The Supreme Court clarified the definition of ’employer’ under the Social Security Act, emphasizing that labor organizations generally do not qualify as employers for SSS coverage purposes. This ruling underscores the importance of accurately determining employment relationships to ensure the proper application of social security benefits. The Court balanced strict adherence to legal definitions with considerations of equity, allowing for the crediting of contributions to ensure the petitioner received retirement benefits, preventing unjust enrichment.

When Union Membership Doesn’t Mean Employer Coverage: Who Pays for Retirement?

This case revolves around Ramchrisen H. Haveria, a former employee of the Social Security System (SSS) who also served as an officer of the SSS Employees’ Association (SSSEA). Haveria’s SSS contributions, made during his time with SSSEA, were later questioned by the SSS, leading to the suspension of his retirement benefits. The central legal question is whether Haveria’s membership in SSSEA qualifies him for SSS coverage, and if not, what recourse he has given the contributions made and benefits previously received.

Haveria had been employed with the SSS from May 1958 to July 1984. During this time, he was also a member and officer/treasurer of the SSSEA. The SSSEA reported him as an employee for SSS coverage and remitted his monthly contributions from May 1966 to December 1981. After his employment with the SSS, Haveria worked for private entities, Stop Light Diners and First Ivory Pharma Trade, accumulating a total of 281 monthly contributions. He received retirement benefits from August 1997 until July 2002, when the SSS suspended his benefits, citing a legal opinion that deemed similar contributions by former SSS employees and SSSEA officers as invalid.

The SSS argued that Haveria was not an employee of the SSSEA, and therefore, his contributions during that period were not valid. The Social Security Commission (SSC) supported this view, stating that labor unions or associations are not employers with respect to their officers or members. The SSC also noted that Haveria could not claim coverage under the expanded coverage scheme for self-employed workers because he claimed coverage as an employee of the SSSEA. This decision was appealed to the Court of Appeals (CA), which affirmed the SSC’s ruling.

In its analysis, the Supreme Court turned to Republic Act No. 1161, the Social Security Act of 1954, which was in effect when Haveria first registered with the SSS. The Act defines two types of coverage: compulsory and voluntary. Compulsory coverage applies to employees in the private sector whose employers are required to register with the SSS. Voluntary coverage, on the other hand, is available to employees of private employers who volunteer for membership, employees of government agencies and corporations, and individuals employed by private entities not subject to compulsory membership.

The Court emphasized the definition of “employer” under R.A. No. 1161:

Any person, natural or juridical, domestic or foreign, who carries on 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.

The Labor Code also excludes labor organizations from the definition of an employer, except when they directly hire employees to render services for the union or association.

Building on this principle, the Supreme Court affirmed that the SSSEA could not be considered an employer under the law. Haveria did not provide sufficient evidence to substantiate his claim of employment with the SSSEA. He did not specify his duties, responsibilities, or work hours, nor did he present any proof of employment, such as pay slips or a contract of employment. Because Haveria was a government employee, he could have qualified for voluntary coverage under Section 9(b) of R.A. No. 1161 had he registered as such while working with the SSS. However, he was registered as a compulsory member based on the mistaken claim that he was an employee of a private entity, the SSSEA.

The Court also addressed the issue of estoppel, which Haveria raised against the SSS. Estoppel, as defined in Article 1431 of the Civil Code, prevents a person from denying or disproving an admission or representation that another person has relied upon. However, the Court held that estoppel could not be invoked against the SSS in this case. It was the SSSEA and Haveria who made the incorrect representation that an employment relationship existed between them. The SSS relied on this representation and erroneously registered Haveria as a compulsory member. The Court cited Noda v. SSS, emphasizing that estoppel does not arise when the act, conduct, or misrepresentation of the party sought to be estopped is due to ignorance founded on innocent mistake.

Considering the circumstances, the Supreme Court agreed with the SSC and the CA that in the interest of justice and equity, Haveria’s contributions remitted by the SSSEA should be considered as voluntary contributions. This would allow him to reach the minimum 120 monthly contributions required for retirement pension eligibility. The remainder of his contributions would be returned to him, subject to offsetting of any excess pensions already paid. The SSS was ordered to recompute all paid monthly pensions and make necessary adjustments.

FAQs

What was the key issue in this case?	The key issue was whether Haveria’s membership in the SSSEA qualified him for compulsory SSS coverage, and consequently, whether he was entitled to receive monthly pensions. The court had to determine if SSSEA could be considered his employer.
Why did the SSS suspend Haveria’s retirement benefits?	The SSS suspended Haveria’s benefits because they determined that his contributions made during his time with SSSEA were invalid, as there was no employer-employee relationship between Haveria and SSSEA. This determination was based on legal opinions regarding similar cases.
What is the difference between compulsory and voluntary SSS coverage?	Compulsory coverage is for employees in the private sector whose employers are required to register with the SSS. Voluntary coverage is for employees of private employers who volunteer for membership, employees of government agencies, and certain other individuals.
Can a labor organization be considered an employer under the Social Security Act?	Generally, no. The Labor Code excludes labor organizations from the definition of an employer, except when they directly hire employees to render services for the union or association.
What is estoppel, and why did it not apply in this case?	Estoppel prevents a person from denying a representation that another person has relied upon. It didn’t apply because Haveria and the SSSEA made the incorrect representation about the employment relationship, and the SSS relied on that representation in error.
How did the Court balance legal definitions with considerations of equity?	While affirming the strict legal definition of ’employer,’ the Court allowed Haveria’s contributions to be considered voluntary, ensuring he met the minimum contribution requirement for retirement benefits. This prevented unjust enrichment and upheld the purpose of social security.
What was the final order of the Supreme Court?	The Supreme Court affirmed the CA’s decision, ordering the SSS to credit Haveria with 120 monthly contributions, recompute his monthly pensions, and return any remaining premium contributions after offsetting excess pensions paid.
What is the practical implication of this ruling for SSS members?	This ruling clarifies the importance of accurately establishing employment relationships for SSS coverage and benefits. It highlights the need for members to understand the basis of their coverage and ensure their contributions are correctly classified.

In conclusion, the Supreme Court’s decision in Haveria v. SSS clarifies the definition of “employer” under the Social Security Act and its implications for SSS coverage. While upholding the strict legal definitions, the Court also considered principles of equity to ensure that Haveria received retirement benefits. This case serves as a reminder of the importance of accurately establishing employment relationships for SSS coverage and benefits.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: RAMCHRISEN H. HAVERIA VS. SOCIAL SECURITY SYSTEM, G.R. No. 181154, August 22, 2018