The Salvation Army vs. Social Security System

An employer-employee relationship may exist between a religious organization and its ministers, determined by the application of the four-fold test, and their compulsory coverage under the Social Security Law is a valid exercise of police power that does not violate the constitutional principle of separation of church and state.

The Salvation Army, a non-stock, non-profit religious organization registered with the Social Security System (SSS) in 1962, initially listed its officers as "employees." In 2005, it requested the SSS to convert the membership status of its officers (ordained ministers) from "employees" to "voluntary or self-employed." The SSS denied the request, a decision later affirmed by the Social Security Commission (SSC) and the Court of Appeals (CA). The petitioner elevated the case to the Supreme Court, arguing that its ministers are not employees but ecclesiastics in a religious relationship, and that enforcing SSS coverage violates their right to free exercise of religion.

• Nature of the Parties: The petitioner is The Salvation Army, an international evangelical Christian church and social welfare organization incorporated in the Philippines as a non-stock, non-profit religious entity. The respondent is the Social Security System (SSS), a government agency administering the state's social security program.
• Registration and Initial Status: On March 22, 1962, The Salvation Army registered with the SSS and listed its officers as "employees."
• Request for Conversion: On December 19, 2005, the petitioner filed a request with the SSS to convert the membership status of its officers from "employees" to "voluntary or self-employed."
• SSS Denial and Appeals: The SSS denied the request for lack of legal and factual basis. The denial was affirmed on appeal by the Social Security Commission (SSC) and subsequently by the Court of Appeals (CA).
• Evidence of Relationship: The petitioner's officers undergo training, sign formal undertakings, receive monthly allowances based on years of service, are subject to periodic evaluation, and can be terminated for persistent ineffectiveness. The petitioner exercises control over their appointments, assignments, duties, and personal conduct as per its doctrines and regulations.

• Ecclesiastical Relationship: Petitioner argued that its officers are not ordinary employees but "ecclesiastics commissioned, ordained, and appointed" in a relationship that is purely religious and ecclesiastical in nature, falling outside the scope of secular labor laws.
• Violation of Religious Freedom: Petitioner maintained that compelling it to treat its ministers as employees for SSS coverage infringes upon its constitutionally guaranteed right to the free exercise of religion and constitutes state interference in internal church affairs.

• Existence of Employer-Employee Relationship: Respondent countered that the petitioner's officers satisfy the elements of the four-fold test (selection and engagement, payment of wages, power of dismissal, power of control), establishing them as employees under the Social Security Law.
• Valid Exercise of Police Power: Respondent argued that the Social Security Law is a social legislation enacted under the state's police power to promote social justice. Its application to religious institutions does not violate the non-establishment clause, as the obligation is secular and the funds are held in trust for members, not used to establish a religion.

• Employer-Employee Relationship: Whether the religious ministers of The Salvation Army are considered its employees for purposes of compulsory coverage under the Social Security Law.
• Constitutional Challenge: Whether the enforcement of the Social Security Law against a religious organization and its ministers violates the constitutional guarantees of religious freedom and the separation of church and state.

• Employer-Employee Relationship: The existence of an employer-employee relationship was affirmed. All four elements of the test were present: (1) selection and engagement through training and appointment; (2) payment of wages through regular allowances equivalent to compensation; (3) power of dismissal through evaluation and termination clauses; and (4) power of control, the most crucial element, exercised through the petitioner's rules governing the ministers' duties, assignments, and conduct. The nature of the control, even if over spiritual matters, does not negate the employment relationship for the secular purpose of SSS coverage.
• Constitutional Challenge: The application of the Social Security Law does not violate religious freedom. The controversy is secular, concerning the classification of membership status, not the interpretation of doctrine or governance of the congregation. The law's enforcement is a valid exercise of police power aimed at social justice. The SSS funds are not public funds used to establish religion; benefits are paid to ministers not because of their religion but because of their status as employees. The non-establishment clause is not implicated as the state action's primary consideration is not religion.

• Separation of Church and State in Ecclesiastical Affairs — The State cannot interfere in purely ecclesiastical affairs, which involve matters of faith, doctrine, worship, and internal governance (e.g., excommunication, ordination). However, not all matters involving a church and its ministers are ecclesiastical; courts may adjudicate secular aspects of the relationship, such as the existence of an employer-employee relationship for social legislation purposes.
• Four-Fold Test for Employer-Employee Relationship — The existence of an employer-employee relationship is determined by the following elements: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power of control, which is the most important element. This test applies to religious organizations and their ministers.
• Police Power and Social Legislation — The Social Security Law is an exercise of the state's police power to promote social justice and protect labor. Its compulsory coverage extends to all employers and employees, including religious and charitable institutions, as the law's purpose is secular and for the general welfare.

• "The fine line which must be drawn between what the Court may or may not look into would have to be resolved depending on the attendant circumstances of a particular case." — This underscores the case-specific nature of determining whether a dispute involving a religious institution is justiciable.
• "The Court merely evaluates on the basis of the petitioner's rules, the relationship between the petitioner and its ministers for the proper classification of the latter's membership status in the SSS; there is thus no impermissible intrusion into the religious sphere." — This clarifies the limited, secular scope of the judicial inquiry.
• "The funds contributed to the System created by the law are not public funds, but funds belonging to the members which are merely held in trust by the Government." — This addresses the constitutional concern regarding the use of public funds for religious purposes.

• Archbishop of Manila v. Social Security System, 110 Phil. 616 (1961) — Controlling precedent holding that religious and charitable institutions are included as "employers" under the Social Security Law, as the law's coverage is comprehensive and the exemption for such institutions had been previously deleted by amendment.
• Pastor Austria v. NLRC, 371 Phil. 340 (1999) — Followed for its definition of "ecclesiastical affair" as matters concerning doctrine, creed, worship, and internal governance, which the State cannot meddle with.
• Bishop of Shinji Amari of Abiko Baptist Church v. Villaflor, Jr., G.R. No. 224521, February 17, 2020 — Recognized that an employer-employee relationship may exist between a religious organization and its ministers, to be judged using the four-fold test.

• Republic Act No. 8282 (Social Security Act of 1997) — The governing law at the time of the dispute. Section 9(a) provides for compulsory SSS coverage of all employees not over sixty years of age and their employers. The definitions of "employer" and "employee" under the law were applied to find coverage.
• Article 174, Labor Code — Cited to show the parallel compulsory coverage in the State Insurance Fund, reinforcing the policy of mandatory social security protection.
• Article II, Section 6, 1987 Constitution — Provides that "The separation of Church and State shall be inviolable." The Court held this was not violated as the case involved a secular employment matter.
• Article III, Section 5, 1987 Constitution — Guarantees the free exercise of religion. The Court held this was not infringed because the state action did not interfere with religious belief or practice but regulated a secular employment relationship.

• Perlas-Bernabe, S.A.J. (Chairperson)
• Inting, J.
• Rosario, J. (Designated additional Member)
• Lopez, J. (Designated additional Member)

N/A — The decision was unanimous.