Baybay Water District(BWD) v.

Commission on Audit followed, regulation regarding transfer of employees, supervision of their

G.R. No. 127248-49 (Jan 23, 2002)
Ponente: MENDOZA, J. Digest Author: MERCADO
DOCTRINE: Management prerogative refers to the right of an employer to regulate
all aspects of employment, such as the freedom to prescribe work assignments,
working methods, processes to be followed, regulation regarding transfer of
employees, supervision of their work, lay-off and discipline, and dismissal and recall
of work, presupposing the existence of an employer-employee relationship;
Members of water districts’ boards of directors are not employees of the water
districts; The right of directors of water districts to the payment of compensation is
expressly provided in P.D. No. 198, thus pre-empting the existence of any discretion
by the water districts.
FACTS:
 Resident Auditor of the BWD conducted an audit and disallowed
payments of per diems in excess of those authorized by the Local Water
Utilities Administration (LWUA) and P.D. No. 198, RATA (representation
and transportation allowance) and rice allowances granted to the
members of the board of directors of the BWD, as well as duplication of
claims for cash gifts as part of the Christmas bonus of the general
manager and traveling allowance of the officers of the BWD.
 BWD appealed to COA Regional Office in Baybay, Leyte but the latter
affirmed the findings of the resident auditor. Subsequently, BWD
appealed to the COA which dismissed the appeal. Hence, this petition.
work, lay-off and discipline, and dismissal and recall of work.
- Clearly, the existence of such right presupposes the existence of an
employer-employee relationship. In the present case, the BWD board of
directors are not employees of BWD. As already noted, their function, as
defined by P.D. No. 1981, is limited to policy-making, implying that their
relationship to the water district is more fiduciary than that of employer-
employee. Moreover, as also noted before, the right of directors of water
districts to the payment of compensation is expressly provided for in P.D.
No. 198, thus pre-empting the exercise of any discretion by the water
districts.
- With respect to the officers and employees of BWD, it has been held that
the terms and conditions of employment of government employees are
governed by law. Thus, the exercise of management prerogative by
government corporations are limited by the provisions of the laws
applicable to them. The cash gift granted to the general manager as part
of his Christmas bonus was in excess of that authorized by R.A. No. 6686.
It cannot be justified by the exercise of management prerogative as it is
contrary to law.
DISPOSITION: Denied.

PETITIONER’S CONTENTION: The prohibition undermines the management

prerogatives of water districts.

ISSUE: Whether the benefits granted to the BWD officers and employees is an
exercise of management prerogative.

RULING+RATIO: NO.
- With respect to the board of directors, there is no basis for such
contention. To begin with, management prerogative refers to the right of
an employer to regulate all aspects of employment, such as the freedom
to prescribe work assignments, working methods, processes to be

1Sec. 18. Functions Limited to Policy-Making.—The not engage in the detailed management of the district.
function of the board shall be to establish policy. The Board shall