G.R. No. L-17361; April 29, 1968
FRANKLIN BAKER COMPANY OF THE PHILIPPINES, petitioner-appellant, vs. SOCIAL SECURITY SYSTEM, respondent-appellee.

FACTS

Petitioner-appellant Franklin Baker Company of the Philippines, a manufacturer of desiccated coconut in San Pablo City, and its employee Tomas Zamora were compulsory members of the Social Security System (SSS). Petitioner temporarily ceased operations from December 22, 1957, to February 18, 1958, due to machinery overhaul and lack of production orders. Zamora rendered no actual services during this period. He then went on sick leave without pay from March 9, 1958, until his death on June 13, 1958. The SSS received a death claim application for Zamora’s beneficiaries on July 10, 1958, and found that no premium remittances had been made for him for February, March, and June 1958. The unpaid premiums consisted of P5.85 chargeable to the employee (deducted from the death benefits) and P8.18 due from the employer-petitioner. The SSS billed petitioner for its share based on Social Security Commission Resolution No. 139, Series of 1958, which held employers liable for their share during months with no premiums remitted if an employer-employee relationship existed. Petitioner filed a petition for reconsideration with the Commission, which was dismissed on April 28, 1960, prompting this appeal.

ISSUE

1. Whether an employer is liable for its share of SSS premiums during a period when the employee is on leave without pay and receives no compensation.
2. Whether the adoption of a “theoretical salary” basis for computing the employer’s 3-1/2% contribution during such wageless period is valid.

RULING

1. Yes. The Supreme Court affirmed prior rulings (Insular Lumber Co. vs. SSS, Roman Archbishop of Manila vs. SSS, Insular Life Assurance Co., Ltd., et al. vs. SSS) that payment of contributions by an employer is compulsory during coverage, which is determined solely by the existence of an employer-employee relationship. An employee on leave without pay remains an employee, as the contract of employment has not terminated; the employer is still bound to accept the employee upon return, and the employee remains entitled to SSS benefits. Therefore, the employer is still liable to pay contributions for an employee on leave without pay.
2. Yes. The adoption of a “theoretical salary” basis, as prescribed by the Social Security Commission in Circulars Nos. 21 and 24, is valid and reasonable. Under this policy, if an employee earns no compensation in a particular month, the premium contributions are based on the salary from the immediately preceding month or, for variable wage earners, the daily rate multiplied by the number of workdays in the wageless month. The Court held that since the employer’s obligation to contribute subsists during the employer-employee relationship (as settled in prior cases and implicit in Section 19 of the Social Security Act), a reasonable basis for computation must be adopted during periods of no actual compensation. This method does not amount to legislation but is a valid implementation of the statute. The Social Security Act should be liberally construed in favor of beneficiaries. The resolution of the Social Security Commission dated April 28, 1960, was affirmed.