The Supreme Court denied the petition of Lopez Sugar Corporation (LSC) and affirmed that it must remit to the Social Security System (SSS) the social security contributions of four employees who were illegally dismissed, covering the period during which they were out of work. The Court held that illegally dismissed employees are deemed to have never left their employment, so the employer's obligation to remit their social security contributions did not cease.
The Case
Romeo Perrin, Jr., Eduardo Candelario, Leonito Franco, and Rogelio Pabalan (collectively, Perrin et al.) were employees of LSC who were dismissed on September 25, 1995. When they filed a Complaint for Illegal Dismissal, the Labor Arbiter dismissed the same. The National Labor Relations Commission (NLRC) reversed the Labor Arbiter's Decision and ruled that Perrin et al. were illegally dismissed. The NLRC directed LSC to reinstate them to their former positions with backwages. The NLRC Decision was affirmed by the Court of Appeals (CA) and eventually by the Court.
The Labor Arbiter implemented the NLRC Decision and ordered LSC to pay Perrin et al. backwages and separation pay in lieu of reinstatement. After the order was implemented, Perrin et al. demanded from LSC the payment of their social security contributions during the period covered by the award of backwages, but LSC refused.
Perrin et al. referred their claims to the Member's Assistance Center of SSS Sagay City, Negros Occidental Branch. They later filed a Petition before the Social Security Commission (SSC) to compel LSC to remit their contributions so they may also avail of their retirement benefits. SSS filed a Petition in Intervention, praying that LSC be ordered to pay all premium contributions due plus a 3% penalty for late payment.
LSC argued that its obligation to contribute ceased when the employees were separated from employment, citing Section 11 of Republic Act No. 8282, the Social Security Act of 1997. The SSC ruled in favor of Perrin et al. and ordered LSC to pay. LSC's Motion for Reconsideration was denied, and its Petition for Review before the CA was also denied. Its subsequent Motion for Reconsideration was denied by the CA, leading to the present Petition.
The Issue
The question was whether the CA erred in upholding LSC's liability to remit Perrin et al.'s social security contributions for the period covered by the award of backwages.
The Ruling
The Court denied the petition. Its final disposition reads: "ACCORDINGLY, the Petition for Review on Certiorari is DENIED. The Decision, dated October 14, 2020, and the Resolution, dated April 26, 2022, of the Court of Appeals in CA-G.R. SP No. 158759 are AFFIRMED. SO ORDERED."
The Court held that because LSC failed to remit the social security contributions, it is liable to pay a penalty of three percent (3%) per month from the date the contribution falls due until paid, pursuant to Section 22 of the Social Security Act of 1997.
By the Numbers
- G.R. No. 260447
- Employees dismissed: September 25, 1995
- Period covered: October 1995 to November 2005
- Social security contributions: PHP 248,174.00
- 3% per month penalty: PHP 1,302,702.75, computed as of July 31, 2015
- SSC Resolution: October 5, 2016
- SSC Order denying reconsideration: July 4, 2018
- CA Decision: October 14, 2020
- CA Resolution: April 26, 2022
- CA case: CA-G.R. SP No. 158759
The Court's Reasoning
The Court explained that under Sections 18, 19, and 22 of the Social Security Act of 1997, an employer has an obligation to deduct and withhold from its employees' wages the employees' share of the social security contributions and remit them, together with the employer's share, to the SSS.
LSC argued, citing Section 11 of the Act, that the employer's obligation to remit ceases when the employee is separated from employment, and that there is no qualification that the separation must be legal before the obligation ceases. The Court did not agree.
The Court pointed to Article 294 of the Labor Code, which provides that an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to full backwages. Citing Escario v. NLRC, the Court held that illegally dismissed employees are deemed to have not left their employment and are entitled to all rights and privileges that accrue to them from that employment. In Dumapis v. Lepanto Consolidated Mining Co., the Court emphasized that illegally dismissed employees are entitled to the salaries and benefits they would have received had they not been illegally dismissed.
Since there was no dispute that Perrin et al. were illegally dismissed, as ruled by the NLRC and affirmed by the CA and the Court, they are deemed to have never left their employment. Consequently, LSC's obligation to remit their social security contributions did not cease for the period during which they were illegally dismissed. The Court also found that the Satisfaction of Judgment pertained only to the receipt of backwages, so Perrin et al. could not have intended to waive their right to have their social security contributions remitted to SSS.
Source: Supreme Court Decision, G.R. No. 260447.
This report summarizes a public Supreme Court decision and is not legal advice.