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REPUBLIC v. ASIAPRO COOPERATIVE

FACTS:

The petitioner, Social Security System (SSS), filed a petition-complaint against the respondent, Asiapro Cooperative (Asiapro), before the Social Security Commission (SSC). The petitioner asked that the respondent be directed to register as an employer, report its owners-members as covered employees, and remit the necessary contributions in accordance with the Social Security Law of 1997. The respondent, a multi-purpose cooperative, entered into service contracts with Stanfilco and paid its owners-members a share of the service surplus generated. The petitioner claimed that the respondent was actually a manpower contractor supplying employees to Stanfilco and should be considered an employer. The respondent, however, contended that it was not an employer as its owners-members were the cooperative itself. The SSC issued orders denying the respondent's motion to dismiss and motion for reconsideration. The respondent then filed a petition for certiorari before the Court of Appeals, questioning the SSC's orders.

The petitioner Social Security System (SSS) filed a petition-complaint before the Social Security Commission (SSC) against the respondent cooperative and Stanfilco for compulsory coverage of the respondent cooperative's owners-members and for collection of unpaid SSS contributions. The respondent cooperative filed a Motion to Dismiss, arguing that the SSC lacks jurisdiction over the case since there is a dispute as to the existence of an employer-employee relationship between the cooperative and its owners-members. The SSC denied the motion and proceeded with the case. The Court of Appeals granted the petition filed by the respondent cooperative and nullified the orders of the SSC. The petitioner SSS filed a motion for reconsideration, which was denied by the Court of Appeals. Hence, this petition was filed.

The main issue is whether or not the SSC has jurisdiction over the subject matter and whether the denial of the respondent cooperative's Motion to Dismiss constituted grave abuse of discretion.

The petitioner, Social Security System (SSS), filed a petition-complaint before the Social Security Commission (SSC) against the respondent cooperative, Stanfilco Employees Multi-Purpose Cooperative (respondent cooperative). The SSS claimed that the respondent cooperative failed to remit the required social security contributions of its owners-members who were allegedly employees of the cooperative. The SSS argued that an employer-employee relationship existed between the respondent cooperative and its owners-members because the cooperative provided services to Stanfilco, which were under its control.

In response, the respondent cooperative argued that no employer-employee relationship existed between them and its owners-members because the owners-members themselves owned the cooperative. They claimed that the persons of the employer and the employee were merged in the owners-members. The respondent cooperative also pointed out that its owners-members registered themselves as self-employed individuals with the SSS. The respondent cooperative questioned the jurisdiction of the SSC, stating that it has no authority to hear the case.

The Court of Appeals supported the position of the respondent cooperative, ruling that the SSC acted with grave abuse of discretion when it assumed jurisdiction over the case without first determining the existence of an employer-employee relationship. The respondent cooperative argued that the question of whether an employer-employee relationship exists between them and its owners-members is a legal issue that needs to be interpreted according to the applicable law and jurisprudence. They further contended that they should not be estopped from challenging the jurisdiction of the SSC simply because they filed a motion to dismiss, especially when the issue of jurisdiction was raised at the outset of the case.

ISSUES:

  1. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against the respondent cooperative.

  2. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it had already filed an Answer with Motion to Dismiss before the said body.

  3. Whether the Social Security Commission (SSC) has jurisdiction to determine the existence of an employer-employee relationship.

  4. Whether there is an employer-employee relationship between the respondent cooperative and its owners-members.

  5. Whether an employer-employee relationship exists between the respondent cooperative and its owners-members.

  6. Whether the provision in the Service Contracts, which states that there shall be no employer-employee relationship between the respondent cooperative and its owners-members, is valid and enforceable.

  7. Whether or not the petitioner SSC has jurisdiction to hear the petition-complaint filed by the petitioner SSS regarding the compulsory coverage of the respondent cooperative and its owners-members.

RULING:

  1. The petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against the respondent cooperative. Section 5 of Republic Act No. 8282 and Section 1, Rule III of the 1997 SSS Revised Rules of Procedure both provide that any dispute arising under the Social Security Act with respect to coverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall be cognizable by the Commission. The 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.

  2. The respondent cooperative is not estopped from assailing the jurisdiction of petitioner SSC even though it had already filed an Answer with Motion to Dismiss before the said body. 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. Once jurisdiction is acquired by the court, it remains with it until the full termination of the case.

  3. The SSC has jurisdiction to determine the existence of an employer-employee relationship for the purpose of determining the coverage of the Social Security System. The dispute on the existence of an employer-employee relationship falls within the jurisdiction of the SSC, not the National Labor Relations Commission (NLRC).

  4. There is an employer-employee relationship between the respondent cooperative and its owners-members. The elements of an employer-employee relationship are present in this case, particularly the control over the worker's conduct. The respondent cooperative has the exclusive discretion in the selection and engagement of its owners-members, it pays them wages in the form of weekly stipends or shares in the service surplus, it has the power to discipline and remove them, and it has sole control over the manner and means of performing the services.

  5. Yes, there is an employer-employee relationship between the respondent cooperative and its owners-members. The existence of an employer-employee relationship cannot be negated by an expressly repudiated provision in a contract when the terms and surrounding circumstances show otherwise.

  6. No, the provision in the Service Contracts, which states that there shall be no employer-employee relationship between the respondent cooperative and its owners-members, is invalid and contrary to law and public policy as it is being used to circumvent the compulsory coverage of employees by the Social Security Law.

  7. The instant Petition is granted. The Decision and the Resolution of the Court of Appeals are reversed and set aside. The Orders of the petitioner SSC are reinstated. The petitioner SSC is directed to continue hearing the petition-complaint filed before it by the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-members.

PRINCIPLES:

  • The jurisdiction of the SSC is clearly stated in Section 5 of Republic Act No. 8282 and Section 1, Rule III of the 1997 SSS Revised Rules of Procedure. Any issue regarding the compulsory coverage of the SSS is within the exclusive domain of the petitioner SSC.

  • The 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.

  • 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. Once jurisdiction is acquired by the court, it remains with it until the full termination of the case.

  • The existence of an employer-employee relationship is not within the exclusive jurisdiction of the NLRC. Article 217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that claims for Employees Compensation, Social Security, Medicare, and maternity benefits fall under their jurisdiction.

  • The SSC has jurisdiction to determine the existence of an employer-employee relationship for the purpose of determining the coverage of the Social Security System.

  • In determining the existence of an employer-employee relationship, the elements to be considered are the selection and engagement of workers, payment of wages, power of dismissal, and power to control the worker's conduct.

  • The power of control is the most important element, referring to the existence of the power and not necessarily its actual exercise.

  • The employment status of a person is defined and prescribed by law, not by what the parties say it should be.

  • Agreements between contracting parties must not be contrary to law, morals, customs, public policy, or public order.

  • Employees who are also members or co-owners of a cooperative cannot invoke the right to collective bargaining as they cannot bargain with themselves or their co-owners.

  • Employees who are not members or co-owners of a cooperative are entitled to exercise the rights of all workers to organization, collective bargaining, negotiation, and other rights enshrined in the Constitution and existing laws.

  • A cooperative has juridical personality and its Board of Directors is responsible for directing, controlling, supervising, and managing its business and affairs.

  • An owner-member of a cooperative can be an employee of the cooperative, and an employer-employee relationship can exist between them.

  • Jurisdiction of the Social Security Commission to hear petition-complaints.

  • Reinstatement of orders by the higher court.