Jalotjot vs. Marinduque Iron Mines Agents, Inc. et al.

The Social Security Commission may motu proprio order an employer to remit unpaid premium contributions in administrative proceedings not strictly governed by technical rules, and the employer’s obligation to remit contributions continues for as long as the employer-employee relationship subsists, even if the employee is on sick leave without pay.

Rafael Jalotjot was an employee of Marinduque Iron Mines Agents, Inc. and an employee-member of the Social Security System, which was administered by the Social Security Commission under the Social Security Act, as amended. The Act required employers to remit premium contributions on behalf of covered employees and vested the Commission with direction and control of the System. Elizalde Rope Company and the Social Security System were impleaded as alternative respondents in the administrative proceedings.

Rafael Jalotjot was an employee of Marinduque Iron Mines Agents, Inc. On 1 September 1954, while so employed, he became an employee-member of the Social Security System. Within a short time thereafter, he contracted pulmonary tuberculosis and was confined at the mine hospital of his employer in the province of Marinduque in October 1957. He was later transferred to the Quezon Institute in Quezon City, where he was still confined at the time he filed a petition for sickness benefits on 12 July 1961.

On 6 November 1958, Marinduque Iron Mines Agents, Inc. separated Jalotjot from its employ. The company remitted to the System premium contributions corresponding to the month of September 1957 only and refused Jalotjot’s demand for sickness benefits up to his separation in November 1958. Because of that refusal, Jalotjot filed a petition with the Social Security Commission, impleading Marinduque Iron Mines Agents, Inc., Elizalde Rope Company, and the Social Security System as alternative respondents.

The Commission held Marinduque Iron Mines Agents, Inc. liable for Jalotjot’s sickness benefits. It also ordered the company to remit its 3-1/2 share in the premium contributions on account of Jalotjot’s membership and to deduct Jalotjot’s 2-1/2 share from his sickness benefits. Marinduque Iron Mines Agents, Inc. appealed.

• Commission’s Authority to Order Remittance: Respondent-appellant Marinduque Iron Mines Agents, Inc. argued that the Commission had no authority to motu proprio order it to remit its 3-1/2 share in premium contributions, because the order created a cause of action between it and the System despite the absence of any cross-claim by the System against Marinduque as alternative respondent.
• Entitlement to Sickness Benefits: Respondent-appellant argued that Jalotjot was not entitled to sickness benefits because at the time of his confinement he had not been a member of the System for at least one year and had not paid premiums for at least six months, as required by the rules and regulations of the Commission and Section 14 of the Social Security Act.
• Deduction of Employee’s Share: Respondent-appellant argued that the Commission had no authority to order the deduction from Jalotjot’s sickness benefits of his 2-1/2 share in the premium contributions.

• Commission’s Authority to Order Remittance: Whether the Social Security Commission had authority to motu proprio order Marinduque Iron Mines Agents, Inc. to remit its 3-1/2 share in premium contributions despite the absence of a cross-claim by the Social Security System.
• Entitlement to Sickness Benefits: Whether Rafael Jalotjot was entitled to sickness benefits despite not having been a member for at least one year and not having paid premiums for at least six months at the time of his confinement.
• Deduction of Employee’s Share: Whether the Commission had authority to order the deduction from Jalotjot’s sickness benefits of his 2-1/2 share in the premium contributions.

• Commission’s Authority to Order Remittance: Yes. Hearings before the Commission are administrative and not strictly governed by technical rules of procedure, and the Commission has direction and control of the System under Section 3 of the Social Security Act, as amended.
• Entitlement to Sickness Benefits: Yes. Coverage is determined solely by the existence of an employer-employee relationship under Section 9, and the employer’s duty to remit contributions continues while employment subsists, even during sick leave without pay.
• Deduction of Employee’s Share: Yes. The challenge rests on the same premises as the rejected second assignment of error, so the Commission’s authority to order the deduction was upheld.

• Commission’s Authority to Order Remittance: The appellant’s position was untenable because Commission hearings are administrative and not strictly governed by technical rules applied to judicial trials, citing Oromega Lumber Co. vs. SSC. Since the Commission discovered that Marinduque had not complied with its statutory duty to remit its share in premium contributions, it acted within its authority in ordering remittance; it is vested with direction and control of the System under Section 3 of the Social Security Act, as amended. No prejudice was shown because Marinduque’s defense was that it did not remit because Jalotjot received no compensation after becoming sick, and it was not shown that Marinduque could offer any other excuse if the System had filed a cross-claim.
• Entitlement to Sickness Benefits: The argument had no merit. From 1 September 1957 until his employment was terminated in early November 1958, Jalotjot was a member of the System; his membership was not ended by his sickness. Marinduque was therefore responsible for remitting the employee’s share of premiums throughout that period of more than one year under Section 22. The excuse that no compensation was earned was not entirely true because Jalotjot was entitled to receive, and was paid, under the Workmen’s Compensation Act, and his contribution could have been deducted from those payments. Even without compensation payments, the argument was rejected under Franklin Baker Company of the Philippines vs. Social Security System, which held that payment of contributions by an employer is compulsory during coverage; coverage is determined solely by the existence of an employer-employee relationship under Section 9; an employee on leave, even without pay, remains an employee, the contract of employment is not terminated, the employer is bound to accept his return, and the employer remains liable to pay contributions. The time when an employee may not actually be receiving compensation, as on sick leave without pay, is not excepted.
• Deduction of Employee’s Share: The premises of this assignment were the same as those in the second assignment of error; perforce, it also failed.

• Coverage Determined Solely by Employer-Employee Relationship — Under Section 9 of the Social Security Act, coverage is determined solely by the existence of an employer-employee relationship. As long as employment is not terminated, the employer’s payment of contributions is compulsory. The Court applied this rule because Jalotjot remained an employee until his separation in November 1958, notwithstanding his sickness and confinement.
• Employer’s Duty to Remit Contributions During Sick Leave Without Pay — An employee on leave, even without pay, remains an employee; the employment contract has not terminated, the employee may return to work, and the employer is bound to accept him. The employer remains liable to pay contributions. The Court applied this to reject Marinduque’s claim that it had no obligation because Jalotjot earned no compensation after becoming sick.
• Administrative Proceedings Before the Social Security Commission Not Strictly Governed by Technical Rules — Hearings before the Commission are administrative and are not strictly governed by the technical rules of procedure applied to judicial trials. This allowed the Commission to motu proprio order Marinduque to remit its unpaid share in premium contributions even without a cross-claim by the System.
• Commission’s Authority Over the System — The Commission is vested with the direction and control of the System under Section 3 of the Social Security Act, as amended, and may order remittance of unpaid premium contributions discovered in a case before it.

• "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 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." — This passage states the ratio decidendi for continuing employer liability during leave without pay and defines coverage by the employer-employee relationship.
• "the time when an employee may not be actually receiving compensation as when he is on sick leave without pay, is not excepted (Franklin Baker Co. vs. SSS, supra)." — This short ruling directly rejects the employer’s excuse that no compensation was being paid during the employee’s sickness.
• "The foregoing position of the appellant is untenable, because the hearings before the Commission are administrative and are not strictly governed by the technical rules of procedure that are applied to judicial trials (Oromega Lumber Co. vs. SSC, L-14833, 28 April 1962); and since the Commission had discovered, in the case before it, that the appellant had not complied with its statutory duty of remitting to the System its share in the premium contributions, the Commission acted well within its authority in ordering the remittance since it has been vested with the direction and control of the System (Sec. 3, Social Security Act, as amended)." — This passage establishes the Commission’s authority to order remittance motu proprio in administrative proceedings.

• Oromega Lumber Co. vs. SSC, L-14833, 28 April 1962 — Cited to establish that hearings before the Social Security Commission are administrative and not strictly governed by the technical rules of procedure applied to judicial trials.
• Franklin Baker Company of the Philippines vs. Social Security System, L-17361, 29 April 1963 — Analogous and controlling precedent; held that payment of contributions by an employer is compulsory during coverage, coverage is determined solely by the existence of an employer-employee relationship, and an employee on leave without pay remains an employee for whom contributions must be paid.

• Section 3, Social Security Act, as amended — Vested the Social Security Commission with direction and control of the System; the basis for its authority to order Marinduque to remit its unpaid share in premium contributions.
• Section 9, Social Security Act — Provides that coverage is determined solely by the existence of an employer-employee relationship; applied to hold that Jalotjot remained covered while employed, even during sick leave without pay.
• Section 14, Social Security Act — Invoked by Marinduque to argue that Jalotjot was not entitled to sickness benefits because he had not been a member for at least one year and had not paid premiums for at least six months; the argument was rejected.
• Section 22, Social Security Act — Made the employer responsible for remitting the employee’s share of premiums; applied to hold Marinduque liable for Jalotjot’s share throughout the period of more than one year.
• Workmen’s Compensation Act — Under it, Jalotjot was entitled to receive and was paid compensation; his premium contribution could have been deducted from those payments.

Bengzon, C.J., Bautista, Angelo, Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur. Concepcion, J., took no part.