G.R. No. 148208 ; December 15, 2004
CENTRAL BANK (now Bangko Sentral ng Pilipinas) EMPLOYEES ASSOCIATION, INC., petitioner, vs. BANGKO SENTRAL NG PILIPINAS and the EXECUTIVE SECRETARY, respondents.

FACTS

Republic Act No. 7653, the New Central Bank Act, took effect in 1993. Section 15(c) of the law grants the Monetary Board the authority to establish a human resource management system for the Bangko Sentral ng Pilipinas (BSP). A proviso in this section states that the compensation of employees with positions at salary grade 19 and below shall conform to the rates prescribed under the Salary Standardization Law (SSL). In 2001, the Central Bank Employees Association filed a petition for prohibition, challenging this proviso as unconstitutional. The petitioner argued that the classification between BSP officers (exempt from the SSL) and rank-and-file employees (subject to the SSL) was an invalid classification that violated the equal protection clause. They contended it created an arbitrary distinction not based on substantial differences and led to significant pay disparity and demoralization among rank-and-file staff.
The respondents, BSP and the Executive Secretary, defended the provision’s validity. They asserted the classification was reasonable and germane to the law’s purpose of establishing professionalism within the BSP, subject to national government policies. The core issue presented was whether the proviso denying SSL exemption to BSP rank-and-file employees constituted a denial of equal protection of the laws.

RULING

The Supreme Court ruled the proviso in Section 15(c) of R.A. No. 7653 violated the equal protection clause and was unconstitutional. The legal logic proceeded in two stages. First, the Court acknowledged that when the law was enacted in 1993, the classification might have been valid under a rational basis review, as the legislature could have rationally decided to standardize lower-rank salaries while allowing competitive pay for officers to attract expertise. However, the Court applied the doctrine of “supervening events.” Subsequent laws exempting all rank-and-file employees of other major government financial institutions (GFIs)—like the GSIS, SSS, Land Bank, and Development Bank of the Philippines—from the SSL constituted a supervening event.
This legislative action created a clear and discriminatory distinction. A classification that was once permissible became invalid because it now singled out BSP rank-and-file employees as the only ones among similarly situated GFI employees subjected to the SSL. The equal protection clause requires that all persons or things similarly situated should be treated alike. The rank-and-file employees of the BSP perform functions of the same category and nature as their counterparts in other GFIs. There was no substantial distinction to justify treating them differently regarding compensation exemption. The continued application of the proviso thus resulted in invidious discrimination against BSP rank-and-file personnel, rendering it unconstitutional.