Lopez Sugar Corporation vs. Romeo Perrin, Jr., et al.

An illegally dismissed employee is deemed never to have left employment; consequently, the employer's obligation to deduct, withhold, and remit social security contributions does not cease with respect to the period covered by the award of backwages, and the Social Security Commission has jurisdiction over disputes involving such contributions.

Lopez Sugar Corporation employed Romeo Perrin, Jr., Eduardo Candelario, Leonito Franco, and Rogelio Pabalan, while the Social Security System is the government instrumentality charged with administering the social security program under Republic Act No. 1161, as amended by Republic Act No. 8282, or the Social Security Act of 1997. That statute imposes on every employer the duty to deduct and withhold the employee's share of contributions from wages and to remit them, together with the employer's own share, to the System, and vests in the Social Security Commission jurisdiction over disputes respecting coverage, benefits, contributions, and penalties thereon. The dispute therefore turns on how the statutory cessation clause in Section 11 of the Social Security Act operates against an employer whose separation of the employee was subsequently adjudged illegal.

Romeo Perrin, Jr., Eduardo Candelario, Leonito Franco, and Rogelio Pabalan were employees of Lopez Sugar Corporation until they were dismissed on September 25, 1995. They filed a Complaint for Illegal Dismissal, which the Labor Arbiter dismissed, but the National Labor Relations Commission reversed the Labor Arbiter and ruled that they had been illegally dismissed, directing Lopez Sugar Corporation to reinstate them to their former positions with backwages. That NLRC Decision was affirmed by the Court of Appeals and eventually by the Supreme Court. When the Labor Arbiter implemented the NLRC Decision, Lopez Sugar Corporation was ordered to pay Perrin et al. backwages and separation pay in lieu of reinstatement, among others.

After that order was implemented, Perrin et al. demanded from Lopez Sugar Corporation the payment of their social security contributions for the period covered by the award of backwages, but the company refused. Perrin et al. referred their claims to the Member's Assistance Center of the SSS Sagay City, Negros Occidental Branch. In a Letter dated April 1, 2011, the Branch Head of that office informed Perrin et al.'s counsel that the office had sent a billing letter to Lopez Sugar Corporation for the unpaid social contributions, but the company questioned the propriety of being required to pay them. The Cluster Legal Unit of the SSS Sagay City, Negros Occidental Branch accordingly recommended that the issues raised by both sides be brought before and decided by the Social Security Commission.

Perrin et al. then filed a Petition before the Social Security Commission to compel Lopez Sugar Corporation to remit to the SSS their social security contributions for the period for which they were awarded backwages, so that they could also avail of retirement benefits based on contributions paid for that period. Lopez Sugar Corporation moved to dismiss on three grounds: that the Commission had no jurisdiction over the case; that the Petition was barred by res judicata; and that the Petition failed to state a cause of action and in fact lacked a cause of action. The SSS, for its part, filed a Petition in Intervention praying that Lopez Sugar Corporation be ordered to pay all premium contributions due on behalf of Perrin et al., plus the three percent penalty imposed thereon for late payment.

In an Order dated April 1, 2013, the Commission denied the Motion to Dismiss for lack of merit and required Lopez Sugar Corporation to file its Answer. The company instead filed an Omnibus Motion for Reconsideration and Suspension of Period to File Answer, insisting that it had no obligation to contribute SSS premiums during the period when the illegal dismissal case was pending, citing Section 11 of Republic Act No. 8282, which provides that when an employee under compulsory coverage is separated from employment, the employer's contribution on his account and his obligation to pay contributions arising from that employment shall cease at the end of the month of separation, and arguing that the provision does not qualify that the separation must be legal. It further argued that premium contributions are based on "compensation" and not on "backwages"; that the Commission had no jurisdiction because the case involved determination of the amount of full backwages, which falls under the exclusive jurisdiction of the Labor Arbiter under Article 217 of the Labor Code; and that Perrin et al.'s failure to raise the matter before the Labor Arbiter, coupled with their execution of a Satisfaction of Judgment releasing the company from all claims arising from their employment, barred them from seeking relief.

The Commission ruled in favor of Perrin et al. in its Resolution dated October 5, 2016, holding that Lopez Sugar Corporation had the obligation to remit their social security contributions to the SSS, considering the continued existence of the employer-employee relationship during the period that Perrin et al. were prevented from working on account of their illegal dismissal. The company's Motion for Reconsideration was denied in an Order dated July 4, 2018, and the Court of Appeals thereafter affirmed both issuances, holding that an illegally dismissed employee is deemed to have never left his office and that the company remained obligated to remit the corresponding contributions.

• Jurisdiction of the SSC: Petitioner argued that because the computation of social security contributions in this case was based on the backwages awarded to Perrin et al., the question of whether it had the obligation to remit those contributions should have been resolved by the Labor Arbiter and not by the Social Security Commission, since the Commission has no jurisdiction to rule on what constitutes backwages, the matter falling under Article 217 of the Labor Code.
• Cessation of the Obligation to Contribute: Petitioner insisted that it had no obligation to contribute SSS premiums during the period when the illegal dismissal case was pending, invoking Section 11 of Republic Act No. 8282, which provides that upon separation of an employee under compulsory coverage, the employer's contribution on his account and its obligation to pay contributions arising from that employment cease at the end of the month of separation, and stressing that the provision does not qualify that the separation must be legal.
• Contributions Based on Compensation, Not Backwages: Petitioner argued that premium contributions for purposes of the Social Security Act of 1997 are based on "compensation" and not on "backwages."
• Res Judicata: Petitioner claimed that Perrin et al.'s claim for social security contributions was barred by the NLRC's prior judgment declaring them illegally dismissed and awarding backwages, both cases allegedly involving the amount of backwages awarded.
• Waiver Through Satisfaction of Judgment: Petitioner argued that Perrin et al.'s failure to raise before the Labor Arbiter the claim that their backwages should include social security contributions barred them from raising the issue in another case, and that their knowing and voluntary execution of a Satisfaction of Judgment, releasing the company from all claims arising from their employment, likewise barred them from asking for any relief in connection with that employment.

• SSC Jurisdiction: Whether the Social Security Commission has jurisdiction over a petition to compel an employer to remit social security contributions for the period covered by an award of backwages, or whether the matter falls within the exclusive jurisdiction of the Labor Arbiter under Article 217 of the Labor Code.
• Res Judicata: Whether the claim for social security contributions is barred by the NLRC's prior judgment in the illegal dismissal case under the doctrine of res judicata.
• Waiver and Satisfaction of Judgment: Whether the Satisfaction of Judgment executed by Perrin et al. operates as a valid waiver of their right to have their social security contributions remitted to the SSS.
• Employer's Duty to Remit Contributions: Whether the Court of Appeals erred in upholding Lopez Sugar Corporation's liability to remit Perrin et al.'s social security contributions to the SSS corresponding to the period during which they were illegally dismissed.

• SSC Jurisdiction: Yes. Section 5(a) of Republic Act No. 1161, as amended by Republic Act No. 8282, and Rule III, Section 1 of the 1997 SSS Revised Rules of Procedure vest in the Social Security Commission jurisdiction over any dispute with respect to coverage, benefits, contributions, and penalties thereon or any other matter related thereto.
• Res Judicata: No. The fourth element of res judicata in the concept of bar by prior judgment — identity of subject matter and causes of action — is absent, the NLRC case having concerned illegal dismissal while the SSC case concerned the employer's refusal to remit social security contributions.
• Waiver and Satisfaction of Judgment: No. A waiver, to be valid, must be clear and unequivocal, and the general release clause in the Satisfaction of Judgment, read in light of the circumstances of its execution, did not show an intent to waive the right to have social security contributions remitted.
• Employer's Duty to Remit Contributions: Yes. Under Article 294 of the Labor Code, an illegally dismissed employee is deemed never to have left employment, so the employer's obligation to remit social security contributions did not cease for the period of the illegal dismissal, and the three percent monthly penalty under Section 22 attaches.

• SSC Jurisdiction: Section 5(a) of Republic Act No. 1161, as amended by Republic Act No. 8282, provides that any dispute arising under the Act with respect to coverage, benefits, contributions, and penalties thereon, or any other matter related thereto, shall be cognizable by the Social Security Commission. Rule III, Section 1 of the 1997 SSS Revised Rules of Procedure likewise lodges jurisdiction in the Commission over disputes respecting coverage, entitlement to benefits, and the collection and settlement of contributions and penalties thereon, after the SSS through its President, Manager, or Officer-in-charge of the Department, Branch, or Representative Office concerned has first taken action thereon in writing. In Social Security Commission vs. Alba, the Court recognized the Commission's jurisdiction in cases involving unremitted social security contributions. Here, the Petition filed by Perrin et al. did not raise the issue of what should be included in their backwages; it simply alleged that Lopez Sugar Corporation is legally bound to pay their social security contributions for the period during which they were illegally dismissed. The SSS Branch Head had acted on the claim by sending a billing letter, which the company refused to honor, and the Cluster Legal Unit recommended that the matter be raised before the Commission. The jurisdictional prerequisite of prior written action by the SSS was thus satisfied, and the Commission properly took cognizance of the case.

• Res Judicata: For res judicata in the concept of bar by prior judgment to apply, four elements must concur: (1) finality of the former judgment; (2) jurisdiction of the court rendering it over the subject matter and the parties; (3) a judgment on the merits; and (4) identity of parties, subject matter, and causes of action between the first and second actions. Only the fourth element was in issue. While the illegal dismissal case before the NLRC and the claim for social security contributions before the Commission involved the same parties, they did not involve the same subject matter and causes of action. The subject matter of the NLRC case was the illegal dismissal of Perrin et al., whereas the subject matter of the SSC case was the company's obligation to remit their social security contributions to the SSS. The cause of action before the NLRC was their dismissal from employment; the cause of action before the Commission was the company's refusal to remit the contributions. The claim was therefore not barred by the NLRC's prior judgment.

• Waiver and Satisfaction of Judgment: A waiver, to be valid, must be clear and unequivocal, meaning that the person waiving the right must understand what is being waived and the effect of the waiver. Waivers and quitclaims are carefully examined and strictly scrutinized not only as to the words and terms used but also as to the factual circumstances under which they were executed. The phrase "any and all manner of action in law or in equity" is a general and standard clause in most employee quitclaims and cannot be construed in its strict literal sense. The circumstances here showed that Perrin et al. did not intend to waive their right to have their social security contributions remitted: they executed the Satisfaction of Judgment after receiving their backwages, and since it is the employer's duty to remit both the employees' and the employer's contributions, they could reasonably have expected that upon receipt of their backwages the company would comply with that mandate. The Satisfaction of Judgment pertained only to the receipt of backwages.

• Employer's Duty to Remit Contributions: Sections 18, 19, and 22 of the Social Security Act of 1997 obligate the employer to deduct and withhold from its employees' wages and salaries the employees' share of social security contributions and to remit them, together with the employer's share, to the SSS; the employer is liable for their payment, and any contribution not paid when due bears a penalty of three percent per month from the date it falls due until paid. Lopez Sugar Corporation argued that its obligation ceased upon separation under Section 11 of the Act, which contains no qualification that the separation must be legal. The argument fails. Article 294 of the Labor Code entitles an employee unjustly dismissed from work to reinstatement without loss of seniority rights and other privileges, to full backwages inclusive of allowances, and to other benefits or their monetary equivalent computed from the time compensation was withheld up to actual reinstatement. In Escario vs. NLRC, the Court held that illegally dismissed employees are deemed to have not left their employment and are entitled to all rights and privileges accruing from that employment; in Dumapis vs. 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. There being no dispute that Perrin et al. were illegally dismissed, as ruled by the NLRC and affirmed by the Court of Appeals and the Court, they are deemed never to have left their employment, and the company's obligation to remit their social security contributions did not cease for the period of the illegal dismissal. Having failed to remit, the company is liable for the three percent per month penalty under Section 22 from the date each contribution fell due until paid.

• Deemed-Never-Separated Rule for Illegally Dismissed Employees — An employee who is illegally dismissed is, in contemplation of law, deemed never to have left employment, and is therefore entitled to all rights and privileges that accrue from that employment, including the salaries and benefits that would have been received had the dismissal not occurred. The Court applied this rule to hold that the employer's statutory obligation to deduct, withhold, and remit social security contributions does not cease during the period covered by the award of backwages, and that Section 11 of the Social Security Act of 1997 — which provides that the employer's contribution and obligation to pay contributions cease at the end of the month of separation — does not relieve the employer where the separation was adjudged illegal.
• Jurisdiction of the Social Security Commission over Contribution Disputes — Under Section 5(a) of Republic Act No. 1161, as amended by Republic Act No. 8282, any dispute arising under the Social Security Act with respect to coverage, benefits, contributions, and penalties thereon, or any other matter related thereto, is cognizable by the Social Security Commission. Rule III, Section 1 of the 1997 SSS Revised Rules of Procedure adds the requirement that the SSS, through its President, Manager, or Officer-in-charge of the Department, Branch, or Representative Office concerned, must have first taken action thereon in writing. The Court applied the rule where the petition sought only to compel remittance of contributions and did not ask the Commission to determine what constitutes backwages, and where the SSS Branch Head had already acted on the claim by sending a billing letter.
• Res Judicata — Bar by Prior Judgment — Res judicata in the concept of bar by prior judgment requires the concurrence of four elements: (1) finality of the former judgment; (2) jurisdiction of the court rendering it over the subject matter and the parties; (3) a judgment on the merits; and (4) identity of parties, subject matter, and causes of action between the first and second actions. The Court found the fourth element absent because the illegal dismissal case before the NLRC concerned the fact of dismissal, while the case before the Social Security Commission concerned the employer's refusal to remit social security contributions.
• Requisites of a Valid Waiver; Strict Scrutiny of Quitclaims — A waiver, to be valid, must be clear and unequivocal, such that the person waiving the right understands what is being waived and the effect of the waiver. Waivers and quitclaims are carefully examined and strictly scrutinized with regard not only to the words and terms used but also to the factual circumstances under which they were executed. General release clauses phrased as "any and all manner of action in law or in equity" are standard boilerplate in employee quitclaims and cannot be construed in their strict literal sense. The Court applied the doctrine to hold that a Satisfaction of Judgment covering the receipt of backwages did not waive the employees' right to have their social security contributions remitted.
• Employer's Statutory Duty to Remit and the Three Percent Penalty — Sections 18, 19, and 22 of the Social Security Act of 1997 require the employer to deduct and withhold the employee's contribution from wages and to remit it, together with the employer's own contribution, to the SSS; the employer is liable for payment, and any contribution not paid when due bears a penalty of three percent per month from the date it falls due until paid. The Court sustained the award of contributions and the penalty against the employer for the period of the illegal dismissal.

• "Thus, they are deemed to have never left their employment. Consequently, LSC's obligation to remit Perrin et al.'s social security contributions did not cease with respect to the period during which Perrin et al. were illegally dismissed." — This passage states the ratio decidendi of the case: it links the deemed-never-separated rule for illegally dismissed employees to the continuing statutory duty to remit social security contributions, and is the holding for which the decision is chiefly cited.
• "It is a settled rule that for a waiver to be valid, the waiver must be clear and unequivocal." — This states the controlling standard for testing the Satisfaction of Judgment executed by the employees, and anchors the Court's refusal to give literal effect to the general release clause.
• "The phrase 'any and all manner of action in law or in equity' is a general and standard clause in most employee quitclaims that cannot be construed in its strict literal sense." — This defines the Court's treatment of boilerplate release language in quitclaims and explains why the Satisfaction of Judgment did not bar the claim for remittance of contributions.
• "Having established Far Alba's accountability to the SSS for Lamboso's unremitted contributions from 1960 to 1970, a discussion on the propriety of filing a claim of such nature against the estate proceedings of Arturo Alba, Sr. becomes unnecessary. In any event, the Court sustains the jurisdiction of the Commission over disputes under the Social Security Act 'with respect to coverage, benefits, contributions and penalties thereon or any other matter related thereto.'" — Quoted from Social Security Commission vs. Alba, this passage supplies the jurisprudential basis for the Commission's jurisdiction over claims for unremitted contributions.

• Social Security Commission vs. Alba, 581 Phil. 446 (2008) — Controlling precedent on jurisdiction; cited and followed for the rule that the Social Security Commission has jurisdiction over disputes under the Social Security Act with respect to coverage, benefits, contributions, and penalties thereon or any other matter related thereto, including claims for unremitted contributions.
• Escario vs. NLRC, 645 Phil. 503 (2010) — Followed for the rule that illegally dismissed employees are deemed to have not left their employment and are entitled to all rights and privileges accruing to them from that employment.
• Dumapis vs. Lepanto Consolidated Mining Co., 884 Phil. 156 (2020) — Followed for the rule that illegally dismissed employees are entitled to the salaries and benefits they would have received had they not been illegally dismissed.
• Aguila vs. Perfect Dimension Corporation, G.R. No. 243317, August 4, 2025 — Cited as the source of the four-element formulation of res judicata in the concept of bar by prior judgment applied in this case.
• Roxaco-Asia Hospitality Corporation vs. Gulf Canary Construction and Development, Inc., G.R. Nos. 246250-51, September 29, 2025 — Cited for the rule that a waiver must be clear and unequivocal.
• Sanico vs. Colipano, 818 Phil. 981 (2017) — Cited for the requirement that, for a waiver to be clear and unequivocal, the person waiving the right must understand what is being waived and the effect of the waiver.
• F.F. Cruz & Co., Inc. vs. Galandez, 856 Phil. 150 (2019) — Cited for the rule that waivers and quitclaims are strictly scrutinized with regard not only to the words and terms used but also to the factual circumstances under which they were executed, and for the treatment of general release clauses as standard boilerplate.
• Republic of the Philippines vs. Asiapro Cooperative, 563 Phil. 979 (2007) — Cited in connection with Rule III, Section 1 of the 1997 SSS Revised Rules of Procedure and the requirement of prior written action by the SSS before the Commission may take cognizance of a dispute.

• Section 5(a), Republic Act No. 1161, as amended by Republic Act No. 8282 (Social Security Act of 1997) — Vests in the Social Security Commission jurisdiction over any dispute arising under the Act with respect to coverage, benefits, contributions, and penalties thereon or any other matter related thereto. Applied to uphold the Commission's jurisdiction over the petition to compel remittance of contributions, the Court noting that the petition did not require a determination of what constitutes backwages.
• Rule III, Section 1, 1997 SSS Revised Rules of Procedure — Lodges jurisdiction in the Commission over disputes respecting coverage, entitlement to benefits, and the collection and settlement of contributions and penalties thereon, after the SSS through its President, Manager, or Officer-in-charge of the Department, Branch, or Representative Office concerned has first taken action thereon in writing. Applied where the SSS Branch Head had sent a billing letter to the employer, satisfying the condition precedent.
• Section 11, Republic Act No. 8282 (Social Security Act of 1997) — Provides that when an employee under compulsory coverage is separated from employment, the employer's contribution on his account and its obligation to pay contributions arising from that employment cease at the end of the month of separation. Invoked by the employer but held inapplicable, because an illegally dismissed employee is deemed never to have left employment.
• Section 18, Republic Act No. 8282 (Social Security Act of 1997) — Requires the employer to deduct and withhold from the employee's monthly salary, wage, compensation, or earnings the employee's contribution corresponding to the prescribed schedule. Applied to establish the employer's duty to withhold the employees' share.
• Section 19, Republic Act No. 8282 (Social Security Act of 1997) — Requires the employer to pay its own contribution with respect to each covered employee and prohibits the employer from deducting or recovering the employer's contributions from the employees. Applied to establish the employer's separate share in the contributions due.
• Section 22, Republic Act No. 8282 (Social Security Act of 1997) — Requires remittance of contributions to the SSS within the first ten days of each calendar month following the month for which they are applicable; makes every employer required to deduct and remit liable for their payment; and imposes a penalty of three percent per month from the date the contribution falls due until paid. Applied to sustain the award of PHP 248,174.00 in contributions and PHP 1,302,702.75 in penalties as of July 31, 2015, without prejudice to additional penalties accruing thereafter.
• Article 294 [279], Labor Code (Security of Tenure) — Entitles an employee unjustly dismissed from work to reinstatement without loss of seniority rights and other privileges, to full backwages inclusive of allowances, and to other benefits or their monetary equivalent computed from the time compensation was withheld up to actual reinstatement. Applied as the statutory basis for treating the illegally dismissed employees as never having left employment.
• Article 217, Labor Code — Invoked by the employer as vesting exclusive jurisdiction in the Labor Arbiter over the determination of the amount of full backwages. Rejected as a basis for ousting the Social Security Commission of jurisdiction, the petition before the Commission having raised only the employer's obligation to remit contributions.

Caguioa (Chairperson), Lazaro-Javier (designated additional Member per Raffle dated September 6, 2022), Inting, and Gaerlan, JJ., concur.