UNICAN vs. NEA

The power to reorganize a government office under Section 5(a)(5) of Presidential Decree No. 269 includes the power to terminate all employees, provided the reorganization is done in good faith for purposes of economy and efficiency; the termination of an entire workforce prior to selective rehiring is valid and not indicative of bad faith per se.

The National Electrification Administration (NEA) is a government-owned and controlled corporation created under Presidential Decree No. 269 to administer rural electrification. In 2001, Congress enacted Republic Act No. 9136, the Electric Power Industry Reform Act (EPIRA), which restructured the electric power industry and imposed additional mandates on NEA regarding rural electric cooperatives. Pursuant to this restructuring framework, the NEA Board implemented a reorganization plan that resulted in the termination of the entire NEA plantilla, affecting over 700 employees, leading to this legal challenge.

• Petitioners are former employees of NEA who were terminated from their employment with the implementation of Resolution Nos. 46 and 59 dated July 10, 2003 and September 3, 2003, respectively, otherwise known as the NEA Termination Pay Plan.
• NEA is a government-owned and controlled corporation created in accordance with Presidential Decree No. 269 issued on August 6, 1973.
• Under PD 269, Section 5(a)(5), the NEA Board is empowered to organize or reorganize NEA's staffing structure, fix salaries of personnel, and define their powers and duties.
• Republic Act No. 9136 (EPIRA Law) was enacted to provide a framework for the restructuring of the electric power industry, including the privatization of the National Power Corporation, and took effect on June 26, 2001.
• The Implementing Rules and Regulations of RA 9136 were issued on February 27, 2002, providing under Rule 33, Section 3(b)(ii) that all NEA officials and employees shall be considered legally terminated when a restructuring of NEA is implemented pursuant to a law enacted by Congress or pursuant to Section 5(a)(5) of Presidential Decree No. 269.
• On August 28, 2002, former President Gloria Macapagal-Arroyo issued Executive Order No. 119 directing the NEA Board to submit a reorganization plan.
• The NEA Board issued the assailed resolutions implementing the Termination Pay Plan.
• On September 17, 2003, the Department of Budget and Management approved the NEA Termination Pay Plan.
• NEA implemented an Early Leavers Program giving incentives to those who availed of early retirement before the effectivity of the reorganization plan.
• The other employees were terminated effective December 31, 2003.
• The petition involves the termination of the entire plantilla of NEA consisting of more than 700 employees.

• The NEA Board has no power to terminate all NEA employees; the power to organize or reorganize under PD 269 only allows reduction of manpower complement, not total termination of the entire workforce.
• Executive Order No. 119 did not grant the NEA Board the power to terminate all employees.
• Resolution Nos. 46 and 59 were carried out in bad faith.
• The NEA Board should have made a selective termination instead of abolishing all offices, retaining only employees necessary to carry out continuing mandates while abolishing only positions related to functions removed by Congress (franchise granting and rate fixing).
• A valid reorganization should have only: (1) abolished old positions pertaining to abolished functions; (2) created new positions for additional EPIRA mandates; and (3) maintained old positions not affected by the EPIRA Law.

• The Supreme Court has no jurisdiction over the petition because petitioners violated the principle of hierarchy of courts by filing directly with the Supreme Court instead of the Regional Trial Court.
• Injunction is improper because the assailed resolutions of the NEA Board have long been implemented, rendering the case moot and academic.
• The assailed NEA Board resolutions were issued in good faith pursuant to a bona fide reorganization for economy and efficiency.

• Procedural Issues:

  • Whether the Supreme Court has jurisdiction over the petition despite petitioners' failure to observe the principle of hierarchy of courts.
  • Whether the remedy of injunction is still available given that the assailed resolutions have long been implemented and the terminations have already taken effect.

• Substantive Issues:

  • Whether the NEA Board had the power to pass Resolution Nos. 46 and 59 terminating all NEA employees.
  • Whether the NEA Board acted in bad faith in implementing the reorganization and termination of employees.

• Procedural:

  • The Supreme Court has jurisdiction as an exception to the principle of hierarchy of courts because the case involves special and important reasons clearly set out in the petition, specifically the transcendental importance affecting over 700 employees who were dismissed in one stroke, similar to the ruling in National Power Corporation Drivers and Mechanics Association (NPC-DAMA) v. National Power Corporation.
  • The remedy of injunction is still available despite implementation of the resolutions because the case falls under the exception to the principle of mootness; the issue is capable of repetition yet evading review, involves transcendental importance, and requires the formulation of controlling principles to guide the bench, bar, and public.

• Substantive:

  • The NEA Board had the power to terminate all employees. Under Section 5(a)(5) of PD 269, the power to organize or reorganize NEA's staffing structure includes the power to terminate, as reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. Rule 33, Section 3(b)(ii) of the EPIRA IRR explicitly provides that NEA officials and employees shall be considered legally terminated when restructuring is implemented pursuant to PD 269.
  • Petitioners failed to prove bad faith by clear and convincing evidence. The burden of proving bad faith rests on the alleging party, and mere allegations without hard evidence cannot suffice. The termination of all employees before rehiring necessary personnel is valid if done pursuant to a bona fide reorganization for economy and to make the bureaucracy more efficient, as held in Betoy v. NPC.

• Hierarchy of Courts — While the Supreme Court, Court of Appeals, and Regional Trial Courts have concurrent jurisdiction to issue extraordinary writs, direct invocation of the Supreme Court's original jurisdiction should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition, such as transcendental importance affecting a large number of employees.
• Exception to the Principle of Mootness — Courts will decide a question otherwise moot if it is capable of repetition yet evading review, or when there is a grave violation of the Constitution, or to formulate controlling principles to guide the bench, bar, and public.
• Power of Reorganization Includes Power of Removal — Reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions, and could result in the loss of one's position through removal or abolition of an office.
• Test of Good Faith in Reorganization — For a reorganization for the purpose of economy or to make the bureaucracy more efficient to be valid, it must pass the test of good faith; otherwise, it is void ab initio. Indicators of bad faith under Republic Act No. 6656 include significant increase in positions, replacement by less qualified personnel, and abolition of offices replaced by substantially similar units.
• Burden of Proof for Bad Faith — Good faith is presumed, and he who alleges bad faith has the duty to prove the same by clear and convincing evidence.

• "A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ('inferior') courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition."
• "A moot and academic case is one that ceases to present a justiciable controversy by virtue of supervening events, so that a declaration thereon would be of no practical use or value."
• "As a rule, the writ of prohibition will not lie to enjoin acts already done. However, as an exception to the rule on mootness, courts will decide a question otherwise moot if it is capable of repetition yet evading review."
• "[R]eorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. It could result in the loss of one's position through removal or abolition of an office."
• "However, for a reorganization for the purpose of economy or to make the bureaucracy more efficient to be valid, it must pass the test of good faith; otherwise, it is void ab initio."
• "According to jurisprudence, 'basic is the principle that good faith is presumed and he who alleges bad faith has the duty to prove the same.'"

• Mendoza v. Villas — Cited for the explanation of the principle of hierarchy of courts and the requirement that petitions for extraordinary writs should be filed with lower courts first rather than directly with the Supreme Court.
• Chamber of Real Estate and Builders Associations, Inc. (CREBA) v. Secretary of Agrarian Reform — Cited in Mendoza regarding dismissal of petitions for violation of hierarchy of courts.
• Heirs of Bertuldo Hinog v. Melicor — Cited regarding the principle that concurrence of jurisdiction does not give parties unrestricted freedom of choice of court forum.
• People v. Cuaresma — Cited regarding the hierarchy of courts as determinative of venue and appropriate forum for petitions for extraordinary writs.
• National Power Corporation Drivers and Mechanics Association (NPC-DAMA) v. National Power Corporation (NPC) — Controlling precedent allowing direct filing with the Supreme Court due to transcendental importance involving termination of all NPC employees, similar to the instant case.
• Funa v. Executive Secretary — Cited for the exception to the principle of mootness when the case is capable of repetition yet evading review or involves transcendental importance.
• Public Interest Center, Inc. v. Elma — Cited regarding the exception to mootness when there is grave violation of the Constitution.
• Betoy v. The Board of Directors, National Power Corporation — Controlling precedent upholding the termination of all employees pursuant to reorganization under EPIRA, establishing that power to reorganize includes power to remove and that terminating all before rehiring is valid if in good faith.
• Culili v. Eastern Telecommunications, Inc. — Cited for the principle that good faith is presumed and the burden of proving bad faith rests on the alleging party.
• Spouses Palada v. Solidbank Corporation — Cited for the standard that allegations of bad faith must be proved by clear and convincing evidence.

• PD 269, Section 5(a)(5) — Grants the NEA Board the specific power to organize or reorganize NEA's staffing structure, fix salaries of personnel, and define their powers and duties.
• RA 9136 (EPIRA Law), Section 3 — Provides the scope of the law including the restructuring of the electric power industry and privatization of NPC assets.
• RA 9136 (EPIRA Law), Section 77 — Mandates the Department of Energy to promulgate Implementing Rules and Regulations within six months from effectivity.
• Rule 33, Section 3(b)(ii) of the EPIRA IRR — Explicitly provides that NEA officials and employees shall be considered legally terminated and entitled to separation pay when a restructuring is implemented pursuant to law or PD 269.
• Executive Order No. 119 — Issued on August 28, 2002, directing the NEA Board to submit a reorganization plan.
• RA 6656, Section 2 — Enumerates indicators of bad faith in government reorganization, including replacement by less qualified personnel, abolition of offices replaced by substantially similar units, and significant increase in positions.