Republic of the Philippines vs. Asiapro Cooperative

The Social Security Commission has exclusive jurisdiction over disputes involving compulsory SSS coverage, including the authority to determine the existence of an employer-employee relationship as an incident thereof, and a registered cooperative with separate juridical personality can be the employer of its own owners-members when the four-fold test is satisfied.

The Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by R.A. No. 1161, as amended by R.A. No. 8282 (Social Security Act of 1997), to resolve disputes arising under the Social Security Law. The SSS is a government corporation created under the same law. Asiapro Cooperative is a multi-purpose cooperative organized under R.A. No. 6938 (Cooperative Code of the Philippines) and registered with the Cooperative Development Authority on 23 November 1999. Asiapro's owners-members render services to client companies — in this case Stanfilco, a division of DOLE Philippines, Inc. — under Service Contracts executed between the cooperative and the client. The owners-members do not receive wages from Asiapro but instead receive a share in the service surplus derived from the cooperative's service contracts. The owners-members had initially requested that Stanfilco register them with SSS as self-employed and remit their contributions accordingly, with contributions equal to the combined employer and employee shares.

Asiapro Cooperative is a multi-purpose cooperative registered with the Cooperative Development Authority on 23 November 1999 under R.A. No. 6938. Its owners-members are classified into regular members, who enjoy full rights and privileges, and associate members, who have limited rights. The cooperative's primary objectives are to provide savings and credit facilities and to develop livelihood services for its owners-members. In pursuit of these objectives, Asiapro entered into Service Contracts with Stanfilco, a division of DOLE Philippines, Inc. based in Bukidnon. Under this arrangement, the owners-members render services at Stanfilco's premises. They do not receive wages from the cooperative; instead, they receive a share in the service surplus, which the cooperative earns from its service contracts. The amount of the share is determined by the Board of Directors and shall not be lower than prevailing wage rates under existing labor laws, rules, and regulations, including applicable wage orders.

The owners-members assigned to Stanfilco initially requested Stanfilco's services to register them with the SSS as self-employed individuals and to remit their contributions as such, with their contributions equal to the combined employer and employee shares, in compliance with Section 19-A of R.A. No. 1161, as amended. On 26 September 2002, however, SSS Vice-President for Mindanao Division Atty. Eddie A. Jara sent a letter to Asiapro's CEO and General Manager Leo G. Parma, informing the cooperative that based on the Service Contracts it executed with Stanfilco, Asiapro was actually a manpower contractor supplying employees to Stanfilco and was therefore an employer of its owners-members working there. SSS directed Asiapro to register as an employer and to report and remit premium contributions for its owners-members. Asiapro replied through counsel on 9 October 2002, asserting that it was not an employer because its owners-members were the cooperative itself and it could not be its own employer. SSS reiterated its demand on 21 October 2002, but Asiapro continuously ignored it.

On 12 June 2003, SSS filed a petition-complaint before the SSC against Asiapro and Stanfilco, praying that Asiapro — or, in the alternative, Stanfilco — be directed to register as an employer and to report Asiapro's owners-members as covered employees under compulsory SSS coverage and to remit the necessary contributions. Asiapro filed an Answer with Motion to Dismiss, alleging that no employer-employee relationship existed between it and its owners-members and that the SSC therefore lacked jurisdiction. Stanfilco filed an Answer with Cross-claim against Asiapro. The SSC denied Asiapro's Motion to Dismiss on 17 February 2004 and denied reconsideration on 16 September 2004. Rather than filing a Petition for Review, Asiapro elevated the matter to the Court of Appeals via Petition for Certiorari, which granted the petition on 5 January 2006, ruling that the SSC had no jurisdiction because no employer-employee relationship existed. The SSC and the SSS then filed the present Petition for Review before the Supreme Court.

• SSC Jurisdiction: Petitioners argued that the SSC has jurisdiction over the petition-complaint under Section 5 of R.A. No. 8282, which expressly confers upon the SSC the power to settle disputes on compulsory coverage, benefits, contributions, and penalties. Since the petition-complaint involved the compulsory coverage of Asiapro's owners-members, the subject matter was within the SSC's expertise and jurisdiction.
• Incidental Determination of Employer-Employee Relationship: Petitioners asserted that even if a prior determination of employer-employee relationship were necessary, the issue did not preclude the SSC from taking cognizance, because the principal relief sought had to be resolved by reference to the Social Security Law and not the Labor Code, and jurisdiction therefore belonged solely to the SSC.
• Estoppel: Petitioners maintained that Asiapro was estopped from assailing the SSC's jurisdiction because it had already filed an Answer before the SSC, thereby submitting itself to the latter's jurisdiction.
• Question of Fact: Petitioners contended that the existence of an employer-employee relationship is a question of fact requiring the presentation of evidence, and that the SSC did not act with grave abuse of discretion in denying the Motion to Dismiss.
• Existence of Employer-Employee Relationship: Petitioners argued that Asiapro is the employer of its owners-members, as it undertook to provide services to Stanfilco under its full and sole control, satisfying the four-fold test.

• No Employer-Employee Relationship: Respondent argued that its owners-members own the cooperative, and thus no employer-employee relationship can arise between them; the persons of the employer and employee are merged in the owners-members themselves. The owners-members had even requested registration with SSS as self-employed individuals.
• SSC Lacks Jurisdiction: Respondent contended that the SSC has no jurisdiction over the petition-complaint because there is no employer-employee relationship, and that the SSC may only assume jurisdiction where there is no dispute as to the existence of such relationship. Any inquiry into the relationship would encroach on the jurisdiction of the NLRC.
• Legal, Not Factual, Issue: Respondent asserted that the question of whether an employer-employee relationship exists is a legal and not a factual issue, as the facts are undisputed and need only to be interpreted by applicable law and jurisprudence.
• No Estoppel: Respondent argued that it cannot be estopped from assailing the SSC's jurisdiction simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction was raised at the very first instance and the only relief sought was dismissal for lack of jurisdiction.

• SSC Jurisdiction: Whether the SSC has jurisdiction over the petition-complaint filed by SSS against Asiapro Cooperative, including the authority to determine the existence of an employer-employee relationship as an incident thereof.
• Estoppel: Whether Asiapro Cooperative is estopped from assailing the jurisdiction of the SSC after filing an Answer with Motion to Dismiss before it.

• SSC Jurisdiction: Yes. The SSC has exclusive jurisdiction over disputes involving compulsory SSS coverage, including the authority to determine the existence of an employer-employee relationship as a necessary incident, without need of a prior NLRC determination. An employer-employee relationship was found to exist between Asiapro and its owners-members under the four-fold test.
• Estoppel: Moot. Having concluded that the SSC has jurisdiction, the Court found it no longer necessary to discuss whether Asiapro was estopped from assailing the SSC's jurisdiction.

• SSC Jurisdiction: Section 5 of R.A. No. 8282 and Section 1, Rule III of the 1997 SSS Revised Rules of Procedure expressly confer upon the SSC the power to settle disputes arising under the Social Security Act with respect to coverage, benefits, contributions, and penalties. The petition-complaint filed by SSS alleged that Asiapro's owners-members were subject to compulsory SSS coverage because they were employees of the cooperative; accordingly, the case fell within the SSC's jurisdiction. Jurisdiction is determined by the allegations in the complaint, not by the defenses in the Answer or Motion to Dismiss; otherwise, the question of jurisdiction would depend almost entirely on the defendant. Once jurisdiction is acquired, it remains until the full termination of the case. Although Asiapro's Motion to Dismiss challenged the SSC's jurisdiction on the ground that no employer-employee relationship existed, this was insufficient to deprive the SSC of jurisdiction. Moreover, the question of whether an employer-employee relationship exists for purposes of SSS coverage is excluded from the NLRC's jurisdiction under Article 217(a)(6) of the Labor Code, which excepts claims for Social Security from the NLRC's jurisdiction. Since coverage is the foundation of claims, issues on coverage necessarily fall within the SSC's domain. The SSC therefore has authority to inquire into the existence of an employer-employee relationship as an incident of determining compulsory coverage, without awaiting a prior NLRC pronouncement. Applying the four-fold test — (1) selection and engagement, (2) payment of wages, (3) power of dismissal, and (4) power of control — the Court found all elements present. The Service Contracts gave Asiapro exclusive discretion in selecting and engaging owners-members; the weekly stipends or shares in service surplus constituted wages as defined under Article 97(f) of the Labor Code, being remuneration payable for services rendered and not lower than prevailing wage rates; the Service Contracts granted Asiapro the power to investigate, discipline, and remove owners-members; and Asiapro had sole control over the manner and means of performing services at Stanfilco. A stipulation in the Service Contracts expressly disclaiming an employer-employee relationship was struck down as contrary to law and public policy, because employment status is defined by law and not by the parties' stipulations. The Court distinguished Cooperative Rural Bank of Davao City, Inc. vs. Ferrer-Calleja, which addressed the right of owner-members to collective bargaining — a concept inapplicable here because an owner cannot bargain with himself — and noted that the cited case actually recognized that an owner-member can be an employee of the cooperative. Because a cooperative acquires juridical personality upon registration with the CDA and its Board of Directors directs and supervises its business, the cooperative has a personality separate and distinct from its owners-members and can therefore enter into an employment relationship with them.
• Estoppel: The Court found it unnecessary to resolve the estoppel issue, having already concluded that the SSC possesses jurisdiction over the petition-complaint.

• Four-Fold Test for Employer-Employee Relationship — The existence of an employer-employee relationship is determined by four elements: (1) the selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and (4) the power to control the worker's conduct, with the control test assuming primacy. The power of control refers to the existence of the power and not necessarily its actual exercise; it is enough that the employer has the right to wield it. In this case, all four elements were satisfied by the terms of the Service Contracts between Asiapro and Stanfilco, establishing an employer-employee relationship between the cooperative and its owners-members.
• Jurisdiction Determined by Allegations in the Complaint — It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend almost entirely on the defendant. Once jurisdiction is acquired, it remains until full termination of the case. This principle applies even to quasi-judicial bodies.
• Separate Juridical Personality of Cooperatives — A cooperative acquires juridical personality upon registration with the Cooperative Development Authority, with its Board of Directors directing and supervising its business. A cooperative can thus be likened to a corporation with a personality separate and distinct from its owners-members, and an owner-member can be an employee of the cooperative, giving rise to an employer-employee relationship between them.
• Employment Status Defined by Law, Not by Contract — The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract when the terms and surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what the parties say it should be. Contractual stipulations must not be contrary to law, morals, customs, public policy, or public order; a provision disclaiming employment to circumvent compulsory SSS coverage is void.
• SSC Jurisdiction over Coverage Disputes — Under Section 5 of R.A. No. 8282 and Section 1, Rule III of the 1997 SSS Revised Rules of Procedure, any dispute arising under the Social Security Act with respect to coverage, benefits, contributions, and penalties is cognizable by the SSC. The question of whether an employer-employee relationship exists for purposes of SSS coverage is excluded from the NLRC's jurisdiction under Article 217(a)(6) of the Labor Code and falls within the SSC's exclusive domain.

• "The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what the parties say it should be." — This passage articulates the ratio decidendi on the invalidity of contractual disclaimers of employment relationships, a principle central to the Court's ruling that the Service Contract provision disclaiming employer-employee status was void.

• "It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend almost entirely upon the defendant." — This passage states the controlling rule on jurisdiction by allegations, foundational to the Court's conclusion that the SSC properly assumed jurisdiction over the petition-complaint.

• "With that, a cooperative can be likened to a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a cooperative can be an employee of the latter and an employer-employee relationship can exist between them." — This passage establishes the doctrinal basis for recognizing that a cooperative, by virtue of its separate juridical personality, can be the employer of its own owners-members.

• "The Service Contract provision in question must be struck down for being contrary to law and public policy since it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by the Social Security Law." — This passage explains the public-policy rationale for invalidating the disclaimer of employment in the Service Contracts, tying the ruling to the protective purpose of the Social Security Law.

• Social Security System vs. Court of Appeals, 401 Phil. 132 (2000) — Cited for the proposition that mandatory coverage under the SSS Law is premised on the existence of an employer-employee relationship, except in cases of compulsory coverage of the self-employed.
• Abacus Securities Corporation vs. Ampil, G.R. No. 160016, 27 February 2006, 483 SCRA 315 — Followed for the principle that jurisdiction is determined by the allegations in the complaint, not by the defenses in the Answer or Motion to Dismiss.
• Philrock, Inc. vs. Construction Industry Arbitration Commission, 412 Phil. 236 (2001) — Followed for the principle that once jurisdiction is acquired, it remains until the full termination of the case, applicable even to quasi-judicial bodies.
• Jo vs. National Labor Relations Commission, 381 Phil. 428 (2000) — Followed for the four-fold test elements of employer-employee relationship and for the principle that the power of control refers to the existence of the power, not necessarily its actual exercise.
• Chavez vs. National Labor Relations Commission, G.R. No. 146530, 17 January 2005, 448 SCRA 478 — Followed for the primacy of the control test and for the principle that employment status is defined by law, not by the parties' stipulations.
• Cooperative Rural Bank of Davao City, Inc. vs. Ferrer-Calleja, G.R. No. L-77951, 26 September 1988, 165 SCRA 725 — Distinguished. The case addressed the right of owner-members to collective bargaining, not the existence of an employer-employee relationship. The Court noted that the cited case actually recognized that an owner-member can be an employee of the cooperative.

• Section 5, Republic Act No. 8282 (Social Security Act of 1997) — Confers upon the SSC the power to settle disputes arising under the Act with respect to coverage, benefits, contributions, and penalties. Applied as the statutory basis for the SSC's jurisdiction over the petition-complaint involving compulsory SSS coverage.
• Section 1, Rule III, 1997 SSS Revised Rules of Procedure — Mirrors Section 5 of R.A. No. 8282, providing that disputes under the Social Security Act regarding coverage, entitlement to benefits, collection of contributions and penalties, and related matters are cognizable by the SSC. Applied to confirm the SSC's jurisdiction.
• Article 217(a)(6), Labor Code of the Philippines — Enumerates the jurisdiction of Labor Arbiters and the NLRC, expressly excepting claims for Social Security benefits. Applied to exclude the question of employer-employee relationship for SSS coverage purposes from the NLRC's jurisdiction and place it within the SSC's.
• Article 97(f), Labor Code of the Philippines — Defines "wages" as remuneration or earnings capable of being expressed in terms of money, payable by an employer to an employee for work done or services rendered. Applied to characterize the shares in service surplus given to owners-members as wages.
• Article 1306, Civil Code of the Philippines — Provides that contracting parties may establish stipulations, clauses, terms, and conditions as they deem convenient, provided they are not contrary to law, morals, customs, public policy, or public order. Applied to strike down the Service Contract provision disclaiming employer-employee relationship.
• Articles 16, 38, and 39, Republic Act No. 6938 (Cooperative Code of the Philippines) — Provide that a cooperative acquires juridical personality upon registration with the CDA, and that its Board of Directors directs and supervises its business and manages its property. Applied to establish the cooperative's separate juridical personality and its capacity to be an employer of its owners-members.

Consuelo Ynares-Santiago (Chairperson, Third Division), Ma. Alicia Austria-Martinez, Adolfo S. Azcuna, and Ruben T. Reyes concurred. No separate concurring opinions were noted.