Title
Elizalde Rope Factory, Inc. vs. Social Security Commission
Case
G.R. No. L-15163
Decision Date
Feb 28, 1962
Employer must pay Social Security premiums during strike, as employer-employee relationship persists despite unpaid leave or labor disputes.
strike
social security premiums
worker

Case Summary (G.R. No. L-15163)

Factual Background

The record showed that Tupas was one of the rope factory’s laborers who participated in the strike beginning 17 September 1957. While the strike lasted from October 1957 to January 1958, the rope factory did not pay any premiums to the Social Security Commission for Tupas during that period. When the strike ended in the middle of February 1958, the rope factory resumed premium payments and continued them up to 6 May 1958, the date of Tupas’s death.

On 16 July 1958, the Social Security Commission sent bill No. 138 to the rope factory for P10.27, corresponding to the rope factory’s contribution to the unpaid premiums for Tupas covering the strike months. In a letter dated 23 July 1958, the rope factory asserted that the amount of P9.45—allegedly representing the employer’s 3 1/2% contribution for October, November, and December 1957—should be borne by Tupas himself because he was on strike and therefore “unemployed” by the company, and because he received no wages during those months. The rope factory declared it was willing to pay only P0.82 for the underpaid premium for May 1958.

Actions and Rulings of the Social Security Commission

On 4 November 1958, the Social Security Commission wrote again to the rope factory, stating that the strike was “not unlawful” and reiterating its demand that the rope factory pay the P10.27. The Commission’s letter enclosed Annex A, Circular No. 21 dated 15 October 1958, clarifying the Commission’s interpretation of the obligation to pay premiums even when an employee had no earnings due to certain circumstances such as leave without pay. The circular stated that the employer’s duty to remit its 3 1/2% contribution and to withhold and remit the employee’s 2 1/2% exists as long as the employer-employee membership relationship is not broken or terminated, such as when the employee is on leave without pay. It further explained that the employer must continue to remit its 3 1/2% contribution every month even without the employee’s 2 1/2%, where there are no earnings, and that the unpaid 2 1/2% is to be deducted either in lump sum or by installments from future earnings.

Also attached was Annex B, a memorandum dated 28 October 1958 from the Commission’s Legal Staff. It recommended, among others, that the rope factory be advised to pay its 3 1/2% contribution for Tupas for the months covered by the strike, that the 3 1/2% should be computed based on wages Tupas received in August 1957 in accordance with Circular No. 21, and that the premiums be recomputed so that the employee’s 2 1/2% contribution would be based on Tupas’s wages in August 1957. The memorandum further recommended similar treatment for other strikers and required their employee and employer contributions to be computed based on wages received in August 1957.

On 2 December 1958, the rope factory requested reconsideration, but the Social Security Commission denied the request by Resolution No. 41, which the rope factory received on 16 January 1959. The rope factory then appealed to the Supreme Court.

The Parties’ Contentions

The rope factory anchored its position on the notion that during a strike, the worker ceases to be an “employee” for purposes of the Social Security Law because he neither performs services nor receives compensation. It argued that, since Edilberto Tupas was on strike from 17 September 1957 to the middle of February 1958, the statutory definition of an employee was not satisfied for that period because both the rendering of services and the receipt of compensation were wanting. It also invoked the definition of an employer as one who carries on a business and uses the services of another person under his orders as regards employment, contending that during the strike the rope factory ceased to “use” Tupas’s services and had him under no orders regarding employment; it therefore concluded that no premium should accrue for him during the strike period.

The Social Security Commission maintained that premiums corresponding to the strike months must be paid under Circular No. 21. It acknowledged that during a strike the worker renders no work or service and receives no compensation. However, it argued that this did not sever or dissolve the employment relationship. It characterized a strike as a means by which workers express grievances and enforce demands, asserting that workers do not thereby intend to terminate their relationship with their employer. The Commission therefore rejected the rope factory’s claim that Tupas ceased being its employee during the strike.

Legal Framework Applied by the Court

The Supreme Court referred to Section 18 of Republic Act No. 1161, as amended by Republic Act No. 1792, which provides for the deduction and withholding from the monthly compensation of a covered employee of a contribution equal to two and a half per centum. It also referred to Section 19, which provides that the employer shall pay, with respect to such covered employee in his employ, a monthly contribution equal to three and a half per centum. The Court emphasized that these provisions did not require that the employer’s 3 1/2% and the employee’s 2 1/2% contributions be based strictly on monthly compensation actually earned during each month where the employee had no earnings. Rather, the provisions required that once the employee was compulsorily covered, both employee and employer contributions were to be made every month during his employment, while the coverage relationship remained intact.

The Supreme Court’s Reasoning

Applying the statutory provisions and the Commission’s circular interpretation, the Supreme Court held that Edilberto Tupas had been compulsorily covered by the Social Security System in September 1957. The Court ruled that when Tupas went on strike from 17 September 1957 to the middle of February 1958, his employment did not cease or end. For this period, the Court held that the monthly premium accrued and that the rope factory, as his employer, had to pay its 3 1/2% contribution in accordance with Circular No. 21.

The Court thus sustained the Commission’s view that the fact of non-work and lack of compensation during the strike did not, by its

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