Central Bank Employees Ass’n v.
BSP
FACTS
• RA 7653 (the New Central Back Act) took effect which abolished the old Central Bank
of the Philippines and created a new BSP
• 8 years after the effectivity of RA 7653, Central Bank Employees Association Inc, filed a
petition for prohibition against BSP and the Executive Secretary of the Office of the
President, to restrain respondents from further implementing the last proviso in S15(c),
A2 of RA 7653 on the ground that it is unconstitutional
Section 15 Exercise of Authority - In the exercise of its authority, the monetary board shall:
(c) establish a human resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to
establish professionalism and excellence at all levels of BSP in accordance with sound principles
of management . . .
Provided, however, That compensation and wage structure of employees whose positions fall
under salary grade 19 and below shall be in accordance with the rates prescribed under RA
6758
• Petitioners argue that the assailed proviso is unconstitutional because it makes an
"unconstitutional cut" between two classes of employees of BSP
1. the BSP officers or those exempted from the coverage of the Salary
Standardization Law (SSL) (exempt class); and
2. the rank-and-file (Salary Grade 19 and below), or those not exempted from the
coverage of the SSL (non-exempt class)
3. the classification was not reasonable, but arbitrary and capricious, and violated
the equal-protection clause of the Constitution.
4. The proviso was allegedly not germane to the purposes of Section 15(c) of Article
II of RA 7653, the most important of which was to establish professionalism and
excellence at all levels in the BSP
• BSP (respondents), contend that the assailed provision does not violate the equal
protection clause and can stand the constitutional test, provided it is construed in
harmony with other provisions of the same law, such as “fiscal and administrative
autonomy of BSP,” and the mandate of the Monetary Board to “establish professionalism
and excellence at all levels in accordance with sound principles of management.”
• OSG also defends the validity of the provision and argues that the classification is based
on actual and real differentiation, even as it adheres to enunciated policy of RA 7653 to
establish professionalism and excellence within BSP subject to prevailing laws and
policies of the national government
• After R.A. 7653 was passed, the charters of the GSIS, LBP, DBP, and SSS were
amended, leaving the BSP as the only Government Financial Institution (GFI) with the
rank-and-file personnel being discriminated upon. The petitioner points out that the
charters of the charters of the seven other GFIs share this common proviso: a
blanket exemption of all their employees from the coverage of the SSL, expressly or
impliedly. Thus, eleven years after the amendment of the BSP charter, the rank-and-file
of seven other GFIs were granted the exemption that was specifically denied to the
rank-and-file of the BSP. And as if to add insult to petitioner’s injury, even the
Securities and Exchange Commission (SEC) was granted the same blanket exemption
from the SSL in 2000.
ISSUE
• W/N S15(c), Article II of R.A. No. 7653 violates the equal protection clause? NO (on its
face valid yung law and classification)
SC HELD
• Under the present standards of equal protection, S15(c), A2 of RA 7653 is VALID,
however the continued operation and implementation is unconstitutional
RATIO
The assailed provision of RA 7653 is VALID based on jurisprudential standards
• Based on jurisprudential standards, the Provision is valid. Jurisprudence sets standards
for a valid classification: that is must be reasonable, which means that the classification
should be based on substantial distinctions which make for real differences, that it must
be german to the purpose of the law, that is must not be limited to existing conditions
only, and that it must apply equally to all members of the same class.
• In this case, it is clear in the legislative deliberations that the exemption of officers (SG
20 and above) from the SSL was intended to address the BSP’s lack of competitiveness
in terms of attracting competent officers and executives. If the end-result did in fact lead
to a disparity of treatment between the officers and the rank-and-file in terms of salaries
and benefits, the discrimination or distinction has a rational basis and is not palpably,
purely, and entirely arbitrary in the legislative sense.
Relative Constitutionality
• Constitutionality of a statute cannot, in every instance, be determined by a mere
comparison of its provisions with applicable provisions of the Constitution, since the
statute may be constitutionally valid as applied to one set of facts and invalid in its
application to another.
• A statute valid at one time may become void at another time because of altered
circumstances. Thus, if a statute in its practical operation becomes arbitrary or
confiscatory, its validity, even though affirmed by a former adjudication, is open to
inquiry and investigation in the light of changed conditions.
• The Court cited US and PH jurisprudence which basically explains relative
constitutionality.
o Rutter v Esteban - court declared the continued enforcement of a valid law as
unconstitutional as a consequence of significant changes in circumstances.
o upheld the constitutionality of the moratorium law — its enactment and operation
being a valid exercise by the State of its police power — but also ruled that the
continued enforcement of the otherwise valid law would be unreasonable and
oppressive.
• These significant changes in the circumstance alter the reasonability of the continued
operation of the assailed provision. The case at bar does not meet the second requisite
of a valid classification insofar as its inequality of treatment cannot be justified on
the mere assertion that each exemption (granted to the seven other GFIs) rests on a
“policy determination by the legislature.”
• Against the standard of “strict scrutiny,” the disparity in the treatment of the rank-and-
file employees of the BSP and those of the other GFIs could not stand judicial scrutiny. It
was held that there were no characteristics peculiar only to the rank-and-file
employees of the seven GFIs that would justify the exemption that was denied to
those of the BSP. Moreover, the challenged provision operated on the basis of the
salary grade or officer- employee status, a distinction akin to that based on
economic class and status. That classification was suspect, as shown by a number of
international conventions, as well as foreign and international jurisprudence.
o Article 1 of Universal Declaration of Human Rights
o International Covenant on Civil and Political rights
o Burger Court
o Warren Court
• while the granting of a privilege per se is a matter of policy exclusively within the
domain and prerogative of Congress, the validity or legality of the exercise of this
prerogative is subject to judicial review. So when the distinction made is superficial, and
not based on substantial distinctions that make real differences between those included
and excluded, it becomes a matter of arbitrariness that the Court has the duty and the
power to correct.
• In light of the lack of real and substantial distinctions that would justify the unequal
treatment between the rank-and-file of BSP from the seven other GFIs, it is clear that the
enactment of the seven subsequent charters has rendered the continued application of the
challenged proviso anathema to the equal protection of the law, and the same should be
declared as an outlaw.
