City of Gen Santos v Antonino-Custodio (2014)

DOCTRINE: An LGU can grant and release hospitalization and health care insurance benefits to its
officials and employees who were sickly and unproductive due to health reasons. This criteria negates the
position that the benefits provide for supplementary retirement benefits that augment existing retirement
laws.

Local autonomy also grants local governments the power to streamline and reorganize. This power is
inferred from Sec. 76 of the LGC on organizational structure and staffing pattern, and Section 16
otherwise known as the general welfare clause. Local autonomy allows an interpretation of Sections 76
and 16 of the LGC as granting a city the authority to create its organization development program.

FACTS:

 Ordinance No. 08 was passed by the City of General Santos to “entice those employees who were
unproductive due to health reasons to avail of incentives by way of early retirement package.” As
amended, those qualified were government employees below 60 but not less than 50, sickly
employees below 50 but not less than 40. The incentives include cash gift, lifetime free medical
consultation, annual aid and a gold ring.
 The city’s audit team leader sent a query on the legality of the ordinance. The COA agreed that
such ordinance was against the GSIS Act which prohibits supplementary retirement plans from the
time the GSIS Charter took effect.
 It also alleged that based on jurisprudence, an early retirement plan should need valid
reorganization pursuant to law to be valid.
 It also further alleged that nowhere in the LGC does it allow LGUs to establish an early retirement
program.

ISSUE: W/N Ordinance No. 8 is in the nature of an early retirement program requiring a law authorizing it
for its validity – NO, Sec. 6 is a form of severance pay.

HELD:
 SC consistently held that findings of administrative agencies are generally respected, unless found
to have been tainted with unfairness that amounted to grave abuse of discretion.
 Designing and implementing a local government units own organizational structure and staffing
pattern also implies the power to revise and reorganize. Without such power, local governments
will lose the ability to adjust to the needs of its constituents. Effective and efficient governmental
services especially at the local government level require rational and deliberate changes planned
and executed in good faith from time to time.
 Jurisprudence provides that the ordinance is valid when passed by the province granting and
releasing hospitalization and health care insurance benefits to its officials and employees. This
court held that Section 2 of A.O. No. 10354 requiring the Presidents prior approval before the grant
of any allowance or benefit is applicable only to offices under the executive branch. Section 2 does
not mention LGUs, thus, the prohibition does not apply to them.
 Local autonomy allows an interpretation of Sections 76 and 16 as granting petitioner city the
authority to create its organization development program.
 However, LGUs may not provide such when it amounts to a supplementary retirement benefit
scheme. Section 5 of Ordinance No. 8 which refers to an “early retirement incentive” should indeed
be invalid as argued by COA. But Section 6 although labeled retirement incentive, is really a
severance pay; hence, valid.
 In fact, by virtue of RA No. 6656, employees separated from the service as a result of reorganization
shall be entitled to separation pay and other benefits.