Title
Haveria vs. Social Security System
Case
G.R. No. 181154
Decision Date
Aug 22, 2018
Haveria, a former SSS employee, claimed SSS membership via SSSEA employment. Courts ruled his coverage erroneous, treating SSSEA contributions as voluntary to meet pension eligibility, denying compulsory benefits.
retirement benefits
erroneous inclusion
compulsory member

Case Summary (G.R. No. 181154)

Factual Background

Petitioner worked with the SSS from May 1958 to July 1984 and, during that period, became a member of the SSSEA. He was reported by the SSSEA for SSS coverage, and his membership was approved. The SSSEA then remitted petitioner’s monthly SSS contributions from May 1966 to December 1981. After leaving the SSS, petitioner worked for private entities, specifically Stop Light Diners from July 1989 to December 1996, and then First Ivory Pharma Trade, Inc. from January to March 1997. Petitioner later received a retirement pension from August 1997 until July 2002, and he had also previously received other SSS benefits such as salary loans, a housing loan in 1968, and partial disability benefits in 1995.

In June 2002, petitioner received a letter from the SSS ordering the suspension of his retirement benefits. The letter referenced a legal opinion in separate claims of Genaro Ledesma and Filemon Pahuyo, former SSS employees and officers of the SSSEA, whose pension claims had been denied. The SSS’s position in that legal opinion was that they were not entitled to benefits under the Social Security Act of 1997 or R.A. No. 8282, because there was no employment relationship between the claimants and the SSSEA.

Following the suspension order, petitioner filed a letter-petition with the SSC, seeking a declaration of the validity of his SSSEA-based SSS membership and the restoration of his monthly pension. He argued that his monthly contributions were valid because he was an employee of the SSSEA. He further asserted that the SSS had registered him as a member and accepted his contributions. Even if the SSS registration were erroneous, petitioner claimed entitlement on grounds of equity and estoppel.

SSC Proceedings and Ruling

In a Resolution dated December 7, 2005, the SSC held that petitioner’s coverage was erroneous. It concluded that petitioner was not an employee of the SSSEA; rather, he was an employee of the SSS, which is a government agency. The SSC also found that there was no employment relationship between petitioner and the SSSEA, emphasizing that labor unions or associations are not employers with respect to their officers or members. It further ruled that petitioner could not claim expanded coverage as an employee of the SSSEA, because his coverage claim depended on asserting that employment relationship.

On petitioner’s plea of estoppel, the SSC ruled that the SSS’s acceptance of petitioner’s registration documents did not automatically validate his membership, because petitioner had not satisfied the basic qualifying conditions for membership in the first place. The SSC then determined the number of contributions that could be credited for pension eligibility. While petitioner had paid 281 monthly contributions, the SSC found that his actual SSS coverage effectively began only in July 1989 when he was reported as an employee of Stop Light Diners. It determined that during his private employment, he remitted 90 monthly contributions through Stop Light Diners and three monthly contributions through First Ivory Pharma Trade, for a total of 93 valid monthly contributions.

In the interest of justice, the SSC treated the contributions remitted by the SSSEA as voluntary contributions after March 1997, when petitioner’s last employer, First Ivory Pharma Trade, remitted its final contribution. Since the contributions became voluntary, the SSS could credit only enough monthly contributions to reach the statutory minimum of 120 monthly contributions required for the retirement pension. The SSC ordered the refund of the remaining premiums and further directed that pensions previously paid prematurely would be offset with petitioner’s future pensions. The dispositive portion directed the SSS to credit petitioner’s SSSEA-remitted contributions as voluntary contributions from April 1997 up to the point of reaching 120 monthly contributions, to recompute monthly pensions accordingly, to offset refundable contributions with advance payments, and to offset prematurely paid pensions against future pension benefits.

Petitioner moved for reconsideration, but the SSC denied it in an Order dated November 15, 2006.

CA Review and Ruling

Petitioner then filed a petition for review on certiorari to the CA. The CA Decision dated October 22, 2007 and its Resolution dated January 14, 2008 affirmed the SSC’s Resolution and Order.

The CA agreed that petitioner was not an employee of the SSSEA. It found no employment relationship between the association and petitioner and characterized him as an officer of the labor association while remaining a full-time employee of the SSS at the relevant time. The CA reasoned that a government employee could not concurrently be an employee of a private entity. Consequently, it held that petitioner’s SSS contributions attributed to his SSSEA affiliation were erroneous for purposes of compulsory coverage.

On petitioner’s estoppel argument, the CA reiterated that estoppel does not lie against the government. It also accorded respect to the SSC’s findings within its specialized competence, stressing that such findings may be set aside only upon proof of grave abuse of discretion, fraud, or error of law. Petitioner’s motion for reconsideration was likewise denied.

Issues Raised in the Petition

In the petition before the Court, petitioner maintained that he was an employee of the SSSEA and that his SSSEA-based SSS membership was valid. He claimed that the CA’s ruling was overly simplistic and erroneous. He further argued that no law prohibited government employees from having employment in private entities or from registration with the SSS. Even assuming the circumstances were disputed, petitioner contended that SSS membership is not predicated on the existence of an employment relationship, because even voluntary membership is allowed.

Petitioner also asserted that the SSS should be treated as a corporate body performing proprietary functions, rather than a purely government instrumentality, such that estoppel could be invoked against it. Lastly, he invoked social justice and argued that the SS Law should be interpreted in favor of granting benefits where doubt exists.

Legal Basis: Compulsory Coverage, Voluntary Coverage, and “Employer”

The Court held that the petition lacked merit and anchored its analysis on the statutory structure of R.A. No. 1161 as it then existed when petitioner was registered in May 1966, while also considering the amendments introduced by R.A. No. 8282 in 1997.

The Court noted that under R.A. No. 1161, the system recognized two kinds of coverage: compulsory coverage and voluntary coverage. Compulsory coverage applied to employees in the private sector within the statutory age range whose employer was required to register under the SSS. Voluntary coverage applied to employees of private employers who chose to be members despite not being required, employees of government agencies and government-owned or government-controlled corporations, and other individuals permitted to join by paying twice the employee’s contribution. Under the amended scheme introduced by R.A. No. 8282, voluntary coverage expanded to include spouses devoting full-time to household management and overseas Filipino workers, while compulsory coverage expanded to include a variety of self-employed and other categories.

The Court further emphasized that determining compulsory coverage required an understanding of who qualifies as an “employer.” Under R.A. No. 1161, an “employer” was defined as any person who carries on in the Philippines a trade, business, industry, undertaking, or activity of any kind and uses the services of another person under orders as regards employment, except the government and its political subdivisions, branches, instrumentalities, including government-owned or government-controlled corporations.

The Court also invoked the Labor Code definition of “employer.” Article 219 defined “employer” broadly but expressly excluded labor organizations from the definition, except when they directly hire employees to render services for the union or association. Thus, the legal framework barred labor organizations like the SSSEA from being treated as an employer in relation to their officers or members.

Application to Petitioner: Absence of Employment Relationship with SSSEA

Applying these provisions, the Court agreed with the SSC and the CA that the SSSEA could not be treated as an employer and that petitioner had not established an actual employment relationship with the SSSEA. The Court reasoned that petitioner anchored his compulsory coverage claim on his alleged employment with the SSSEA. However, the Court held that the SSSEA, as a labor organization, did not qualify as an employer under the applicable law. It also found that petitioner failed to present evidence beyond a bare allegation that he was an employee of the SSSEA. He did not describe his day-to-day duties, work hours, or responsibilities. He likewise did not provide proof of employment such as pay slips or a contract of employment.

Given these findings, the Court characterized petitioner’s relationship with the SSSEA as one of membership or office, not employment. It held that as a government employee, petitioner would have been eligible for voluntary coverage under Section 9(b) of R.A. No. 1161, had he registered as a voluntary member while working with the SSS. Because he was registered as a compulsory member on the mistaken claim that he was an employee of the SSSEA, the Court ruled that his supposed compulsory coverage for the period when he relied on the SSSEA employment basis was erroneous.

The Court therefore concluded that petitioner’s compulsory coverage validly commenced only in 1989, when he was reported as an employee of the private employer Stop Light Diners, and continued through his subsequent private employment with First Ivory Pharma Trade until his retirement in 1997.

Estoppel Against the SSS

The Court

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