Government -owned or -controlled corporations

GOCCs without original charters are covered by the Labor Code, not the Civil Service Law.

1. Concept

“Government-Owned or -Controlled Corporation (GOCC)” – refers to any agency organized as a stock or nonstock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government of the Republic of the Philippines directly or through its instrumentalities either wholly or, where applicable as in the case of stock corporations, to the extent of at least a majority of its outstanding capital stock: Provided, however, That for purposes of [R.A. 10149], the term “GOCC” shall include GICP/GCE and GFI as defined herein. (Section 3[o], R.A. 10149)

a. Attributes

Thus, a government-owned or controlled corporation is:

1) Established by original charter or through the general corporation law;

2) Vested with functions relating to public need whether governmental or proprietary in nature; and

3) Directly owned by the government or by its instrumentality, or where the government owns a majority of the outstanding capital stock. (GSIS Family Bank Employees Union v. Villanueva, G.R. No. 210773, 23 January 2019)

Possessing all three (3) attributes is necessary to be classified as a government-owned or controlled corporation. (Ibid.)

b. Classes of Corporations

The Constitution recognizes two classes of corporations. The first refers to private corporations created under a general law. The second refers to government-owned or controlled corporations created by special charters. (Feliciano v. Commission on Audit, En Banc, G.R. No. 147402, 14 January 2004)

A corporation is created by operation of law. It acquires a judicial personality either by special law or a general law. The general law under which a private corporation may be formed or organized is the Corporation Code, the requirements of which must be complied with by those wishing to incorporate. Only upon such compliance will the corporation come into being and acquire a juridical personality, thus giving rise to is right to exist and act as a legal entity. On the other hand, a government corporation is normally created by special law, referred to often as a charter. (BDCEU-SDM v. Ferrer-Calleja, G.R. No. 80887, 30 September 1994)

BDCEU-SDM v. FERRER-CALLEJA, G.R. No. 80887, 30 September 1994

⦁ [Bliss Development Corporation] is a government-owned corporation created under the Corporation Law. It is without a charter, governed by the Labor Code and not by the Civil Service Law hence, Executive Order No. 180 does not apply to it.

3. Government-owned or -controlled corporations

a. GOCCs with original charter

Sec. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. (Article XII, 1987 Constitution)
SECTION 2. (I) The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters. (Article IX-B, 1987 Constitution)

Under Article IX-B, Section 2, paragraph I of the 1987 Constitution, only GOCCs with original charters are covered by civil service laws. (PNCC v. NLRC, G.R. No. 248401, 23 June 2021)

b. GOCCs without original charter

Officers and employees of government-owned or controlled corporations without original charters are covered by the Labor Code, not the Civil Service Law. (GSIS Family Bank Employees Union v. Villanueva, G.R. No. 210773, 23 January 2019)

PNCC v. NLRC, G.R. No. 248401, 23 June 2021

⦁ Since PNCC is a non-chartered GOCC, incorporated under the Corporation Code, it is governed by the Labor Code, not by the Civil Service Law.

⦁ In Paloma v. Philippine Airlines Inc., the Court pronounced that prior to the privatization of the Philippine Airlines Inc. (PAL), it was a non-chartered GOCC in the sense that the GSIS owned majority of its stockholdings. Consequently, PAL personnel were covered by the Labor Code, not by the Civil Service Law. The same rule applies to PNCC employees.

1) Limited in negotiating economic terms

[N]on-chartered government-owned or controlled corporations are limited by law in negotiating economic terms with their employees. This is because the law has provided the Compensation and Position Classification System, which applies to all government-owned or controlled corporations, chartered or non-chartered. (GSIS Family Bank Employees Union v. Villanueva, G.R. No. 210773, 23 January 2019)


1987 Philippine Constitution

/Updated: February 24, 2023

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