G.R. No. L-26197 July 20, 1968
ADELO C. RIVERA, plaintiff-appellant, vs. SAN MIGUEL BREWERY CORPORATION, INC., defendant-appellee.

FACTS

Adelo C. Rivera was employed by San Miguel Brewery Corporation, Inc. (the Company) as a security guard from December 8, 1952, until his separation on September 16, 1963, due to physical disability from illness. At separation, he was receiving a daily wage of P5.90. The Company had a wholly company-financed Health, Welfare and Retirement Plan (private plan). Upon Rivera’s separation, the total retirement benefits due under this private plan amounted to P1,261.75. However, the Company deducted P331.40, representing its contributions to the Social Security System (SSS) on Rivera’s behalf from September 1957 to March 1963, pursuant to Article XV of its private plan. Consequently, Rivera received a net amount of P930.35. Rivera, who was not a member of any labor union with a collective bargaining agreement with the Company, filed a complaint for collection of separation pay and recovery of the deducted amount, including damages. The municipal court dismissed the complaint, and the Court of First Instance affirmed the dismissal. Rivera appealed, arguing the deduction was unauthorized.

ISSUE

Whether the Company had the right to deduct its SSS contributions from Rivera’s retirement benefits under its private plan.

RULING

Yes, the Company had the right to make the deduction. The Supreme Court affirmed the lower court’s decision.
1. The deduction is expressly authorized under Section 9 of the Social Security Act (Republic Act 1161, as amended). This provision mandates the integration of existing private plans with the SSS plan. It states that if an employer’s contributions to its private plan exceed the SSS requirement, the employer shall pay only the required SSS contribution and continue contributing to the private plan, reduced by the SSS contribution, so that the employer’s total contribution to both remains the same as its contribution to the private plan before compulsory SSS coverage. The Company’s private plan was wholly company-financed, and its contributions thereto were greater than the SSS requirement. Therefore, it had the right to deduct its SSS contributions from the benefits payable under its private plan to maintain its total contribution level.
2. Article XV of the Company’s private plan, which provides for the reduction of benefits to compensate for the Company’s SSS contributions, is valid. This provision was incorporated pursuant to Section 9 of the Social Security Act, which requires that adjustments to the private plan due to integration be subject to agreement between employer and employees. The private plan was established under a collective bargaining agreement with the union representing the majority of employees and is binding on all employees, union members or not, as a collective bargaining agreement is the law of the plant. Extending the plan’s benefits to non-union members like Rivera, while exempting him from its concomitant burdens like Article XV, would constitute undue discrimination.
3. The deduction does not violate Section 19 of the Social Security Act, which prohibits an employer from deducting or recovering its SSS contribution from the “compensation” of employees. Rivera’s retirement pay is not “compensation” but a fringe benefit from the private plan. The Company is not recovering its contribution from Rivera but is deducting it from the benefits payable under its own private plan, which it integrated with the SSS.
Allowing Rivera to receive full private plan benefits plus SSS benefits without the deduction would result in unjust enrichment at the Company’s expense.