MAYNILAD WATER SUPERVISORS ASSOCIATION v MAYNILAD
WATER SERVICES
G.R. No. 198935 | November 27, 2013
Perez, J. | Protacio – Group 3
TOPIC UNDER THE SYLLABUS:
Contract as the law between the parties/freedom of contract
Summary:
FACTS
- Petitioner MWSA is an association composed of former
supervisory employees of MWSS(R)
o They claim that during their employment with
MWSS, they received a monthly cost of living
allowance (COLA) equivalent to 40% of their basic
pay
- Department of Budget and Management (DBM) issued
Corporate Compensation Circular No. 10 (CCC No. 10)
o This discontinued the payment of allowances and
additional compensation, including the COLA
o Effective November 1, 1989
- In 1997, MWSS was privatized and a part of it was
acquired by Maynilad
o Some of MWSS employees, including members of
petitioner MWSA, were absorbed subject to the
terms and conditions of a Concession Agreement
 “The Concessionaire shall make an offer to
employ each Concessionaire Employee… at a
salary or pay scale and with benefits at least
equal to those enjoyed by such Employee on
the date of his/her separation from MWSS”
 “…grants to all Concessionaire Employees
employee benefits no less favorable than
those granted to such employees by the
MWSS, particularly those set forth in Exhibit
F”
o Take note that the payment of COLA was not
among those listed as benefits in Exhibit F
- 1998, Supreme Court decided that DBM CCC No. 10 was
ineffective for failure to comply with publication
requirements
o MWSS partially released the COLA payments for
employees, covering 1989-1997
o Up to 1999 for its retained employees
- MWSA filed in 2002 a complaint before the Labor Arbiter
praying for payment of their COLA from the year 1997 to
present
o This was the year they were absorbed by
Maynilad
o Argued that because CCC No. 10 was ineffective,
COLA should be paid as part of the benefits
enjoyed by members at the time of separation
- Labor Arbiter granted the claim of MWSA, directing
Maynilad to pay COLA
- NLRC granted Maynilad’s appeal and reversed the
decision of the Labor Arbiter
- MWSA filed petition for certiorari with CA
o CA annulled and set aside decision of NLRC,
reinstating decision of Labor Arbiter
o After Maynilad’s MR, CA changed its own decision
- MWSA then filed for certiorari after being denied a
Motion for Reconsideration
ISSUES
W/N Maynilad bound itself under the Concession Agreement to pay the
COLA of the employees it absorbed from the MWSS – NO.
RATIO
- Studying the Concession Agreement, both MWSS and Maynilad
never intended to include COLA as one of the benefits to be
granted to the absorbed employees
- The list of benefits agreed upon by the parties were clearly
enumerated in Exhibit F
 o Allowances rights, duties and obligations. It is the best
o Bonuses evidence of the intention of the parties.
o Premiums  Thus, when the terms of an agreement have
o Paid leaves been reduced to writing, it is considered as
o Study leaves containing all the terms agreed upon and
- The Declaration by the Court of ineffectiveness of DBM CCC No. there can be no evidence of such terms other
10 did not give rise to the employee’s right to demand payment than the contents of the written agreement
- The government had already resolved to remove the COLA, between the parties and their successors in
among others from the list of allowances being received by interest.
government employees  Time and again, we have stressed the rule that
o Enactment of RA 6758 or the Compensation and a contract is the law between the parties, and
Position Classification Act integrated COLA into the courts have no choice but to enforce such
standardized salary rate contract so long as it is not contrary to law,
- COLA is not in the nature of an allowance intended to morals, good customs or public policy.
reimburse expenses incurred by officials and employees of the  Courts cannot stipulate for the parties or
government in the performance of their functions amend the latter’s agreement, for to do so
o Not a payment in consideration of the fulfillment of would be to alter the real intention of the
official duty contracting parties when the contrary
o COLA is a benefit intended to cover increases in the function of courts is to give force and effect to
cost of living the intention of the parties.
 Thus it is and should be integrated into the
standardized salary rates
- At the time MWSS employees were absorbed by Maynilad, the
COLA was already part and parcel of their monthly salary
o Non-publication of DBM CCC No. 10 did not nullify the
integration of the COLA into the standardized salary
rates
- Unless expressly assumed, labor contracts such as employment
contracts and collective bargaining agreements are not
enforceable against a transferee of an enterprise, labor contracts
being in personam, thus binding only between the parties
o The only commitment of Maynilad was to provide the
absorbed employees with compensation package “no
less favorable than those granted to them by the
MWSS at the time of their separation from MWSS”
o NORTON RESOURCES AND DEVELOPMENT CORP V
ALL ASIA BANK CORP
 The agreement or contract between the
parties is the formal expression of the parties’