G.R. No.
L-15045 January 20, 1961 From the above legal provisions, it is apparent that the
IN RE: PETITION FOR EXEMPTION FROM COVERAGE BY
THE SOCIAL SECURITY SYSTEM. ROMAN CATHOLIC
ARCHBISHOP OF MANILA, petitioner-appellant,
vs.
SOCIAL SECURITY COMMISSION, respondent-appellee.
Feria, Manglapus and Associates for petitioner-appellant.
Legal Staff, Social Security System and Solicitor General for
respondent-appellee.
GUTIERREZ DAVID, J.:
On September 1, 1958, the Roman Catholic Archbishop of
Manila, thru counsel, filed with the Social Security Commission
a request that "Catholic Charities, and all religious and
charitable institutions and/or organizations, which are directly
or indirectly, wholly or partially, operated by the Roman
Catholic Archbishop of Manila," be exempted from compulsory
coverage of Republic Act No. 1161, as amended, otherwise
known as the Social Security Law of 1954. The request was
based on the claim that the said Act is a labor law and does not
cover religious and charitable institutions but is limited to
businesses and activities organized for profit. Acting upon the
recommendation of its Legal Staff, the Social Security
Commission in its Resolution No. 572, series of 1958, denied
the request. The Roman Catholic Archbishop of Manila,
reiterating its arguments and raising constitutional objections,
requested for reconsideration of the resolution. The request,
however, was denied by the Commission in its Resolution No.
767, series of 1958; hence, this appeal taken in pursuance of
section 5(c) of Republic Act No. 1161, as amended.
Section 9 of the Social Security Law, as amended, provides
that coverage "in the System shall be compulsory upon all
members between the age of sixteen and sixty rears inclusive,
if they have been for at least six months a the service of an
employer who is a member of the System, Provided, that the
Commission may not compel any employer to become member
of the System unless he shall have been in operation for at
least two years and has at the time of admission, if admitted for
membership during the first year of the System's operation at
least fifty employees, and if admitted for membership the
following year of operation and thereafter, at least six
employees x x x." The term employer" as used in the law is
defined as any person, natural or juridical, domestic or foreign,
who carries in the Philippines any trade, business, industry,
undertaking, or activity of any kind and uses the services of
another person who is under his orders as regards the
employment, except the Government and any of its political
subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government" (par. [c],
see. 8), while an "employee" refers to "any person who
performs services for an 'employer' in which either or both
mental and physical efforts are used and who receives
compensation for such services" (par. [d], see. 8).
"Employment", according to paragraph [i] of said section 8,
covers any service performed by an employer except those
expressly enumerated thereunder, like employment under the
Government, or any of its political subdivisions, branches or
instrumentalities including corporations owned and controlled
by the Government, domestic service in a private home,
employment purely casual, etc.
coverage of the Social Security Law is predicated on the
existence of an employer-employee relationship of more or
less permanent nature and extends to employment of all kinds
except those expressly excluded.
Appellant contends that the term "employer" as defined in the
law should — following the principle of ejusdem generis — be
limited to those who carry on "undertakings or activities which
have the element of profit or gain, or which are pursued for
profit or gain," because the phrase ,activity of any kind" in the
definition is preceded by the words "any trade, business,
industry, undertaking." The contention cannot be sustained.
The rule ejusdem generis applies only where there is
uncertainty. It is not controlling where the plain purpose and
intent of the Legislature would thereby be hindered and
defeated. (Grosjean vs. American Paints Works [La], 160 So.
449). In the case at bar, the definition of the term "employer" is,
we think, sufficiently comprehensive as to include religious and
charitable institutions or entities not organized for profit, like
herein appellant, within its meaning. This is made more evident
by the fact that it contains an exception in which said
institutions or entities are not included. And, certainly, had the
Legislature really intended to limit the operation of the law to
entities organized for profit or gain, it would not have defined
an "employer" in such a way as to include the Government and
yet make an express exception of it.
It is significant to note that when Republic Act No. 1161 was
enacted, services performed in the employ of institutions
organized for religious or charitable purposes were by express
provisions of said Act excluded from coverage thereof (sec. 8,
par. [j] subpars. 7 and 8). That portion of the law, however, has
been deleted by express provision of Republic Act No. 1792,
which took effect in 1957. This is clear indication that the
Legislature intended to include charitable and religious
institutions within the scope of the law.
In support of its contention that the Social Security Law was
intended to cover only employment for profit or gain, appellant
also cites the discussions of the Senate, portions of which were
quoted in its brief. There is, however, nothing whatsoever in
those discussions touching upon the question of whether the
law should be limited to organizations for profit or gain. Of
course, the said discussions dwelt at length upon the need of a
law to meet the problems of industrializing society and upon
the plight of an employer who fails to make a profit. But this is
readily explained by the fact that the majority of those to be
affected by the operation of the law are corporations and
industries which are established primarily for profit or gain.
Appellant further argues that the Social Security Law is a labor
law and, consequently, following the rule laid down in the case
of Boy Scouts of the Philippines vs. Araos (G.R. No. L-10091,
January 29, 1958) and other cases1, applies only to industry
and occupation for purposes of profit and gain. The cases
cited, however, are not in point, for the reason that the law
therein involved expressly limits its application either to
commercial, industrial, or agricultural establishments, or
enterprises. .
Upon the other hand, the Social Security Law was enacted
pursuant to the "policy of the Republic of the Philippines to
develop, establish gradually and perfect a social security
system which shall be suitable to the needs of the people
Page 1 of 19
throughout the Philippines and shall provide protection to
employees against the hazards of disability, sickness, old age
and death." (See. 2, Republic Act No. 1161, as amended.)
Such enactment is a legitimate exercise of the police power. It
affords protection to labor, especially to working women and
minors, and is in full accord with the constitutional provisions
on the "promotion of social justice to insure the well-being and
economic security of all the people." Being in fact a social
legislation, compatible with the policy of the Church to
ameliorate living conditions of the working class, appellant
cannot arbitrarily delimit the extent of its provisions to relations
between capital and labor in industry and agriculture.
There is no merit in the claim that the inclusion of religious
organizations under the coverage of the Social Security Law
violates the constitutional prohibition against the application of
public funds for the use, benefit or support of any priest who
might be employed by appellant. The funds contributed to the
System created by the law are not public funds, but funds
belonging to the members which are merely held in trust by the
Government. At any rate, assuming that said funds are
impressed with the character of public funds, their payment as
retirement death or disability benefits would not constitute a
violation of the cited provisions of the Constitution, since such
payment shall be made to the priest not because he is a priest
but because he is an employee.
Neither may it be validly argued that the enforcement of the
Social Security Law impairs appellant's right to disseminate
religious information. All that is required of appellant is to make
monthly contributions to the System for covered employees in
its employ. These contributions, contrary to appellant's
contention, are not in the nature of taxes on employment."
Together with the contributions imposed upon the employees
and the Government, they are intended for the protection of
said employees against the hazards of disability, sickness, old
age and death in line with the constitutional mandate to
promote social justice to insure the well-being and economic
security of all the people.
IN VIEW OF THE FOREGOING, Resolutions Nos. 572 kind
767, series of 1958, of the Social Security Commission are
hereby affirmed. So ordered with costs against appellant.
G.R. No. L-26298 September 28, 1984
CMS ESTATE, INC., petitioner,
vs.
SOCIAL SECURITY SYSTEM and SOCIAL
SECURITY COMMISSION, respondents.
Sison Dominguez & Cervantes for petitioner.
The Legal Counsel for respondent SSS.
CUEVAS, J.:
This appeal by the CMS Estate, Inc. from the decision
rendered by the Social Security Commission in its
Case No. 12, entitled "CMS Estate, Inc. vs. Social
Security System, declaring CMS subject to
compulsory coverage as of September 1, 1957 and
"directing the Social Security System to effect such
coverage of the petitioner's employees in its logging
and real estate business conformably to the provision
of Republic Act No. 1161, as amended was certified
to Us by the defunct Court of Appeals 1 for further
disposition considering that purely questions of law are involved.
Petitioner is a domestic corporation organized
primarily for the purpose of engaging in the real estate
business. On December 1, 1952, it started doing
business with only six (6) employees. It's Articles of
Incorporation was amended on June 4, 1956 in order
to engage in the logging business. The Securities and
Exchange Commission issued the certificate of filing
of said amended articles on June 18, 1956. Petitioner
likewise obtained an ordinary license from the Bureau
of Forestry to operate a forest concession of 13,000
hectares situated in the municipality of Baganga,
Province of Davao.
On January 28, 1957, petitioner entered into a
contract of management with one Eufracio D. Rojas
for the operation and exploitation of the forest
concession The logging operation actually started on
April 1, 1957 with four monthly salaried employees.
As of September 1, 1957, petitioner had 89
employees and laborers in the logging operation. On
December 26, 1957, petitioner revoked its contract of
management with Mr. Rojas.
On August 1, 1958, petitioner became a member of
the Social Security System with respect to its real
estate business. On September 6, 1958, petitioner
remitted to the System the sum of P203.13
representing the initial premium on the monthly
salaries of the employees in its logging business.
However, on October 9, 1958, petitioner demanded
the refund of the said amount, claiming that it is not
yet subject to compulsory coverage with respect to its
logging business. The request was denied by
respondent System on the ground that the logging
business was a mere expansion of petitioner's
activities and for purposes of the Social Security Act,
petitioner should be considered a member of the
System since December 1, 1952 when it commenced
its real estate business.
On November 10, 1958, petitioner filed a petition with
the Social Security Commission praying for the
determination of the effectivity date of the compulsory
coverage of petitioner's logging business.
Page 2 of 19
After both parties have submitted their respective
memoranda, the Commission issued on January 14,
1960, Resolution No. 91, 2 the dispositive portion of
which reads as follows:
Premises considered, the instant
petition is hereby denied and
petitioner is hereby adjudged to be
subject to compulsory coverage as of
Sept. 1, 1957 and the Social Security
System is hereby directed to effect
such coverage of petitioner's
employees in its logging and real
estate business conformably to the
provisions of Rep. Act No. 1161, as
amended.
SO ORDERED.
Petitioner's motion for reconsideration was denied in
Resolution No. 609 of the Commission.
These two (2) resolutions are now the subject of
petitioner's appeal. Petitioner submits that respondent
Commission erred in holding —
(1) that the contributions required of
employers and employees under our
Social Security Act of 1954 are not in
the nature of excise taxes because the
said Act was allegedly enacted by
Congress in the exercise of the police
power of the State, not of its taxing
power;
(2) that no contractee — independent
contractor relationship existed
between petitioner and Eufracio D.
Rojas during the time that he was
operating its forest concession at
Baganga, Davao;
(3) that a corporation which has been
in operation for more than two years in
one business is immediately covered
with respect to any new and
independent business it may
subsequently engage in;
(4) that a corporation should be
treated as a single employing unit for
purposes of coverage under the Social
Security Act, irrespective of its
separate, unrelated and independent
business established and operated at
different places and on different dates;
and
(5) that Section 9 of the Social
Security Act on the question of
compulsory membership and
employers should be given a liberal
interpretation.
Respondent, on the other hand, advances the
following propositions, inter alia:
(1) that the Social Security Act speaks
of compulsory coverage of employers
and not of business;
(2) that once an employer is initially
covered under the Social Security Act,
any other business undertaken or
established by the same employer is
likewise subject in spite of the fact that
the latter has not been in operation for
at least two years;
(3) that petitioner's logging business
while actually of a different, distinct,
separate and independent nature from
its real estate business should be
considered as an operation under the
same management;
(4) that the amendment of petitioner's
articles of incorporation, so as to
enable it to engage in the logging
business did not alter the juridical
personality of petitioner; and
(5) the petitioner's logging operation is
a mere expansion of its business
activities.
The Social Security Law was enacted pursuant to the
policy of the government "to develop, establish
gradually and perfect a social security system which
shall be suitable to the needs of the people
throughout the Philippines, and shall provide
protection against the hazards of disability, sickness,
old age and death" (Sec. 2, RA 1161, as amended). It
is thus clear that said enactment implements the
general welfare mandate of the Constitution and
constitutes a legitimate exercise of the police power of
the State. As held in the case of Philippine Blooming
Mills Co., Inc., et al. vs. SSS 3 —
Membership in the SSS is not a result
of bilateral, concensual agreement
Page 3 of 19
 where the rights and obligations of the
parties are defined by and subject to
their will, RA 1161 requires
compulsory coverage of employees
and employers under the System. It is
actually a legal imposition on said
employers and employees, designed
to provide social security to the
workingmen. Membership in the SSS
is therefore, in compliance with the
lawful exercise of the police power of
the State, to which the principle of
non-impairment of the obligation of
contract is not a proper defense.
xxx xxx xxx
The taxing power of the State is exercised for the
purpose of raising revenues. However, under our
Social Security Law, the emphasis is more on the
promotion of the general welfare. The Act is not part
of out Internal Revenue Code nor are the
contributions and premiums therein dealt with and
provided for, collectible by the Bureau of Internal
Revenue. The funds contributed to the System belong
to the members who will receive benefits, as a matter
of right, whenever the hazards provided by the law
occur.
All that is required of appellant is to
make monthly contributions to the
System for covered employees in its
employ. These contributions, contrary
to appellant's contention, are not 'in
the nature of taxes on employment.'
Together with the contributions
imposed upon employees and the
Government, they are intended for the
protection of said employees against
the hazards of disability, sickness, old
age and death in line with the
constitutional mandate to promote
social justice to insure the well-being
and economic security of all the
people.4
Because of the broad social purpose of the Social
Security Act, all doubts in construing the Act should
favor coverage rather than exemption.
Prior to its amendment, Sec. 9 of the Act provides that
before an employer could be compelled to become a
member of the System, he must have been in
operation for at least two years and has at the time of
admission at least six employees. It should be pointed
out that it is the employer, either natural, or judicial
person, who is subject to compulsory coverage and
not the business. If the intention of the legislature was
to consider every venture of the employer as the basis
of a separate coverage, an express provision to that
effect could have been made. Unfortunately, however,
none of that sort appeared provided for in the said
law.
Should each business venture of the employer be
considered as the basis of the coverage, an employer
with more than one line of business but with less than
six employees in each, would never be covered
although he has in his employ a total of more than six
employees which is sufficient to bring him within the
ambit of compulsory coverage. This would frustrate
rather than foster the policy of the Act. The legislative
intent must be respected. In the absence of an
express provision for a separate coverage for each
kind of business, the reasonable interpretation is that
once an employer is covered in a particular kind of
business, he should be automatically covered with
respect to any new name. Any interpretation which
would defeat rather than promote the ends for which
the Social Security Act was enacted should be
eschewed. 5
Petitioner contends that the Commission cannot
indiscriminately combine for purposes of coverage
two distinct and separate businesses when one has
not yet been in operation for more than two years thus
rendering nugatory the period for more than two years
thus rendering nugatory the period of stabilization
fixed by the Act. This contention lacks merit since the
amendatory law, RA 2658, which was approved on
June 18, 1960, eliminated the two-year stabilization
period as employers now become automatically
covered immediately upon the start of the business.
Section 10 (formerly Sec. 9) of RA 1161, as amended
by RA 2658 now provides:
Sec. 10. Effective date of coverage. —
Compulsory coverage of the employer
shall take effect on the first day of his
operation, and that of the employee on
the date of his employment.
(Emphasis supplied)
As We have previously mentioned, it is the intention of
the law to cover as many persons as possible so as to
promote the constitutional objective of social justice. It
is axiomatic that a later law prevails over a prior
statute and moreover the legislative in tent must be
given effect. 6
Page 4 of 19
Petitioner further submits that Eufrancio Rojas is an
independent contractor who engages in an
independent business of his own consisting of the
operation of the timber concession of the former.
Rojas was appointed as operations manager of the
logging consession; 7 he has no power to appoint or
hire employees; as the term implies, he only manages
the employees and it is petitioner who furnishes him
the necessary equipment for use in the logging
business; and he is not free from the control and
direction of his employer in matter connected with the
performance of his work. These factors clearly
indicate that Rojas is not an independent contractor
but merely an employee of petitioner; and should be
entitled to the compulsory coverage of the Act.
The records indubitably show that petitioner started its
real estate business on December 1, 1952 while its
logging operation was actually commenced on April 1,
1957. Applying the provision of Sec. 10 of the Act,
petitioner is subject to compulsory coverage as of
December 1, 1952 with respect to the real estate
business and as of April 1, 1957 with respect to its
logging operation.
WHEREFORE, premises considered, the appeal is
hereby DISMISSED. With costs against petitioner.
SO ORDERED.
G.R. No. L-17361 April 29, 1968
FRANKLIN BAKER COMPANY OF THE
PHILIPPINES, petitioner-appellant,
vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.
Ross, Selph and Carrascoso, for petitioner-appellant.
Office of the Solicitor General and Ernesto T. Duran
for respondent-appellee.
MAKALINTAL, J.:
Appeal from the ruling of the Social Security
Commission dismissing petition for reconsideration of
an order of respondent Social Security System.
Petitioner-appellant Franklin Baker Company of the
Philippines is engaged in the manufacture of
dessicated coconut in San Pablo City. The deceased
Tomas Zamora was one of its employees. Both were
compulsory members of the Social Security System.
Due to the annual overhauling of its machinery and
also to lack of production orders from its mother
company in the United States petitioner temporarily
ceased its operations from December 22, 1957 to
February 18, 1958. Zamora rendered no actual
services during that period. He then went on sick
leave without pay from March 9, 1958, up to the day
of his death, June 13, 1958.
On July 10, 1958 the System received a death claim
application from petitioner for and in behalf of the
designated beneficiaries of the deceased employee.
After processing the claim the System found that no
premium remittances had been made for him for the
months of February, March, and June, 1958. Of the
unpaid premiums, P5.85 was chargeable to the
employee while P8.18 was due from the employer-
petitioner. The employee's share of the unpaid
premiums was subsequently deducted from the death
benefits awarded to his beneficiaries and the System
billed petitioner for its share.
Under Resolution No. 139, Series of 1958, the Social
Security Commission adopted the rule that
"employers are liable to the 3-1/2% company's share
during the months when there are no premiums
remitted, if there is existing employer-employee
relationship between them during those months."
Petitioner excepted to the System's demand for
payment by filing a petition for reconsideration with
the Commission. On April 28, 1960 the Commission
resolved to dismiss said petition, and the case is now
before us on appeal from the resolution of dismissal.
Petitioner raises two issues: (1) that the employer is
not liable for its share of the premiums during the
period when the employee is on leave without pay
since he receives no compensation; and (2) that the
adoption of a "theoretical salary" basis upon which the
employer's liability of 3-1/2% is computed during the
time that the employee receives no compensation is
erroneous.
The first issue has already been resolved by us in
several cases. Insular Lumber Co. vs. SSS, G.R. No.
L-17623, Jan. 31, 1963; Roman Archbishop of Manila
vs. SSS, G.R. No. L-15045, Jan. 20, 1961; Insular Life
Assurance Co., Ltd., et al. vs. SSS, G.R. No. L-16359,
Dec. 28, 1961. In those cases we held:
... payment of contributions by an employer is
compulsory during its coverage, and in
accordance with the provisions of Section 9 of
the Social Security Act, coverage is
determined solely by the existence of an
employer-employee relationship. While an
employee is on leave, even without pay, he is
still an employee of his employer, their
Page 5 of 19
 contract of employment has not yet
terminated. So much so that the employee
may still return to work and the employer is
still bound to accept him. His responsibility as
an employee still exists. He is still entitled to
the benefits of the System when he returns.
Consequently, his employer is still liable to
pay his contributions to the Commission on
account of its employee who is on leave
without pay.
The ruling of the Commission adopting the
"theoretical salary" basis assailed by petitioner under
the second issue raised by it in this appeal reads as
follows:
Neither does the absence of compensation for
the employee for a particular month militate
against the adoption of a theoretical salary
upon which the premium contributions are to
be based. In such cases, this Commission has
adopted the policy that where an employee
does not earn any compensation for a
particular month, the basis for his premium
contributions shall be the salary for the month
immediately preceding the wageless month
or, in case of a variable wage earner, then, it
shall be his daily rate of compensation
multiplied by the number of days in which he
would have worked for that wageless month
(Circulars Nos. 21 and 24). The adoption of
such a theoretical salary is justified on the
ground that during the period when the
employer-employee relationship subsists,
there is a legal obligation to remit premium
contributions to the System for the benefit of
the employee.
Petitioner contends that the adoption of the so-called
"theoretical salary" basis is beyond the authority and
competence of the Social Security Commission, as it
is not justified by the Social Security Act (R. A. 1161,
as amended by Act 1792), particularly section 19
thereof which defines the employer's obligation to
contribute to the System. This section provides:
SEC. 19. Employer's contribution.—
Beginning as of the last day of the month
immediately preceding the month when an
employee's compulsory coverage takes effect
and every month thereafter during his
employment, his employer shall pay, with
respect to such covered employee in his
employ, a monthly contribution equal to three
and a half per centum of the monthly
compensation of said covered employee.
Notwithstanding any contract to the contrary,
an employer shall not deduct, directly or
indirectly, from the compensation of his
employees covered by the System or
otherwise recover from them the employer's
contribution with respect to such employees.
(As amended by Section 11, R.A. 1792)
Since the deceased employee, Tomas Zamora,
received no compensation for the period in question,
petitioner maintains that the imposition of a 3-1/2%
monthly contribution upon the employer on the basis
of the monthly "theoretical" compensation is in effect a
deviation from or an amendment of the statute, which
only Congress can make, We do not think this view is
correct. The obligation of the employer to contribute
its share to the System is effective during the
existence of the employer-employee relationship. This
is already settled in several cases (supra), and implicit
in the provision aforequoted which says that the
employer shall pay the 3-1/2% contribution "beginning
as of the last day of the month immediately preceding
the month when an employee's compulsory coverage
takes effect and every month thereafter during his
employment ...." The time when an employee may not
be actual receiving compensation, as when he is on
sick leave without pay, is not excepted. Obviously,
inasmuch as the obligation to contribute does not
cease during that period, a reasonable basis for
computing the amount of the contribution must be
adopted; and the one prescribed by the Commission
in its circulars Nos. 21 and 24 and applied in the case
at bar is reasonable, both on legal and actuarial
considerations. It does not amount to legislation, but
merely implementation of the existing statute. The
provisions of the Social Security Act should be
liberally construed in favor of those seeking its
benefits. "Any interpretation which would defeat rather
than promote the ends for which the Social Security
Act was enacted should be eschewed. 1
The resolution appealed from, passed by the Social
Security Commission on April 28, 1960, is affirmed,
with costs against petitioner-appellant.
G.R. No. L-15798 December 28, 1961
JOSE P. TECSON, petitioner-appellant,
vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.
Sycip, Quisumbing, Salazar and Associates for
petitioner-appellant.
Office of the Solicitor General and Teodoro R. Banzon
for respondent-appellee.
Page 6 of 19
LABRADOR, J.
This is an appeal from a decision or ruling of the
Social Security Commission denying payment of
death benefits to Jose P. Tecson, the beneficiary of
an employee of Yuyitung Publishing Company, by the
name of Lim Hoc.
The facts as found by the Social Security Commission
are as follows:
The facts attendant are as follows: The late
Lim Hoc, a former employee of the Yuyitung
Publishing Company, was, at the time of his
death on November 3, 1957, a member of the
System, having qualified as such on
September 1, 1957. In the SSS-Form E-1
accomplished and filed by him with the
System, he gave his civil status as married,
but made no mention of the members of his
family or other relatives. Instead, he
designated therein the petitioner Jose P.
Tecson, reportedly a friend and co-worker of
his, as his beneficiary. After the death of Lim
Hoc, petitioner, in his capacity as the
designated beneficiary, filed with the System a
claim for death benefits. (ROA, p. 31).
In denying the petition of Tecson the Social Security
Commission states that the legislative policy
underlying the system is to grant and afford protection
to the covered employee as well as his family; that
while Section 13 of the law (Rep. Act No. 1161 as
amended) makes mention of the beneficiary as
recorded by his employer, it is not just anyone that the
employee designates who may be appointed his
beneficiary because Section 24 (a) of the law clearly
provides that the employer shall report to the system
the names, ages, civil status, salaries and dependents
of employees, and paragraph (a) of the same section
provides that if an employee subject to compulsory
coverage should die or become sick or disabled
without the System having previously received a
report about him from his employer, the said employer
shall pay to the employee or his legal heirs, damages,
etc.
It may be true that the purpose of the coverage under
the Social Security System is protection of the
employee as well as of his family, but this purpose or
intention of the law cannot be enforced to the extent
of contradicting the very provisions of said law as
contained in Section 13, thereof, as follows:
Section 13. — Upon the covered employee's
death or total and permanent disability under
such conditions as the Commission may
define, before becoming eligible for retirement
and if either such death or disability is not
compensable under the Workmen's
Compensation Act, he or, in case of his death,
his beneficiaries as recorded by his employer
shall be entitled to the following benefit: ...
(R.A. 1161 as amended.)
When the provisions of a law are clear and explicit,
the courts can do nothing but apply its clear and
explicit provisions. (Velasco v. Lopez, 1 Phil. 720;
Caminetti vs. U.S., 242 U.S. 470, 61 L. ed. 442).
It should be remembered that the benefits or
compensation allowed an employee or his beneficiary
under the provisions of the Social Security Act are
paid out of funds which are contributed in part by the
employees and in part by the employers' (commercial
or industrial companies members of the System).
Sections 18 and 19 of the Social Security Act
(Republic Act No. 1161 as amended) provide that 2-
½% of the salary of an employee subject to
compulsory coverage, shall be deducted and withheld
from his monthly compensation and paid over to the
System, while the employer for his part contributes
another amount of 3-½% of the salary of said
employee. The contributions are collected by the
System, which acts as the trustee of such funds. It is
provided also in the Act that of the total yearly
collection not more than 12% during the first two year
of the operation of the System and not more than 10%
during any year thereafter shall be disbursed for
salaries and wages of the employees of the System
(Sec. 24). A certain percentage of the funds of the
System may be invested in interest-bearing bonds
and deposits and in loans or advances to the National
Government (Sec. 25). As these funds are obtained
from the employees and the employers, without the
Government having contributed any portion thereof, it
would be unjust for the System to refuse to pay the
benefits to those whom the employee has designated
as his beneficiaries. The contribution of the employee
is his money; the contribution of the employer is for
the benefit of the employee. Hence the beneficiary
should primarily be the one to profit by such
contributions. This is what is expressly provided in
above-quoted Section 13 of the law.
It should also be noted that the Social Security
System is not a law of succession. Its purpose is to
provide social security, which means funds for the
beneficiary, if the employee dies, or for the employee
himself and his dependents if he is unable to perform
his task because of illness or disability, or is laid off by
reason of the termination of the employment, or
Page 7 of 19
because of temporary lay-off due to strike, etc. It
should also be remembered that the beneficiaries of
the System are those who dependent upon the
employee for support. Section 23 of the law (before its
amendment by Republic Act No. 2658, which took
effect on June 18, 1960) requires the employer to
report and transmit to the System such record of the
names, ages, civil status, occupations, salaries
and dependents of all his employees. It is not the
heirs of the employee who are to receive the benefits
or compensation. It is only in case the benificiary is
the estate, or if there is none designated, or if the
designation is void, that the System is required to pay
the employee's heirs. Such is the express provision of
Section 15 of the same Act, as amended.
The Commission held that under its regulations, which
are quoted below, the employee must choose the
beneficiaries from anyone of the persons enumerated
therein:
lawphil.net
(a) The following persons may be designated
as beneficiaries entitled to receive death
benefits provided they have been registered
as such in the records of the System prior to
said employee's death, to wit:
(1) The legitimate widow or widower if not
legally separated from the deceased;
(2) Legitimate and/or legitimated children;
(3) Grandchildren;
(4) Parents;
(5) Grandparents;
(6) Natural children duly acknowledged;
(7) Brothers and/or sisters;
(8) In the absence of any of the foregoing
relatives, any other person designated by the
employee. (Rule 7, [3], of the Rules and
Regulations of the Social Security System).
The above rule indicates the persons that may be
designated as beneficiaries. The deceased Lim Hoc
must have designated Jose P. Tecson as his
beneficiary under the provisions of Section 23 of the
Act. The employer must have received no information
from the deceased employee Lim Hoc about the
existence of Lim Hoc's wife and children, their names,
ages, civil status, occupations, salaries, etc. It was
subsequently known that Lim Hoc had a wife and
children in Communist China; the omission by him of
their existence and names in the records of the
employer must have been due to the fact that they
were not at the time, at least, dependent upon him. If
they were actually dependents, their names would
have appeared in the record of the employer. The
absence in the record of his employee of their
existence and names must have been due to the lack
of communication, of which We can take judicial
notice, between Communist China and the
Philippines, or to the express desire of Lim Hoc to
extend the benefits of his contributions to the system
to his "friend and co-worker", to the exclusion of his
wife. It is to be noted also that the funeral expenses of
Lim Hoc are to be paid from the benefits, so that what
is to be paid to Tecson would be greatly reduced.
FOR ALL THE FOREGOING CONSIDERATIONS,
the resolution should be, as it is hereby, set aside and
annulled, and the respondent System is hereby
ordered to pay the monetary claim of Jose P. Tecson.
Without costs.
G.R. No. L-21642 July 30, 1966
SOCIAL SECURITY SYSTEM, petitioner-appellee,
vs.
CANDELARIA D. DAVAC, ET AL., respondents;
LOURDES Tuplano, respondent-appellant.
J. Ma. Francisco and N. G. Bravo for respondent-
appellant.
Office of the Solicitor General Arturo A. Alafriz,
Solicitor Camilo D. Quiason and E. T. Duran for
petitioner-appellee.
BARRERA, J.:
This is an appeal from the resolution of the Social
Security Commission declaring respondent
Candelaria Davac as the person entitled to receive
the death benefits payable for the death of Petronilo
Davac.
The facts of the case as found by the Social Security
Commission, briefly are: The late Petronilo Davac, a
former employee of Lianga Bay Logging Co., Inc.
became a member of the Social Security System
(SSS for short) on September 1, 1957. As such
member, he was assigned SS I.D. No. 08-007137. In
SSS form E-1 (Member's Record) which he
accomplished and filed with the SSS on November
21, 1957, he designated respondent Candelaria
Davac as his beneficiary and indicated his relationship
to her as that of "wife". He died on April 5, 1959 and,
Page 8 of 19
thereupon, each of the respondents (Candelaria
Davac and Lourdes Tuplano) filed their claims for
death benefit with the SSS. It appears from their
respective claims and the documents submitted in
support thereof, that the deceased contracted two
marriages, the first, with claimant Lourdes Tuplano on
August 29, 1946, who bore him a child, Romeo
Davac, and the second, with Candelaria Davac on
January 18, 1949, with whom he had a minor
daughter Elizabeth Davac. Due to their conflicting
claims, the processing thereof was held in abeyance,
whereupon the SSS filed this petition praying that
respondents be required to interpose and litigate
between themselves their conflicting claims over the
death benefits in question.
1äw phï1.ñët
On February 25, 1963, the Social Security
Commission issued the resolution referred to above,
Not satisfied with the said resolution, respondent
Lourdes Tuplano brought to us the present appeal.
The only question to be determined herein is whether
or not the Social Security Commission acted correctly
in declaring respondent Candelaria Davac as the
person entitled to receive the death benefits in
question.
Section 13, Republic Act No. 1161, as amended by
Republic Act No. 1792, in force at the time Petronilo
Davac's death on April 5, 1959, provides:
1. SEC. 13. Upon the covered employee's
death or total and permanent disability under
such conditions as the Commission may
define, before becoming eligible for retirement
and if either such death or disability is not
compensable under the Workmen's
Compensation Act, he or, in case of his
death, his beneficiaries, as recorded by his
employer shall be entitled to the following
benefit: ... . (emphasis supplied.)
Under this provision, the beneficiary "as recorded" by
the employee's employer is the one entitled to the
death benefits. In the case of Tecson vs. Social
Security System, (L-15798, December 28, 1961), this
Court, construing said Section 13, said:
It may be true that the purpose of the
coverage under the Social Security System is
protection of the employee as well as of his
family, but this purpose or intention of the law
cannot be enforced to the extent of
contradicting the very provisions of said law
as contained in Section 13, thereof, ... . When
the provision of a law are clear and explicit,
the courts can do nothing but apply its clear
and explicit provisions (Velasco vs. Lopez, 1
Phil, 270; Caminetti vs. U.S., 242 U.S. 470, 61
L. ed. 442).
But appellant contends that the designation herein
made in the person of the second and, therefore,
bigamous wife is null and void, because (1) it
contravenes the provisions of the Civil Code, and (2) it
deprives the lawful wife of her share in the conjugal
property as well as of her own and her child's legitime
in the inheritance.
As to the first point, appellant argues that a
beneficiary under the Social Security System partakes
of the nature of a beneficiary in life insurance policy
and, therefore, the same qualifications and
disqualifications should be applied.
Article 2012 of the New Civil Code provides:
ART. 2012. Any person who is forbidden from
receiving any donation under Article 739
cannot be named beneficiary of a life
insurance policy by the person who cannot
make any donation to him according to said
article.
And Article 739 of the same Code prescribes:
ART. 739. The following donations shall be
void:
(1) Those made between persons who were
guilty of adultery or concubinage at the time of
the donation;
xxx xxx xxx
Without deciding whether the naming of a beneficiary
of the benefits accruing from membership in the
Social Security System is a donation, or that it creates
a situation analogous to the relation of an insured and
the beneficiary under a life insurance policy, it is
enough, for the purpose of the instant case, to state
that the disqualification mentioned in Article 739 is not
applicable to herein appellee Candelaria Davac
because she was not guilty of concubinage, there
being no proof that she had knowledge of the
previous marriage of her husband Petronilo.1
Regarding the second point raised by appellant, the
benefits accruing from membership in the Social
Security System do not form part of the properties of
the conjugal partnership of the covered member. They
Page 9 of 19
are disbursed from a public special fund created by
Congress in pursuance to the declared policy of the
Republic "to develop, establish gradually and perfect
a social security system which ... shall provide
protection against the hazards of disability, sickness,
old age and death."2
The sources of this special fund are the covered
employee's contribution (equal to 2-½ per cent of the
employee's monthly compensation);3 the employer's
contribution (equivalent to 3-½ per cent of the monthly
compensation of the covered employee);4 and the
Government contribution which consists in yearly
appropriation of public funds to assure the
maintenance of an adequate working balance of the
funds of the System.5 Additionally, Section 21 of the
Social Security Act, as amended by Republic Act
1792, provides:
SEC. 21. Government Guarantee. — The
benefits prescribed in this Act shall not be
diminished and to guarantee said benefits the
Government of the Republic of the Philippines
accepts general responsibility for the solvency
of the System.
From the foregoing provisions, it appears that the
benefit receivable under the Act is in the nature of a
special privilege or an arrangement secured by the
law, pursuant to the policy of the State to provide
social security to the workingmen. The amounts that
may thus be received cannot be considered as
property earned by the member during his lifetime.
His contribution to the fund, it may be noted,
constitutes only an insignificant portion thereof. Then,
the benefits are specifically declared not
transferable,6 and exempted from tax legal processes,
and lien.7Furthermore, in the settlement of claims
thereunder the procedure to be observed is governed
not by the general provisions of law, but by rules and
regulations promulgated by the Commission. Thus, if
the money is payable to the estate of a deceased
member, it is the Commission, not the probate or
regular court that determines the person or persons to
whom it is payable.8 that the benefits under the Social
Security Act are not intended by the lawmaking body
to form part of the estate of the covered members
may be gathered from the subsequent amendment
made to Section 15 thereof, as follows:
SEC. 15. Non-transferability of benefit. — The
system shall pay the benefits provided for in
this Act to such persons as may be entitled
thereto in accordance with the provisions of
this Act. Such benefits are not transferable,
and no power of attorney or other document
executed by those entitled thereto in favor of
any agent, attorney, or any other individual for
the collection thereof in their behalf shall be
recognized except when they are physically
and legally unable to collect personally such
benefits: Provided, however, That in the case
of death benefits, if no beneficiary has been
designated or the designation there of is void,
said benefits shall be paid to the legal heirs in
accordance with the laws of succession. (Rep.
Act 2658, amending Rep. Act 1161.)
In short, if there is a named beneficiary and the
designation is not invalid (as it is not so in this case), it
is not the heirs of the employee who are entitled to
receive the benefits (unless they are the designated
beneficiaries themselves). It is only when there is no
designated beneficiaries or when the designation is
void, that the laws of succession are applicable. And
we have already held that the Social Security Act is
not a law of succession.9
Wherefore, in view of the foregoing considerations,
the resolution of the Social Security Commission
appealed from is hereby affirmed, with costs against
the appellant.
So ordered.
G.R. No. L-20088 January 22, 1966
LUZON STEVEDORING CORPORATION, petitioner-
appellant,
vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.
C.R. Tiongson and B.L. Rillo for the petitioner-
appellant.
Office of the Solicitor General and Solicitor Camilo D.
Quiason for the
respondent-appellee.
BENGZON, J.P., J.:
Luzon Stevedoring Corporation (Lusteveco for short),
a domestic corporation with principal office in Manila,
is engaged in the business of stevedoring, lightering
and towering in the cities of Iloilo and Bacolod under
the trade name of Visayan Stevedore Transportation
Company. It owns, maintains and operates towboats,
barges and a drydock. In 1959 it carried in its payrolls
temporary employees assigned as follows:
(1) 1,752 and 2,552 stevedores in the cities of Iloilo
and Bacolod, respectively, who were hired on rotation
and on vessel-by-vessel basis. They were paid daily
Page 10 of 19
with the understanding of being laid off at the end of
each day. On the average, each stevedore worked for
14 days during the year.
(2) Drydock workers temporarily drafted in the repair
and maintenance of towboats and barges during the
peak season, i.e., September to December. They
were paid on daily basis and the duration of their
employment depended upon the number of vessels or
barges drydocked. Average number of working days
for each laborer in 1959 amounted to only 20 days. 1äw phï1.ñët
(3) Sailors, patrons, officers and crew members of
towboats and barges who were hired in place of
regular sailors, patrons, officers and crew members
who were absent or on leave. They were laid off upon
return of the regular employees. Each relief worker
averaged 36 working days in 1959.
The labor unions to which said temporary workers
belong control the rotation of employment.
On September 28, 1960 the Consolidated Union of
the Philippines, Trade Union of Central Philippines,
Union de Marinos de Iloilo and Vistranco Employees
Association requested the Social Security
Commission for the exemption of the aforementioned
temporary employees from compulsory coverage of
the Social Security Act (R.A. 1161) on the ground that
they "work only intermittently and are not in a position
to maintain membership in the Social Security System
long enough to be fully entitled to the law's sickness,
disability, death and retirement benefits". Later, on
October 19, 1960 Lusteveco lodged a similar request
with the Social Security Commission. On April 16,
1962, however, the Social Security Commission
denied the request for exemption and ordered
Lusteveco to "pay all back premiums due and unpaid
from the respective dates of coverage of the
employees concerned, to be determined from the
records of the System." Its motion for reconsideration
having been denied, Lusteveco instituted the instant
appeal.
The question is, do said temporary and casual
employees come within the compulsory coverage of
the Social Security Act?
Lusteveco's plea for exemption rests on the
contention that compulsory coverage under the Social
Security Act, as amended extends primarily to
permanent employees and secondarily to temporary
employees whose tenure of employment is merely
indefinite but not with respect to the duration of the
work to be performed. Such a contention would
accordingly place beyond the ambit of the law the
employees in question who were allegedly hired by
the day with uncertain chance of working the following
day even if the same work were still available.
Formerly, the pertinent provision on compulsory
coverage of the Social Security Act, as amended by
Republic Act 1792, stated:
SEC. 9. Compulsory coverage.—Coverage in
the system shall be compulsory upon all
employees between the ages of sixteen and
sixty years, inclusive, if they have been for at
least six months in the service of the employer
who is a member of the System: x x x
(Emphasis supplied).
Coverage required at least six months' service with
the employer. Hence, the effectivity of the coverage
on the first day of the calendar month following the
month when the employer qualified as a member of
the System, provided the employee has rendered at
least six months' service.1 In this light, this Court was
prompted to state that the coverage of the Social
Security Law is predicated on the existence of an
employer-employee relationship of more or less
permanent nature and extends to employment of all
kinds except those expressly excluded.2
The Social Security Act was however amended by
Republic Act 2658 which took effect on June 18,
1960.3 The amendment broadened the coverage of
the Social Security System, increased its benefits and
liberalized the terms and conditions for their
enjoyment.4 Thus, Sections 9 and 10 were made to
read as follows:
SEC. 9. Compulsory coverage.—Coverage in
the System shall be compulsory upon all
employees between the ages of sixteen and
sixty, inclusive, and their employers: ...
SEC. 10. Effective date of coverage.—
Compulsory coverage of the employer shall
take effect on the first day of his operation,
and that of the employee on the date of his
employment. (Emphasis supplied)
Eliminated was the six months' service requirement.
Sans such requirement, all employees regardless of
tenure, such as the employees in question, would
qualify for compulsory membership in the Social
Security System; except of course those classes of
employees contemplated in Section 8(j) of the Social
Security Act.
Page 11 of 19
Section 8(j) defines employment covered by the
Social Security Act and provides exception therefrom.
Among the exceptions mentioned — paragraph (10)
— are services performed by temporary employees
which may be excluded by regulation of the Social
Security Commission. It is pursuant to this exception
that Lusteveco seeks to persuade the Social Security
Commission and this Court to exempt the employees
in question from social security coverage. Suffice it to
state in this instance that Congress has delegated to
the Social Security Commission the issuance of
regulations bearing on the exemption of services
performed by temporary employees from social
security coverage. No such regulation has been cited
to buttress the claim for exemption. Perforce, no
exemption could be granted as there is no way of
telling whether or not the employees in question
belong to a group or class designated by regulation of
the Social Security Commission as exempt.
Lusteveco further argues that since the employees in
question are hired intermittently in short durations, it
would be impossible for them to accumulate the
requisite number of monthly contributions to the
Social Security System before they can be entitled to
benefits afforded by the Social Security Act.
Consequently, as to them, exemption from
membership in the Social Security System ought to be
granted because the law could not have intended
them to be covered without enjoying the benefits
provided for therein.
It is not entirely correct to say that the employees in
question cannot possibly be entitled to social security
benefits by reason of their temporary employment.
From the moment an employee is reported for
membership, he is entitled to death and disability
benefits pursuant to Section 13 of Republic Act 1161,
as amended. The number of monthly contributions
mentioned in said section is not a prerequisite to the
enjoyment of death or disability benefits but is merely
a basis in determining the amount of benefit to be
paid.
In the case of sickness and retirement benefits, an
employee member may enjoy said benefits provided
he accumulates to his credit twelve and one-hundred
twenty months contributions, respectively. It is not an
impossibility for the employees in question to reach
the minimum number of monthly contributions simply
because their employment is temporary and
intermittent. For nowhere in the law is it required that
the monthly contributions be in the same amount,
consecutive or derived from the same employer.
Moreover, Sections 12 and 13 of the law specifically
provide that a covered employee shall receive a lump
sum which should not be less than the total
contributions paid by him and his employer in his
behalf. The employee therefore loses not a single
centavo of his investment. On the contrary, he gains
by the amount paid by his employer in his behalf.
The coverage in the Social Security System of the
employees in question, temporary though their
employment may be, is in line with the declared policy
of Congress to develop, establish gradually and
perfect a social security system which shall be
suitable to the needs of the laborers throughout the
Philippines, and shall provide protection against the
hazards of disability, sickness, old age and death.
Adherence to such policy would strongly militate in
favor of the coverage of such temporary employees
for, more than their brothers who are regularly and
permanently employed, they are exposed to the
hazards of disability, sickness, old age and death.
More often than not, they are hapless and
defenseless victims of these hazards. Social justice
demands that "they who have less in life should be
given more in law". The elimination of the six months
service requirement aforementioned is a clear
indication of such congressional policy.
Wherefore, the resolutions of the Social Security
Commission appealed from are hereby affirmed. No
costs. So ordered.
G.R. No. 129315 October 2, 2000
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO,
MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO
PEDELOS, PATRICIA NAS, and TERESITA
FLORES, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
LAO ENTENG COMPANY, INC. and/or TRINIDAD
LAO ONG, respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review
of the Resolution dated October 17, 1996 of public
respondent National Labor Relations Commission
(First Division),1 in NLRC NCR Case No. 00-04-03163-
95, and the Resolution dated March 5, 1997 denying
the motion for reconsideration. The aforecited October
17th Resolution affirmed the Decision dated
September 28, 1996 of Labor Arbiter Potenciano S.
Cañizares dismissing the petitioners' complaint for
illegal dismissal and declaring that petitioners are not
Page 12 of 19
regular employees of private respondent Lao Enteng
Company, Inc..
The records of the case show that the five male
petitioners, namely, Osias I. Corporal, Sr., Pedro
Tolentino, Manuel Caparas, Elpidio Lacap, and
Simplicio Pedelos worked as barbers, while the two
female petitioners, Teresita Flores and Patricia Nas
worked as manicurists in New Look Barber Shop
located at 651 P. Paterno Street, Quiapo, Manila
owned by private respondent Lao Enteng Co. Inc..
Petitioner Nas alleged that she also worked as
watcher and marketer of private respondent.
Petitioners claim that at the start of their employment
with the New Look Barber Shop, it was a single
proprietorship owned and managed by Mr. Vicente
Lao. In or about January 1982, the children of Vicente
Lao organized a corporation which was registered
with the Securities and Exchange Commission as Lao
Enteng Co. Inc. with Trinidad Ong as President of the
said corporation. Upon its incorporation, the
respondent company took over the assets,
equipment, and properties of the New Look Barber
Shop and continued the business. All the petitioners
were allowed to continue working with the new
company until April 15, 1995 when respondent
Trinidad Ong informed them that the building wherein
the New Look Barber Shop was located had been
sold and that their services were no longer needed.2
On April 28, 1995, petitioners filed with the Arbitration
Branch of the NLRC, a complaint for illegal dismissal,
illegal deduction, separation pay, non-payment of 13th
month pay, and salary differentials. Only petitioner
Nas asked for payment of salary differentials as she
alleged that she was paid a daily wage of P25.00
throughout her period of employment. The petitioners
also sought the refund of the P1.00 that the
respondent company collected from each of them
daily as salary of the sweeper of the barber shop.
Private respondent in its position paper averred that
the petitioners were joint venture partners and were
receiving fifty percent commission of the amount
charged to customers. Thus, there was no employer-
employee relationship between them and petitioners.
And assuming arguendo, that there was an employer-
employee relationship, still petitioners are not entitled
to separation pay because the cessation of operations
of the barber shop was due to serious business
losses.
Respondent Trinidad Lao Ong, President of
respondent Lao Enteng Co. Inc., specifically stated in
her affidavit dated September 06, 1995 that Lao
Enteng Company, Inc. did not take over the
management of the New Look Barber Shop, that after
the death Lao Enteng petitioner were verbally
informed time and again that the partnership may fold
up anytime because nobody in the family had the time
to be at the barber shop to look after their interest;
that New Look Barber Shop had always been a joint
venture partnership and the operation and
management of the barber shop was left entirely to
petitioners; that her father's contribution to the joint
venture included the place of business, payment for
utilities including electricity, water, etc. while
petitioners as industrial partners, supplied the labor;
and that the barber shop was allowed to remain open
up to April 1995 by the children because they wanted
to give the partners a chance at making it work.
Eventually, they were forced to close the barber shop
because they continued to lose money while
petitioners earned from it. Trinidad also added that
private respondents had no control over petitioners
who were free to come and go as they wished.
Admittedly too by petitioners they received fifty
percent to sixty percent of the gross paid by
customers. Trinidad explained that some of the
petitioners were allowed to register with the Social
Security System as employees of Lao Enteng
Company, Inc. only as an act of accommodation. All
the SSS contributions were made by petitioners.
Moreover, Osias Corporal, Elpidio Lacap and Teresita
Flores were not among those registered with the
Social Security System. Lastly, Trinidad avers that
without any employee-employer relationship
petitioners claim for 13th month pay and separation
pay have no basis in fact and in law.3
In a Decision dated September 28, 1995, Labor
Arbiter Potenciano S. Cañizares, Jr. ordered the
dismissal of the complaint on the basis of his findings
that the complainants and the respondents were
engaged in a joint venture and that there existed no
employer-employee relation between them. The Labor
Arbiter also found that the barber shop was closed
due to serious business losses or financial reverses
and consequently declared that the law does not
compel the establishment to pay separation pay to
whoever were its employees.4
On appeal, NLRC affirmed the said findings of the
Labor Arbiter and dismissed the complaint for want of
merit, ratiocinating thus:
Indeed, complainants failed to show the existence of
employer-employee relationship under the fourway
test established by the Supreme Court. It is a
common practice in the Barber Shop industry that
barbers supply their own scissors and razors and they
Page 13 of 19
split their earnings with the owner of the barber shop.
The only capital of the owner is the place of work
whereas the barbers provide the skill and expertise in
servicing customers. The only control exercised by
the owner of the barber shop is to ascertain the
number of customers serviced by the barber in order
to determine the sharing of profits. The barbers
maybe characterized as independent contractors
because they are under the control of the barber shop
owner only with respect to the result of the work, but
not with respect to the details or manner of
performance. The barbers are engaged in an
independent calling requiring special skills available to
the public at large.5
Its motion for reconsideration denied in the
Resolution6 dated March 5, 1997, petitioners filed the
instant petition assigning that the NLRC committed
grave abuse of discretion in:
I. ARBITRARILY DISREGARDING
SUBSTANTIAL EVIDENCE PROVING THAT
PETITIONERS WERE EMPLOYEES OF
RESPONDENT COMPANY IN RULING THAT
PETITIONERS WERE INDEPENDENT
CONTRACTORS.
II. NOT HOLDING THAT PETITIONERS
WERE ILLEGALLY DISMISSED AND IN NOT
AWARDING THEIR MONEY CLAIMS.7
Petitioners principally argue that public respondent
NLRC gravely erred in declaring that the petitioners
were independent contractors. They contend that they
were employees of the respondent company and
cannot be considered as independent contractors
because they did not carry on an independent
business. They did not cut hair, manicure, and do
their work in their own manner and method. They
insist they were not free from the control and direction
of private respondents in all matters, and their
services were engaged by the respondent company to
attend to its customers in its barber shop. Petitioners
also stated that, individually or collectively, they do not
have substantial capital nor investments in tools,
equipments, work premises and other materials
necessary in the conduct of the barber shop. What the
barbers owned were merely combs, scissors, and
razors, while the manicurists owned only nail cutters,
nail polishes, nippers and cuticle removers. By no
standard can these be considered "substantial capital"
necessary to operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily
disregarding substantial evidence on record showing
that petitioners Pedro Tolentino, Manuel Caparas,
Simplicio Pedelos, and Patricia Nas were registered
with the Social Security System as regular employees
of the respondent company. The SSS employment
records in common show that the employer's ID No.
of Vicente Lao/Barber and Pawn Shop was 03-
0606200-1 and that of the respondent company was
03-8740074-7. All the foregoing entries in the SSS
employment records were painstakingly detailed by
the petitioners in their position paper and in their
memorandum appeal but were arbitrarily ignored first
by the Labor Arbiter and then by the respondent
NLRC which did not even mention said employment
records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general
rule that findings of facts of the NLRC are to be
accorded respect and finality on appeal. We have
long settled that this Court will not uphold erroneous
conclusions unsupported by substantial evidence.8 We
must also stress that where the findings of the NLRC
contradict those of the labor arbiter, the Court, in the
exercise of its equity jurisdiction, may look into the
records of the case and reexamine the questioned
findings.9
The issues raised by petitioners boil down to whether
or not an employer-employee relationship existed
between petitioners and private respondent Lao
Enteng Company, Inc. The Labor Arbiter has
concluded that the petitioners and respondent
company were engaged in a joint venture. The NLRC
concluded that the petitioners were independent
contractors.
The Labor Arbiter's findings that the parties were
engaged in a joint venture is unsupported by any
documentary evidence. It should be noted that aside
from the self-serving affidavit of Trinidad Lao Ong,
there were no other evidentiary documents, nor
written partnership agreements presented. We have
ruled that even the sharing of proceeds for every job
of petitioners in the barber shop does not mean they
were not employees of the respondent company.10
Petitioner aver that NLRC was wrong when it
concluded that petitioners were independent
contractors simply because they supplied their own
working implements, shared in the earnings of the
barber shop with the owner and chose the manner of
performing their work. They stressed that as far as the
result of their work was concerned the barber shop
owner controlled them.
Page 14 of 19
An independent contractor is one who undertakes "job
contracting", i.e., a person who (a) carries on an
independent business and undertakes the contract
work on his own account under his own responsibility
according to his own manner and method, free from
the control and direction of his employer or principal in
all matters connected with the performance of the
work except as to the results thereof, and (b) has
substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other
materials which are necessary in the conduct of the
business.11
Juxtaposing this provision vis-à-vis the facts of this
case, we are convinced that petitioners are not
"independent contractors". They did not carry on an
independent business. Neither did they undertake
cutting hair and manicuring nails, on their own as their
responsibility, and in their own manner and method.
The services of the petitioners were engaged by the
respondent company to attend to the needs of its
customers in its barber shop. More importantly, the
petitioners, individually or collectively, did not have a
substantial capital or investment in the form of tools,
equipment, work premises and other materials which
are necessary in the conduct of the business of the
respondent company. What the petitioners owned
were only combs, scissors, razors, nail cutters, nail
polishes, the nippers - nothing else. By no standard
can these be considered substantial capital necessary
to operate a barber shop. From the records, it can be
gleaned that petitioners were not given work
assignments in any place other than at the work
premises of the New Look Barber Shop owned by the
respondent company. Also, petitioners were required
to observe rules and regulations of the respondent
company pertaining, among other things, observance
of daily attendance, job performance, and regularity of
job output. The nature of work performed by were
clearly directly related to private respondent's
business of operating barber shops. Respondent
company did not dispute that it owned and operated
three (3) barber shops. Hence, petitioners were not
independent contractors.
Did an employee-employer relationship exist between
petitioners and private respondent? The following
elements must be present for an employer-employee
relationship to exist: (1) the selection and engagement
of the workers; (2) power of dismissal; (3) the
payment of wages by whatever means; and (4) the
power to control the worker's conduct, with the latter
assuming primacy in the overall consideration.
Records of the case show that the late Vicente Lao
engaged the services of the petitioners to work as
barbers and manicurists in the New Look Barber
Shop, then a single proprietorship owned by him; that
in January 1982, his children organized a corporation
which they registered with the Securities and
Exchange Commission as Lao Enteng Company, Inc.;
that upon its incorporation, it took over the assets,
equipment, and properties of the New Look Barber
Shop and continued the business; that the respondent
company retained the services of all the petitioners
and continuously paid their wages. Clearly, all three
elements exist in petitioners' and private respondent's
working arrangements.
Private respondent claims it had no control over
petitioners. The power to control refers to the
1âwphi1
existence of the power and not necessarily to the
actual exercise thereof, nor is it essential for the
employer to actually supervise the performance of
duties of the employee. It is enough that the employer
has the right to wield that power.12 As to the "control
test", the following facts indubitably reveal that
respondent company wielded control over the work
performance of petitioners, in that: (1) they worked in
the barber shop owned and operated by the
respondents; (2) they were required to report daily
and observe definite hours of work; (3) they were not
free to accept other employment elsewhere but
devoted their full time working in the New Look Barber
Shop for all the fifteen (15) years they have worked
until April 15, 1995; (4) that some have worked with
respondents as early as in the 1960's; (5) that
petitioner Patricia Nas was instructed by the
respondents to watch the other six (6) petitioners in
their daily task. Certainly, respondent company was
clothed with the power to dismiss any or all of them
for just and valid cause. Petitioners were unarguably
performing work necessary and desirable in the
business of the respondent company.
While it is no longer true that membership to SSS is
predicated on the existence of an employee-employer
relationship since the policy is now to encourage even
the self-employed dressmakers, manicurists and
jeepney drivers to become SSS members, we could
not agree with private respondents that petitioners
were registered with the Social Security System as
their employees only as an accommodation. As we
have earlier mentioned private respondent showed no
proof to their claim that petitioners were the ones who
solely paid all SSS contributions. It is unlikely that
respondents would report certain persons as their
workers, pay their SSS premium as well as their
wages if it were not true that they were indeed their
employees.13
Finally, we agree with the labor arbiter that there was
sufficient evidence that the barber shop was closed
due to serious business losses and respondent
Page 15 of 19
company closed its barber shop because the building
where the barber shop was located was sold. An
employer may adopt policies or changes or
adjustments in its operations to insure profit to itself or
protect investment of its stockholders. In the exercise
of such management prerogative, the employer may
merge or consolidate its business with another, or sell
or dispose all or substantially all of its assets and
properties which may bring about the dismissal or
termination of its employees in the process.14
Prescinding from the above, we hold that the seven
petitioners are employees of the private respondent
company; as such, they are to be accorded the
benefits provided under the Labor Code, specifically
Article 283 which mandates the grant of separation
pay in case of closure or cessation of employer's
business which is equivalent to one (1) month pay for
every year of service.15 Likewise, they are entitled to
the protection of minimum wage statutes. Hence, the
separation pay due them may be computed on the
basis of the minimum wage prevailing at the time their
services were terminated by the respondent company.
The same is true with respect to the 13th month pay.
The Revised Guidelines on the Implementation of the
13th Month Pay Law states that "all rank and file
employees are now entitled to a 13th month pay
regardless of the amount of basic salary that they
receive in a month. Such employees are entitled to
the benefit regardless of their designation or
employment status, and irrespective of the method by
which their wages are paid, provided that they have
worked for at least one (1) month during a calendar
year" and so all the seven (7) petitioners who were
not paid their 13th month pay must be paid
accordingly.16
Anent the other claims of the petitioners, such as the
P10,000.00 as penalty for non-compliance with
procedural process; P10,000.00 as moral damages;
refund of P1.00 per day paid to the sweeper; salary
differentials for petitioner Nas; attorney's fees), we
find them without basis.
IN VIEW WHEREOF, the petition is GRANTED. The
public respondent's Decision dated October 17, 1996
and Resolution dated March 05, 1997 are
SET ASIDE. Private respondents are hereby ordered
to pay, severally and jointly, the seven (7) petitioners
their (1) 13th month pay and (2) separation pay
equivalent to one month pay for every year of service,
to be computed at the then prevailing minimum wage
at the time of their actual termination which was April
15, 1995.
Costs against private respondents.
SO ORDERED.
G.R. No. L-21223 August 31, 1966
PHILIPPINE BLOOMING MILLS CO., INC. (As
Employer) and FRANCISCO TONG (As Assistant
General Manager) and Attorney-in-Fact of
SUSUMO SONODA, SENJI TANAKA, TAKASHIKO
KUMAMOTO, HITOSHI NAKAMURA, TETSUO
KODU, (Employees), petitioners and appellants,
vs.
SOCIAL SECURITY SYSTEM, respondent and
appellee.
Demetrio B. Salem for petitioners and appellants.
Office of the Solicitor General Edilberto Barot and
Solicitor Camilo D. Quiason for respondent and
appellee.
BARRERA, J.:
The facts of this case are not disputed:
The Philippine Blooming Mills Co., Inc., a domestic
corporation since the start of its operations in 1957,
has been employing Japanese technicians under a
pre-arranged contract of employment, the minimum
period of which employment is 6 months and the
maximum is 24 months.
From April 28, 1957, to October 26, 1958, the
corporation had in its employ 6 Japanese technicians.
In connection with the employment of these aliens, it
sent an inquiry to the Social Security System (SSS)
whether these employees are subject to compulsory
coverage under the System, which inquiry was
answered by the First Deputy Administrator of the
SSS, under date of August 29, 1957, as follows:
SIR:
With reference to your letter of August
24, 1957, hereunder are our answers
to your queries:
Aliens employed in the Philippines:
Aliens who are employed in the
Philippines shall also be compulsorily
covered. But aliens who are employed
temporarily shall, upon their departure
from the Philippines, be entitled to a
rebate of a proportionate amount of
their contributions; their employers
shall be entitled to the same
Page 16 of 19
 proportionate rebate of their 6 Japanese employees, plus attorneys' fees. This
contributions in behalf of said aliens claim was controverted by the SSS, alleging that Rule
employed by them. (Rule I, Sec. 3[d], IX of the Rules and Regulations of the System, as
Rules and Regulations.) amended, requires membership in the System for at
least 2 years before a separated or resigned
Starting September, 1957, and until the employee may be allowed a return of his personal
aforementioned Japanese employees left the contributions. Under the same rule, the employer is
Philippines on October 26, 1958, the corresponding not also entitled to a refund of the premium
premium contributions of the employer and the contributions it had paid.
employees on the latter's memberships in the SSS
were as follows: After hearing, the Commission denied the petition for
the reason that, although under the original provisions
of Section 3 (d) of Rule I of the Rules and Regulations
Amount of Premiums of the SSS, alien-employees (who are employed
Mont Contributed
SS temporarily) and their employers are entitled to a
hly
Name Num 2.5% 3.5% Total rebate of a proportionate amount of their respective
Salar
ber (Emplo (Emplo contributions upon the employees' departure from the
y
yee) yer) Philippines, said rule was amended by eliminating that
portion granting a return of the premium contributions.
Susum This amendment became effective on January 14,
03- 1958, or before the employment of the subject aliens
u P520. P175.0 P245.0 P420.0
0751 terminated. The rights of covered employees who are
Sonod 00 0 0 0
77 separated from employment, under the present Rules,
a
are covered by Rule IX which allows a return of the
03- premiums only if they have been members for at least
Senji 520.0
0751 175.00 245.00 420.00 2 years.
Tanaka 0
78

03- It is this resolution of the Commission that is the

Kahei 500.0 subject of the present appeal, appellants contending
0751 175.00 245.00 420.00
Tanaka 0 that the amendment of the Rules and Regulations of
79
the SSS, insofar as it eliminates the provision on the
Takash return of premium contributions, originally embodied
03- in Section 3(d) of Rule I, constituted an impairment of
iko 500.0
0751 175.00 245.00 420.00 obligations of contract. It is claimed, in effect, that
Kuma 0
80 when appellants-employees became members in
moto
September, 1957, and paid the corresponding
Hitoshi 03- premiums to the System, it1 is subject to the condition
500.0
Nakam 0751 175.00 245.00 420.00 that upon their departure from the Philippines, these
0
ura 81 employees, as well as their employer, are entitled to a
rebate of a proportionate amount of their respective
03- contributions.
Tetsuo 500.0
0751 175.00 245.00 420.00
Kudo 0
82
The contention cannot be sustained. Appellants'
argument is based on the theory that the employees'
P1,050. P1,470 P2,520 membership in the System established contractual
Total— 00 .00 .00 relationship between the members and the System, in
the sense contemplated and protected by the
constitutional prohibition against its impairment by
On October 7, 1958, the Assistant General Manager law. But, membership in this institution is not the
of the corporation, on its behalf and as attorney-in-fact result of a bilateral, consensual agreement where the
of the Japanese technicians, filed a claim with the rights and obligations of the parties are defined by
SSS for the refund of the premiums paid to the and subject to their will. Republic Act 1161 requires
System, on the ground of termination of the members' compulsory coverage of employers and employees
employment. As this claim was denied, they filed a under the System. It is actually a legal imposition, on
petition with the Social Security Commission for the said employers and employees, designed to provide
return or refund of the premiums, in the total sum of social security to the workingmen. Membership in the
P2,520.00, paid by the employer corporation and the
Page 17 of 19
SSS is, therefore, in compliance with a lawful exercise
of the police power of the State, to which the principle
of non-impairment of the obligation of contract is not a
proper defense.
As pointed out by the Solicitor General, the issue that
should be determined in this case is whether, in
implementing the SSS law and denying appellants'
claim for refund of their premium contributions, due
process was observed.
The Rules and Regulations promulgated by the SSS,
pursuant to the rule-making authority granted in
Section 4(a) of Republic Act 1161, was duly approved
by the President on July 18, 1957, and published in
the Official Gazette on September 15, 1957.2 These
rules and regulations, among others, provide:
I When an employee under compulsory
DETERMINATION OF COMPULSORY COVERAGE
3. The determination of whether an employer or an
employee shall be compulsorily covered shall be
vested in the Commission. The following general
principles shall guide the Commission in deciding
each case:
xxx xxx xxx
(d) Aliens who are employed in the Philippines shall
also be compulsorily covered. But aliens who ate
employed temporarily and whose visas are only for
fixed terms shall, upon their departure from the
Philippines, be entitled to a rebate of a proportionate
amount of their contributions; their employers shall be
entitled to the same proportionate rebate of their
contributions in behalf of said aliens employed by
them.
XI
AMENDMENTS AND EFFECTIVITY
1. The Commission may, by appropriate
resolution, amend, repeal, revise and/or
modify all or any part or parts of these Rules
and Regulations, as well as adopt any
additional rule or rules, whenever the need
therefor should arise. Any amendment and/or
additional rule, however, shall not take effect
until and after the corresponding resolution of
the Commission has been submitted to and
approved by the President of the Philippines.
2. These Rules and Regulations, any
amendment thereof, or any additional rule or
rules subsequently adopted by the
Commission, shall take effect on the date they
are approved by the President of the
Philippines.
Rule I Section 3 (d) and Rule IX, however, were later
amended, which amendment was approved by the
President on January 14, 1958, to read as follows:
(d) Aliens who are employed in the Philippines
shall also be compulsorily covered (Sec. 3,
Rule I)
EFFECT OF SEPARATION FROM
EMPLOYMENT
coverage is separated from employment, his
employer's contribution on his account shall
cease at the end of the month of separation;
but such employee may continue his
membership in the System and receive the
benefits of the Act, as amended, in
accordance with these rules. If he continues
paying the 6 per cent monthly premiums
representing his as well as the employer's
contribution, based on his monthly salary at
the time of his separation; but if at the time of
his separation the covered employee has
been a member of the System for at least two
years, he shall have the option to choose any
one of the following adjustments of his
membership in the System:
1. A refund of an amount equivalent to his
total contributions of two and one-half per
centum plus interests at the rate of three per
centum per annum, compounded annually;
xxx xxx x x x (Rule IX)
These amended Rules were published in the
November 10, 1958 issue of the Official Gazette.3
It is not here disputed that the Rules and Regulations
of the SSS, having been promulgated in
implementation of a law, have the force and effect of a
statute;" that the amendment thereto, although
approved by the President on January 14, 1958, was
published in the Official Gazette in November, 1958,
or after the employment of the Japanese technicians
had ceased and the corresponding claim for the
refund of the premium contributions was filed with the
System. The question pertinent to this case now is
Page 18 of 19
whether or not appellants are bound by the amended
Rules requiring membership for two years before
refund of the premium contributions may be allowed. 1äwphï1.ñët

These rules and regulations were promulgated to

provide guidelines to be observed in the enforcement
of the law. As a matter of fact, Section 3 of Rule I is
merely an enumeration of the "general principles to
(shall) guide the Commission" in the determination of
the extent or scope of the compulsory coverage of the
law. One of these guiding principles is paragraph (d)
relied upon by appellants, on the coverage of
temporarily-employed aliens. It is not here pretended,
that the amendment of this Section 3(d) of Rule I, as
to eliminate the provision granting to these aliens the
right to a refund of part of their premium contributions
upon their departure from the Philippines, is not in
implementation of the law or beyond the authority of
the Commission to do.

It may be argued, however, that while the amendment

to the Rules may have been lawfully made by the
Commission and duly approved by the President on
January 14, 1958, such amendment was only
published in the November 1958 issue of the Official
Gazette, and after appellants' employment had
already ceased. Suffice it to say, in this regard, that
under Article 2 of the Civil Code,5 the date of
publication of laws in the Official Gazette is material
for the purpose of determining their effectivity, only if
the statutes themselves do not so provide.

In the present case, the original Rules and

Regulations of the SSS specifically provide that any
amendment thereto subsequently adopted by the
Commission, shall take effect on the date of its
approval by the President. Consequently, the delayed
publication of the amended rules in the Official
Gazette did not affect the date of their effectivity,
which is January 14, 1958, when they were approved
by the President. It follows that when the Japanese
technicians were separated from employment in
October, 1958, the rule governing refund of premiums
is Rule IX of the amended Rules and Regulations,
which requires membership for 2 years before such
refund of premiums may be allowed.

Wherefore, finding no error in the resolution of the

Commission appealed from, the same is hereby
affirmed, with costs against the appellants. So
ordered.

Page 19 of 19