individual and the
government;
2. The job order covers piece work or intermittent job or
short duration not exceeding six months and pay is on a
daily basis;
3. The contract of services and job order are not covered by
Civil Service law, rules and regulations, but covered by
Commission on Audit (COA) rules;
4. The employees involved in the contract or job order do
not enjoy the benefits enjoyed by government employees,
such as PERA, ACA and RATA.
5. Services rendered thereunder are not considered as
government service.
b. Institutional Contract of Services — refers to a contract
of services entered into between the hiring government
agency and a private firm or non-governmental agency,
through public bidding or negotiated contracts and subject to
pertinent COA rules and regulations.
In an institutional contract of services, the contracted agency
is engaged to provide personnel who shall perform lump
sum work or service related to or incidental to the hiring
agency's functions and operations, for a specific period of
 time not exceeding six (6) months. Provided, that such
contract of services shall be entered into when it is
impractical or more expensive for the hiring government
agency to directly undertake such service.
Section 2. Execution of a Contract of Services or Job Order. — The employment referred to
in Section 1(a) requires the execution of either a contract of services or memorandum of
agreement (MOA) or job order between the government agency concerned and the individual, in
accordance with the rules and regulations of the COA.

With respect to institutional contracts of services defined in Section 1(b), a contract of service or
a memorandum of agreement must be executed between the hiring government agency and the
contracted agency, also subject to the COA rules and regulations.

Section 3. The contract of services. — MOA or job order shall not contain the following
provisions:

a. The employee performs work or a regular function that is

necessary or essential to the agency concerned or work also
performed by the regular personnel of the hiring agency;
b. The employee is required to report to the office and
render service during the agency's prescribed office hours
from 8:00 am to 5:00 pm or for forty (40) hours per week;
c. The employee is entitled to benefits enjoyed by
government employees such as ACA, PERA and RATA and
other benefits given by the agency such as mid-year bonus,
productivity incentive, Christmas bonus and cash gifts.
d. The employee's conduct and performance shall be under
the direct control and supervision of the government agency
concerned.
e. The employee's performance shall be evaluated by the
government agency.
Section 4. Prohibitions. — The following are prohibited from being hired under a contract
of services and job order.

a. Those who have been previously dismissed from the

service due to commission of an administrative offense;
b. Those who are covered under the rules on nepotism;
c. Those who are being hired to perform functions
pertaining to vacant regular plantilla positions.
d. Those who have reached the compulsory retirement age
except as to consultancy services.
Section 5. Submission of Contract/MOA or Job Order for Review. — The contract of
services, MOA or job order shall be submitted to the CSC Regional Office (CSCRO) having
jurisdiction over the government agency for review of its stipulations within thirty (30) days
from the execution and signing of the contract of services, MOA or job order which shall be the
date indicated on the said instrument.

Section 6. No Rendition of Services. — No service shall be rendered under the contract of

services, MOA or job order pending its review by the CSCRO.

Section 7. Findings of the Regional Offices. — If the findings of the CSCRO show that the
contract, MOA or job order contains the prohibited stipulations, the CSCRO shall direct the
agency concerned to delete the necessary stipulations in order that the same may comply with the
guidelines provided herein.

Section 8. Effect of Non-Submission of Contract/MOA. — Failure of submission of the

contract or MOA for review by the CSCRO shall not invalidate the same. However, this would
be without prejudice to the filing of the charge for Neglect of Duty against the HRMO of the
hiring agency and the officer who signed the same. Furthermore, services rendered under said
contract or MOA shall not be accredited as government service.

Section 9. Contract of Services/Job Orders Subject to CSC Audit. — As far as practicable,

all contracts of services and job orders shall be subject to audit by the CSCROs insofar as their
compliance with these guidelines and to pertinent Civil Service rules and regulations. ICDSca

Section 10. Effect on Existing Contracts of Services and Job Orders. — All existing contracts
of services and job orders which are in any way inconsistent with these guidelines shall continue
to be effective until their termination or expiration. However, the same shall not be renewed
unless they comply with the guidelines herein.
Section 11. All other existing issuances that are inconsistent herewith are deemed repealed or
amended.

Section 12. Effectivity. — These guidelines shall take effect after fifteen (15) days from the
date of publication in a newspaper of general circulation.

Quezon City, Jun. 5, 2002.

(SGD.) KARINA CONSTANTINO-DAVID

Chairman
(SGD.) JOSE F. ERESTAIN, JR. (SGD.) J. WALDEMAR V. VALMORES
CommissionerCommissioner
Attested by:
(SGD.) ARIEL G. RONQUILLO
Director III
CALO, Edmundo R.
Re: Accreditation of Services;
Contract of Service; Appeal
x--------------------------------------------x

RESOLUTION NO. 030102

Edmundo R. Calo, former Chief Corporate Attorney, National Power Corporation (NAPOCOR), appeals
Civil Service Commission - National Capital Region (CSC-NCR) Order dated March 23, 2001 which set
aside the CSC-NCR Order dated January 26, 2001. The latter Order accredited as government service,
the services rendered by Calo from July 19, 1993 up to August 1, 1996 under a Contract of Service.

The pertinent portions of CSC-NCR Order dated March 23, 2001 read, as follows:

"A review of the contract covering the employment of Atty. Calo in said Corporation, however, shows that
there is a stipulation under Article V thereof that there exists no employer-employee relationship between
the parties, that is, between Atty. Calo and NAPOCOR. Further, Article III (2) thereof provides that the
`CONTRACTOR’ shall not be entitled to other remunerations and benefits regularly granted to NAPOCOR
employees.

"Under such circumstances, said contract is in the nature of Contact of Services which is not covered by
Civil Service Law, Rules and Regulations, but by Commission on Audit (COA) rules. Moreover, the
employees involved in the contracts do not enjoy the benefits enjoyed by government employees, such
as Personnel Economic Relief Allowance (PERA), Cost of Living Allowance (COLA) and Representation
and Transportation Allowance (RATA). As the services rendered under contracts of services are not
considered government services, they do not have to be submitted to the Civil Service Commission for
approval (item V of CSC Memorandum Circular No. 38, s. 1993; Rule XI, CSC Memorandum Circular No.
40, s. 1998).
"Only services rendered under the following appointments can be accredited as government service for
retirement purposes, provisional, temporary, substitute, casual emergency and contractual.

"The employment of Atty. Calo under said contract is entirely different from contractual appointment as
may be gleaned from the stipulations embodied in his contract. Contractual appointments under Section
2(e) Rule III of the Revised Omnibus Rules on Appointments and other Personnel Actions are those
issued to a person who shall undertake a specific work or job for a period not exceeding one (1) year. The
appointing authority shall indicate the inclusive period covered by the appointment for purposes of
crediting services.

"Considering that the services rendered by Atty. Calo were pursuant to Contract of Services, the same
are not and cannot be considered as government service. The request, therefore, for the accreditation of
said services should be denied.

"WHEREFORE, the Order dated January 26, 2001 accrediting the services of Atty. Edmundo R. Calo
from July 19, 1993 to August 1, 1996 is hereby set aside."

In his appeal, Calo represents, as follows:

"ASSIGNMENTS OF ERROR

"The CSC, a quo, gravely erred in citing as basis of its reversal order the stipulation of the contract which
states `no employer-employee relationship between the parties’.

"That the appellant does not enjoy the benefits enjoyed by government employees, such as PERA, COLA
and RATA.

"ARGUMENTS

"Appellant cannot fathom why the CSC Region IV (sic), insisted, despite of its knowledge of the case of
Mr. Manaros B. Boransing whose services were accredited by the Commission in its Resolution No.
962566 dated April 11, 1996, as well as the recent case of Gregorio Palma Gil versus National Power
Corporation and Civil Service Commission, CA-G.R. SP No. 48272, both officials of NPC whose
consultancy contracts despite of the similar provision of `no employer-employee’ in their service contracts
were declared and considered as government services because of the `power of control as the ultimate
factor in determining the existence of employer-employee relationship is evident in the case at bar’.
(Underscoring supplied)

"The aforenamed NPC official (Gregorio Palma Gil) was an office-mate of the appellant. All that Gregorio
Palma Gil had performed as his official duties at NPC were similarly performed by the appellant even
more than that. The appellant like Palma Gil is a lawyer assigned first at the Office of the General
Counsel, Contracts Review Department, then at the Bids and Contracts Management Department. The
appellant was required to report an 8-5 official duties, subject to supervision, and his performances, to be
reviewed by his superior, the General Counsel, and even rated every semester of his performances.
(Copies attached as ANNEX `H’, `H-1’ and `H-2’). He was assigned to several Technical Working Groups
in the review of bids and contracts where the output are reported to the Contract Awards Committee who
will further review, reverse, set aside or approve the reports of the former.

"On several instances, the appellant was even authorized to appear as NPC counsel in regular courts’
cases in the event that regular handling lawyers were absent. As correctly stipulated in the contract, the
appellant was tasked also to coordinate not only between NPC offices but as well as other agencies of
the government involving contracts preparation and review (Article I- Scope of Services (2). And lastly,
appellant under the contract was required `to make himself available for proper coordination during the
weekends as may be deemed necessary by the General Counsel’. (Emphasis supplied) (Copy attached
as ANNEX `I’, `I-1’, `I-2’ and `I-3’)

"Simply put, in the cited case of Traders Royal Bank vs. NLRC, G.R. No. 127864, December 22, 1999,
the Supreme Court ruled that:

`This Court has ruled that the existence of employer-employee relationship cannot be proved by merely
showing the agreement of the parties. It is a question of fact which should be supported by substantial
evidence. And in determining the existence of such relationship the elements usually considered are: (a)
the selection of the employee; (b) the payment of wages; (c) the power of dismissal; (d) power to control
the employees’ conduct, with the control test generally assuming primacy in the over-all consideration.’

"Lastly, since appellant was also required to be rated in his performances by his superiors, his entitlement
to salary adjustment were made basis the rating that he got therefrom. In fact, in several instances that
the appellant had availed of salary increases based on his performances as recommended by his
superior, made as basis was the total monthly compensation of the regular lawyers who are receiving
PERA, COLA and RATA. (Copy attached as ANNEX `J’ and `J-1’)"

Records show that on July 17, 1993, Calo sought permission from the Commission on Audit to transfer
employment to the National Power Corporation effective July 19, 1993. The request was granted. From
July 21, 1994 until August 1, 1996, Calo rendered service to the NAPOCOR by virtue of a contract of
service. No evidence was presented to show that he rendered service to the NAPOCOR during the
intervening period of July 19, 1993 to July 20, 1994. The contract herein submitted was executed on July
21, 1994.

Apparently, the contract was not renewed upon its expiration on August 1, 1996. Thereafter, Calo sought
the accreditation of his services at the NAPOCOR as government service before the CSC-NCR.
Submitted in support of the request was the Performance Appraisal Report for the periods 1995 to 1996.
Similarly, NAPOCOR Memorandum dated May 10, 1995 denominated as Compensation Adjustments of
NAPOCOR Contractors was transmitted showing therein the increase of Calo’s compensation together
with other NAPOCOR contractors.

In CSC-NCR Order dated January 26, 2001, Calo’s request was granted. Thus, his services from July 19,
1993 to August 1, 1996 was approved as government service. As earlier noted, there is no evidence to
establish the fact that Calo rendered service from July 19, 1993 to July 20, 1994 to the NAPOCOR.

On February 26, 2001, Noli E. Pomperada, Acting Division Manager A, Compensation and Benefits
Management Division, NAPOCOR, inquired from the CSC-NCR whether the services rendered by
NAPOCOR personnel whose employment was governed by a contract of service may be recorded and
accredited as government service. Also, he requested opinion whether Calo is entitled to earn leave
credits in view of the accreditation of his services. The queries were responded to in CSC-NCR letter
dated March 28, 2001, as follows:

"Together with your letter is a copy of the contract of services entered into by and between Francisco L.
Viray, President, National Power Corporation and Atty. Edmundo R. Calo which commenced on July 20,
1994. Also submitted is a copy of the Order issued by this Office on January 26, 2001, accrediting the
services actually rendered by Atty. Calo covering the period from July 19, 1993 to August, 1996.

"With respect to the first issue, please be informed that contract of service is not covered by Civil Service
Law, rules and regulations pursuant to CSC Memorandum Circular No. 38, s. 1993, as amended by CSC
Memorandum Circular No. 40, s. 1998 and CSC Memorandum Circular No. 15, s. 1999. In the instant
case, the services rendered by Atty. Calo as governed by said contract is not considered government
service more so that `no employer-employee relationship’ is expressly provided therein.
"On the second issue, only those employees who are appointed under contractual status as of September
27, 1999 shall earn vacation and sick leave credits (underscoring supplied). In the instant case, Atty. Calo
was not appointed under contractual status. His services at the National Power Corporation was covered
by a contract which is not governed by the Civil Service Law, rules and regulations. Thus, he is not
entitled to vacation and sick leave credits during the period covered by said contract. Moreover,
contractual personnel during that time do not earn leave credits. We reiterate that it was only after the
issuance of CSC Memorandum Circular No. 14, s. 1999 that contractual personnel were allowed to earn
leave credits. Said Memorandum took effect of August 27, 1999.

"Finally, please be informed that the Order dated January 26, 2001 accrediting the services on Atty. Calo
from July 19, 1993 to August 1, 1996 was set aside in an Order dated March 23, 2001."

In view of Pomperada’s query, a re-evaluation of Calo’s contract was undertaken by the CSC-NCR. Upon
its determination of the express declaration in the contract that no employer-employee relationship exists
between Calo and the NAPOCOR, the CSC-NCR issued an Order dated March 23, 2001 setting aside its
Order dated January 26, 2001. Hence, this appeal.

After a circumspect evaluation of the records of the case, the Commission rules that the services
rendered by Calo from the July 21, 1994 to August 1, 1996 fall within the coverage of contractual
appointment and not contract of service, thus creditable as government service.

The existence of employer-employee relationship between Calo and the NAPOCOR is apparent from the
stipulations of the contract notarized on July 21, 1994. The element of control and supervision, the
foremost consideration taken in determining whether a service is rendered by an employee, in the
discharge of duties is more than evident therefrom. This findings cannot be debunked by the express
declaration in the contract that "there exists no employer-employee relationship" contained in Article V
(Relationship). Thus, there is no occasion to apply the provisions of Civil Service Commission
Memorandum Circular No. 38, Series of 1993 governing engagement of services under a contract of
service which was promulgated on September 10, 1993. For this purpose, the Circular shall be
reproduced hereunder, as follows:

"V. Contract of Services/Job Orders

"Contract of Services and Job Orders refer to employment described as follows:

"1. The contract covers lump sum work or services such as janitorial, security or consultancy services
where no employer-employee relationship exist;

"2. The job order covers piece of work or intermittent job of short duration not exceeding six months on a
daily basis;

"3. The contracts of services and job orders are not covered by Civil Service Law, Rules and Regulations,
but covered by COA rules;

"4. The employees involved in the contracts or job orders do not enjoy the benefits enjoyed by
government employees, such as PERA, COLA and RATA.

"As the services rendered under contracts of services and job orders are not considered as government
services, they do not have to be submitted to the Civil Service Commission for approval."

Under the Circular, an individual’s engagement shall be treated as falling within the scope of contract of
service whenever the work rendered is lump sum or services such as janitorial, security or consultancy
where there is no employer-employee relationship. A perusal of Calo’s contract under Article I (Scope of
Services) showed that he was tasked to perform contract preparation and review, to facilitate and
coordinate between the Office of the Vice President - Contract Management and Services Group and
other NAPOCOR offices vis-a-vis agencies of the government on the matter. On top thereof, Calo was
required to perform any and all duties as may be assigned to him by the Vice President. By the nature of
work assigned, there is no doubt that the duties imposed on him by the NAPOCOR can neither be
classified as lump sum work nor considered consultancy services.

The foregoing ruling is more evidently strengthened by the provision in the contract stating that Calo shall
discharge his duties from Monday to Friday between the hours of eight o’clock in the morning and five o’
clock in the afternoon. And that services shall also be demanded from him on weekends when necessary.
In other words, Calo cannot perform his duties on his own desired time.

It is noted that Calo’s duties and responsibilities is not susceptible of partial performance or division into
parts as would otherwise justify its classification into lump sum work. On the other hand, it requires
continuous performance which cannot be punctuated by time. In the same vein, the duties imposed on
him and performed by him are not advisory in nature as would fall within the scope of a consultancy
service. This brings to fore the second requirement under the Circular which mandates that the job order
covers piece work or intermittent job of short duration not exceeding six months on a daily basis. As
earlier observed, the work assigned to Calo inherently requires continuous performance not terminable in
a short period of time of six (6) months. In fact, Calo’s contract lasts for one (1) year subject to renewal for
another year. Thus, the service is not intermittent or of short duration.

Anent the fourth requirement, the Circular fixes the presence of a stipulation to the effect that the
individuals subject of the job order shall not enjoy the benefits enjoyed by government employees such as
PERA, COLA AND RATA. Under Article III (Contractual Fee/Benefits), Calo is entitled to receive a fixed
salary and other benefits specifically granted by the NAPOCOR’s Board of Directors. In particular and
whenever granted, mid-year and Christmas bonus, cash gift, medical consultations with NAPOCOR
doctors and dentists and free medicine are extended to them.

All told, evidence on record clearly manifests the existence of employer-employee relationship between
the NAPOCOR and Calo. Thus, the services of Calo from July 21, 1994 until August 1, 1996 are
considered government service.

WHEREFORE, the appeal of Edmundo R. Calo is hereby GRANTED. Accordingly, Civil Service
Commission - National Capital Region Order dated March 23, 2001 is set aside. The services of Calo
from July 21, 1994 until August 1, 1996 is considered government service and, thus, creditable as such.

Quezon City, JAN 22 2003

(Original Signed)
KARINA CONSTANTINO-DAVID
Chairman

(Original Signed)
JOSE F. ERESTAIN, JR.
Commissioner

(Original Signed)
J. WALDEMAR V. VALMORES
Commissioner
 Attested by:

(Original Signed)
ARIEL G. RONQUILLO
Director III

FPG/KPZ/X8/jca174
NDC-01-0726
20010906-019
/calo’r2

Source: http://excell.csc.gov.ph/mread03/res-030102.html

DUQUE, Francisco T.
Re: CSC Resolution No. 02-0790;
Request for Exemption
x----------------------------------------------x

RESOLUTION NO. 021273

Dr. Francisco T. Duque, M.D., M.Sc., President and CEO, Philippine Health Insurance Corporation or
Philhealth, requests the said agency's exemption from the coverage of CSC Resolution No. 02-0790,
dated June 5, 2002.

Dr. Duque interposes the present request in the light of the fact that the magnitude of the MEDICARE
functions transferred to Philhealth necessitated the hiring of extra personnel on a job order basis, and that
"non-renewal of their contracts will result to a severely compromised work processes." He assures the
Commission, nonetheless, that a proposal for the creation of contractual positions to be filled up by
qualified job order contractors had already been submitted to the Department of Budget and Management
(DBM) for its approval.

Furthermore, he seeks clarification on the following related issues:

"1. Are the provisions (of CSC Resolution No. 020790, dated June 5, 2002) applicable to contracts
executed before the effectivity of the Resolution but shall take effect by July 1, 2002, which is after the
effectivity of this Resolution?; and

"2. Is Section 3 applicable to both Individual and Institutional Contract of Services?"

The CSC issuance he adverted to enunciates the new policy guidelines recently adopted by the
Commission to govern the practice of service contracting in the public sector. The promulgation came on
the heels of the growing tendency among many government agencies to hire individuals on the basis of
service contracts or job orders as a a way of circumventing civil service rules and regulations particularly
those aimed at protecting and safeguarding the merit and fitness principle.

Under the new issuance, certain requirements have been imposed in the execution of contracts of
service, memorandum of agreements (MOAs) or job orders. It is stipulated under Section 3 thereof some
of the terms and conditions that should not be incorporated in such contracts, MOAs or job orders. More
specifically, it provides:

"Section 3. The contract of services, MOA or job order shall not contain the following provisions:

"a. The employee performs work or a regular function that is necessary and essential to the agency
concerned or work also performed by the regular personnel of the hiring agency;

"b. The employee is required to report to the office and render service during the agency's prescribed
office hours from 8:00 am to 5:00 pm or for forty (40) hours per week;

"c. The employee is entitled to benefits enjoyed by government employees such as ACA, PERA and
RATA and other benefits given by the agency such as mid-year bonus, productivity incentive, Christmas
bonus and cash gifts;

"d. The employee's conduct and performance shall be under the direct control and supervision of the
government agency concerned;

"e. The employee's performance shall be evaluated by the government agency."

It is also spelled out in the said issuance those individuals who are disqualified from being hired under
any of these modes, such as those who have been previously dismissed; those covered by nepotism; and
those who are compulsory retired save as to consultancy services. (Section 4) At the same time, it is
decreed therein the mandatory obligation of government agencies to submit, within thirty (30) days from
execution, their contracts of service, MOAs or job orders to the CSC Regional Offices having jurisdiction
over them for review of the stipulations, pending which, no services shall be rendered. While failure to
submit will not affect the validity of such contract or job order, it will open the responsible official/s to
possible administrative sanction.

Moreover, the issuance provides for its own effectivity. It declares that it shall take effect fifteen (15) days
after its publication on a newspaper of general circulation. The records disclose that it was published in
Today on June 7, 2002, thus, it formally entered into force and effect on June 23, 2002. Its effectivity,
however, is without prejudice to existing contracts of service or job orders, for Section 10 states that "all
existing contracts of services and job orders which are in any way inconsistent with these guidelines shall
continue to be effective until their termination or expiration". This is with the proviso that "the same shall
not be renewed unless they comply with the guidelines herein".

With these parameters in mind, the Commission shall now endeavor to address the concerns raised. For
clarity, the collateral issues shall be resolved first, before assessing the very merit of the request.

The new policy issuance expressly declares that it shall not, in any way, affect the terms and conditions of
service contracts or job orders already existing or subsisting at the time of their entry into force. Section
10 reads:
"Section 10. Effect on Existing Contracts of Services and Job Orders.- All existing contracts of services
and job orders which are in any way inconsistent with these guidelines shall continue to be effective until
their termination or expiration. However, the same shall not be renewed unless they comply with the
guidelines herein."

With nary a doubt, the above-quoted provision is put there in keeping with the constitutional guaranty on
the non-impairment of contract. Now, the provision speaks of "existing contracts of services and job
orders" as being excluded from the ambit of the CSC issuance. The logical questions that arise, in
reference to the query posed by Dr. Duque, are: What does the term "existing contracts" comprehend?
Does it contemplate the situation he described where the service contracts were executed prior to the
effectivity of the policy issuance, but made effective thereafter?

The Commission is of the considered view that it does.

Based on existing jurisprudential pronouncements, it is said that a contract undergoes certain stages of
evolution. These are delineated, as follows:

1. preparation, conception or generation, which is the period of negotiation and bargaining, ending at the
moment of agreement of the parties;

2. perfection or birth of the contract, which is the moment when the parties come to agree on the terms of
the contract; and

3. consummation or death, which is the fulfillment or performance of the terms agreed upon in the
contract. (ABS-CBN Broadcasting Corporation vs. CA, 301 SCRA 572, citing the case of Toyota
Shaw, Inc. vs. CA, 244 SCRA 320)

From the foregoing, a contract comes into being at the precise moment that there is meeting or
concurrence of the minds between and among the parties. Once the parties agree as to the terms and
conditions, a contract is produced. Whether its effectivity is fixed at a later date does not detract from the
fact of its being already a legal, if not an objective, reality.

In the situation detailed by Dr. Duque, when Philhealth and the individual employees affixed their
signatures in their respective service contracts, there was unequivocally a meeting of the minds, so that
thereupon, there commenced a contractual tie between the agency and these individual employees.
Since these service contracts were perfected prior to the effectivity of the policy issuance in question,
these contracts can be said to lie within the purview of the clause "existing contracts of services and job
orders," excepted from the scope and coverage of the issuance in question.

The above conclusion is further borne out when due account is taken of the doctrine of non-impairment of
contracts. "Laws existing at the time of the execution of contracts are the ones applicable to such
transactions and not later statutes, unless the latter provide that they shall have retroactive effect. Later
statutes will not, however, be given retroactive effect if to do so will impair the obligation of contracts, for
the Constitution prohibits the enactment of a law impairing the obligation of contracts. x x x And a statute
which authorizes any deviation from the terms of the contract by postponing or accelerating the period of
performance which it prescribes, imposing conditions not expressed in the contract, or dispensing with
those which are however minute or apparently immaterial in their effect upon the contract, impairs the
obligation, and such statute should not therefore be applied retroactively." (Agpalo, Statutory
Construction, Third Edition [1995], p. 289)

At the time the service contracts Dr. Duque alluded to were entered into between Philhealth and the
employees concerned, the governing rules were those spelled out under Rule XI of the Revised Omnibus
Rules on Appointments and Other Personnel Actions. Subsequent to the execution of these contracts,
however, CSC Resolution No. 02-0790, dated June 5, 2002, was promulgated. As previously mentioned,
this latter enactment imposes new and substantive requirements relating to the execution of service
contracts. Consequently, it cannot be made to apply retroactively so as to modify the service contracts
already perfected without contravening the non-impairment of contract guaranty.

With respect to the second query, it should be clarified that Section 3 of the CSC issuance applies to both
individual and institutional contracts of service. Aside from the fact that the provision in issue speaks of
"contract of services" without making any distinctions, there is also no cogent reason why the two types of
contract of service should be treated differently. While these contracts differ essentially insofar as it
concerns the manner of execution and the contracting parties involved, their legal implication cannot be
any different-- they basically do not give rise to government employment. The incorporation of Section 3
in the CSC issuance only serves to highlight and underscore the point that service contracts, be they
individual or institutional, do not occasion employer-employee relationship.

Having disposed of the peripheral matters, the merit of the request for exemption shall now be inquired
into.

As earlier mentioned, Dr. Duque premises the present request on the ground that with the transfer of
MEDICARE functions to Philhealth, one of the priority programs of the present dispensation, additional
manpower is needed to cope with the volume and magnitude of work. Such added personnel can only be
accommodated through contract of service arrangements due to lack of plantilla items.

The Commission takes judicial notice of the fact that Philhealth is a newly-organized government agency,
and thus, still deep in the process of fine-tuning its operational systems and processes. It also notes that
a proposal for the creation of additional positions in the said agency is pending approval by the DBM.

Nonetheless, it is not convinced that the foregoing are sufficient considerations for exempting the agency
from the coverage of the policy issuance. It should be noted that the policy issuance in question is
actually intended as a measure to clean up or put in order the workings of the bureaucracy. It is meant to
put a stop to the indiscriminate practice of agencies of entering into service contracts whose terms and
conditions are suspect. In not a few instances in the past, the government had ended up being in the
short end of the bargain. It has been observed that the standard clause of "no employer-employee
relationship" had been overly abused. Unscrupulous service contractors would foist the same to evade
any administrative liability incurred during the term of their contracts, but then go on to apply for
retirement benefits, by alleging circumstances purportedly indicating the exercise of control and
supervision by the agency in order to establish the presence of employment relationship. It was for the
purpose of curbing this untoward happenstance and all other inimical off-shoots of hastily formulated or
"un-sanitized" service contracts that the policy issuance was conceived.

Now, the grounds for exemption being invoked by the Philhealth are not enough to tilt the weight of the
scale in its favor vis-a-vis the overriding objective of the policy issuance as elucidated above. More so,
the fact that it is still in the process of fine-tuning its operational systems should be a greater reason why
it should now be placed within the coverage of the issuance. It may not be amiss to mention also that
instead of hiring additional manpower, Philhealth should consider maximizing the potential of its existing
personnel complement by adopting innovative measures like job rotation or time-shifting.

WHEREFORE, the Commission hereby rules, as follows:

1. Contracts of service, memorandum of agreements and job orders executed or perfected

before but made effective after the effectivity of CSC Resolution No. 02-790, dated June
5, 2002, shall form part of the "existing contracts of services and job orders" within the
contemplation of Section 10 of the said resolution. However, Philhealth is directed to
submit an inventory of all its service contracts to the Civil Service Commission-National
Capital Region (CSC-NCR);
 2. The strictures of Section 3 of the resolution in question shall be applicable to both
individual and institutional contracts of services;
3. The request of the Philippine Health Insurance Corporation to be exempted from CSC
Resolution No. 02-0790, dated June 5, 2002, is DENIED. All contracts entered on or after
the date of effectivity of the latter resolution should be submitted to the appropriate CSC
regional office for review not later than three (3) days from the execution thereof. To
facilitate the review process, the Philhealth, instead of submitting contracts on a
piecemeal basis, may submit to the CSC-NCR a standard or pro-forma contract of
service. If the standard contract is found to be in conformity with the policy issuance, it
may then serve as basis for the subsequent hiring of people, especially in situations
where time is of the essence or in other analogous circumstances. Nonetheless,
executed service contracts shall still be submitted, with the resume of the individuals
hired, in order to ensure that no departure has been made from the reviewed standard
service contract; and
4. Service contracts, which remain unchanged even after the declaration by the
Commission or its appropriate regional office that a provision or provisions thereof are
invalid, shall be forwarded to the Commission on Audit for appropriate action.

Quezon City, OCT 01 2002

(Signed)
KARINA CONSTANTINO-DAVID
Chairman

(Signed)
JOSE F. ERESTAIN, JR.
Commissioner

(Signed)
J. WALDEMAR V. VALMORES
Commissioner

Attested by:

(Signed)
ARIEL G. RONQUILLO
Director III

FPG/RTM/X1/Y22/jca196
NDC-02-0697
20020619-085
/duque’r

http://excell.csc.gov.ph/mread02/res-021273.html