PRESIDENTIAL DECREE No.

1641

FURTHER AMENDING TITLE II, BOOK FOUR OF THE LABOR CODE OF THE PHILIPPINES (PD
442, as amended)

WHEREAS, Provisions of the Employees' Compensation and Status Insurance Fund of the Labor
Code of the Philippines must respond to dynamic changes in social-economic development in light
of aspiraling cost of living; and that adjustments must be made to align such provisions with changes
in social security of the country; and

WHEREAS, the judicious management of the State Insurance Fund that the Social Security System
and the Government Service Insurance System administer for the private sector and the public
service, respectively has resulted in accumulation of sufficient reserves to enable the Employees'
Compensation Commission to further upgrade the benefit structure for covered employees, without
requiring additional premium contributions from employers;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by

virtue of the powers vested in me by the Constitution do hereby order and decree:

Section 1. Paragraphs (cc) and (dd) of Article 167 of Presidential Decree No. 442, as amended, are
hereby revised, to read as follows:

"(cc) 'Replacement ration'. The sum of twenty percent and the quotient obtained by dividing three
hundred by the sum of three hundred forty and the average monthly salary credit.

"(dd) 'Credit years of service'. For a member covered prior to January 1979, nineteen hundred
seventy-five minus the calendar years of coverage, plus the number of calendar years in which six
more contributions have been paid from January 1975 up to the calendar years containing the
semester prior to the contingency. For a member covered in or after January 1975, the number of
calendar years in which six or more contributions have been paid from the years of coverage up to
the calendar year containing the semester prior to the contingency."

Section 2. Paragraph (ee) of Article 167 of PD 442, as amended, is hereby further amended to read
as follows:

"(ee) 'Monthly income benefit. Means the amount equivalent to one hundred fifteen percent of the
sum of:

"The average monthly salary credit multiplied by the replacement ratio; and

"One and a half percent of the average monthly salary credit for each year credited year of service in
excess of ten years;

"Provided, However, That the monthly pension of surviving pensioners shall be increased by twenty
percent."

Section 3. Paragraph (e) of Article 177 of PD 442, as amended, is hereby further amended to read
as follows:

"(e) To make the necessary actuarial studies and calculations concerning the grant of constant help
and income benefits for permanent disability or death, and the rationalization of the benefits for
permanent disability and death under the Title with benefits payable by the System for similar
contingencies; Provided; That the Commission may upgrade benefits and new ones, subject to
approval of the President; and Provided, further, that the actuarial stability of the State Insurance
Fund shall be guaranteed; Provided, Finally, That such increases in benefits shall not require any
increases in contribution, except as provided for in paragraph (b) hereof."

Section 4. Paragraph (a = of Article 191 of PD 442 as amended, is hereby further amended to read
as follows:

"Art. 191. Temporary total disability. (a) Under such regulations as the Commission may approve,
any employee under this Title who sustains an injury or contracts sickness resulting in temporary
total disability shall for each day of such a disability or fraction thereof be paid by the system an
income benefit equivalent to ninety percent of his average daily salary credit, subject to the following
conditions the daily income benefit shall not be less than Four pesos, nor more than TWENTY FIVE
pesos, nor paid for a continuous period longer than one hundred twenty days, and the System shall
be notified of the injury or sickness."

Section 5. Paragraph (b) of Article 192 of PD 442, as amended, is hereby further amended to read
as follows:

"(b) the monthly income benefit shall be guaranteed for five years, and shall be suspended if the
employee is gainfully employed, or recovers from his permanent total disability, or fails to present
himself for examination at least once a year upon notice by the System, except as otherwise
provided for in other laws, decrees, orders or Letters of Instructions."

Section 6. Paragraph (b) of Article 194 of PD 442, as amended is hereby further amended, and
paragraph (d) is added thereto, to read as follows:

"(b) Under such regulations as the Commission may approve, the System shall pay to the primary
beneficiaries upon the death of a covered employee who is under permanent total disability under
this Title, eighty percent of the monthly income benefit and his dependents to the dependents
pension: Provided, That the marriage must have been validly subsisting at the time of disability;
Provided, Further, That if he has no primary beneficiary, the System shall pay to his secondary
beneficiaries a lump sum benefit equivalent to the smaller of (1) thirty-five times the monthly
pension, or (2) the difference of sixty times the monthly pension, and the total monthly pensions paid
by the System, excluding the dependent's pension.

"(d) Funeral benefits. A funeral benefit of one thousand pesos shall be paid upon the death of a
covered employee or permanently totally disabled pensioner."

Section 7. Article 208-A of PD 442, as amended, is hereby further amended to read as follows:

"Art. 108-A. Repeal of Laws. All existing laws, Presidential Decrees and Letters of Instructions which
are inconsistent with or contrary to this Decree, are hereby repealed: Provided, That in the case of
the GSIS, conditions for entitlement to benefits shall be covered by the Labor Code, as amended:
Provided, However, That the formulas for computation of benefits, as well as the contribution base,
shall be those provided for under Commonwealth Act numbered one hundred eighty-six, as
amended by the Presidential Decree No. 1146, plus twenty percent thereof."

Section 8. Effectivity. This Decree shall take effect on January 1, 1980.

Done in the City of Manila, this 21st day of September, in the year of Our Lord, nineteen hundred
and seventy-nine.

EXECUTIVE ORDER NO. 402

EXECUTIVE ORDER NO. 402 - GRANTING MEDICAL CARE BENEFITS TO SOCIAL SECURITY
SYSTEM OLD-AGE PENSIONERS AND THEIR DEPENDENTS

WHEREAS, it is the avowed policy of the government to provide adequate medical care
services to the people;

WHEREAS, under the present policy of the Social Security System (SSS) only active
members and their dependents enjoy Medical Care benefits;

WHEREAS, SSS old-age pensioners and their dependents must likewise be assisted in their
medical care expenses consistent with the policy for their counterpart old-age pensioners in
the Government Service Insurance System (GSIS);

WHEREAS, actuarial studies show that the Health Insurance Fund administered by the SSS
for the Medicare beneficiaries in the private sector can finance the benefits of SSS old-age
pensioners and their dependents without impairing the said Funds viability;

NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, by virtue of the

powers vested in me by law, do hereby order:

Section 1. Effective May 1, 1990, Social Security System old-age pensioners and their
dependents shall be entitled to Medical Care benefits presently prescribed in Executive
Order No. 365, without need of any additional contribution.

Sec. 2. This Executive Order shall take effect immediately.

Done in the City of Manila, this 27th day of April, in the year of Our Lord, nineteen hundred
and ninety.

EXECUTIVE ORDER NO. 441

EXECUTIVE ORDER NO. 441 - INCREASING MEDICARE BENEFITS UNDER THE PHILIPPINE
MEDICAL CARE PLAN

WHEREAS, in the light of present economic conditions with increase in prices of practically
all commodities, including the cost of medicines and hospitalization, it is deemed necessary
and timely to further increase and enhance the medicare benefits granted to SSS and GSIS
members, to take them more meaningful and responsive to the times;
WHEREAS, under the present policy of the SSS, only active members and retiree-pensioners
and their dependents enjoy medicare benefits;

WHEREAS, SSS death and total disability pensioners and their dependents must likewise be
assisted in the medical care expenses similar to the old age pensioners and their
dependents;

WHEREAS, under the policy of the GSIS adopted since 1974, retiree-pensioners are granted
free medicare benefits;

WHEREAS, the government desires to increase medicare benefits to a meaningful level;

WHEREAS, actuarial studies show that the Health Insurance Fund administered by the SSS
for medicare beneficiaries in the private sectors and by the GSIS for medicare beneficiaries
in the government sector can further finance an 80% across-the-board rates, and 875
increase in drugs and medicines, and a 25% increase in all other Medicare benefits which
will result to a 585 overall increase and the inclusion under the medical care program of
SSS death and disability pensioners and their dependents, and dependents of GSIS
pensioners without the need for increase in contributions;

WHEREAS, the Philippine Medical Care Commission has recommended further enhancement
of the benefits under Medicare program;

NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, by virtue of the

powers vested in me by law, do hereby order:

Section 1. The Medicare benefits for both GSIS and SSS Medicare beneficiaries are
increased as follows:

Benefit Limit
Items of Hospitalization (By Hospital Category)
Primary Secondary Tertiary

A. Hospital Charges

1. Room and Board not

exceeding 45 days
per year for each member
of program 1 and another
45 days per year to be
shared by all his dependents P45/Day P80/Day P100/Day

2. Medical Expenses Benefits

(Per Single) Period of
confinement

2.1 Ordinary Cases P600 P910 P1145

Drugs & Medicines 495 660 705
X-Ray/Lab/Other 105 250 440

2.2 Intensive Cases P1162.50 P1700 P2900

Drugs & Medicines 937.50 1125 2025
X-Ray/Lab/Other 225 575 875
2.3 Catastrophic Cases - 3660 5565
Drugs & Medicines - 2535 2895
X-Ray/Lab/Other - 1125 2670

3. Operating Room
Fee based on
Commissions Relative
Unit Value (RUV)
Scheme

3.1 RUV 5 & Below 115 205 325

3.2 RUV 5, 1 to 10 - 350 415
3.3 RUV 10, 1 & Above - 800 1075

B. Professional Fees

1. Medical/Dental Practitioners Fee per day of P45 for General Practitioners and P65 for
Specialists not to exceed per single period of confinement, P250 for General Practitioner
and P375 for Specialist in Ordinary Cases; and P375 for General Practitioner and P625 for
Specialist in Intensive Care/Catastrophic Cases.

2. Surgeons Fee in accordance with the Relative Unit Value Scheme prescribed by the
Commission not to exceed P5,900.

3. Anesthesiologists Fee (30% of allowed Surgeons Fee) not to exceed P1,770.

4. Fees for Surgical Family Planning Procedure as may be determined by the Commission.

Sec. 2. Death and total disability pensioners of SSS, as well as their dependents shall be entitled to
Medical Care benefits without need for any additional contribution.

Sec. 3. Dependents of GSIS retiree-pensioners shall also be covered with Medicare benefits.

Sec. 4. All orders, issuances, rules and regulations or parts, thereof inconsistent with this Executive
Order are hereby repealed or modified accordingly.

Sec. 5. This Order shall take effect on the 1st day of January, 1991.

DONE in the City of Manila, this 21st of December in the year of Our Lord, nineteen hundred and
ninety.
chan robles virtual law li brary

D.M. Consunji vs. CA and Juego

TITLE: D.M. Consunji Inc. v Court of Appeals and Maria J. Juego

CITATION: GR No. 137873, April 20, 2001 | 357 SCRA 249

FACTS:

Around 1:30PM of November 2, 1990, Jose Juergo, a construction worker of D.M. Consunji Inc. fell 14
floors from the Renaissance Tower, Pasig City. He was immediately rushed to Rizal Medical Center in
Pasig City. The attending physician, Dr. Errol de Yzo, pronounce Jose dead on arrival (DOA) at around
2:15PM.
Jose Juergo, together with Jessie Jaluag and Delso Destajo, performing their work as carpenter at the
elevator core of the 14th floor of Tower D, Renaissance Tower Building were on board a platform. Jose
was crushed to death when the platform fell due to removal or looseness of the pin, which was merely
inserted to the connecting points of the chain block and platform but without a safety lock. Luckily,
Jessie and Delso jumped out of safety.

PO3 Rogelio Villanueva of the Eastern Police District investigated the tragedy and filed report dated Nov.
25, 1990. Maria Juergo, Joses widow filed a complaint on May 9, 1991 for damages in the RTC and was
rendered a favorable decision to receive support from DM Consunji amounting to P644,000.

DM Consunji seeks reversal of the CA decision.

ISSUE: Whether Maria Juergo can still claim damages with D.M. Consunji apart from the death benefits
she claimed in the State Insurance Fund.

HELD:

The respondent is not precluded from recovering damages under the civil code. Maria Juergo was
unaware of petitioners negligence when she filed her claim for death benefits from the State Insurance
Fund. She filed the civil complaint for damages after she received a copy of the police investigation
report and the Prosecutors Memorandum dismissing the criminal complaint against petitioners
personnel.

Supreme Court remanded to the RTC of Pasig City to determine whether the award decreed in its
decision is more than that of the Employees Compensation Commission (ECC). Should the award
decreed by the trial court be greater than that awarded by the ECC, payments already made to private
respondent pursuant to the Labor Code shall be deducted therefrom.

PHILIPPINE TRANSMARINE CARRIERS, INC., petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION, and CARLOS
NIETES, respondents.
 DECISION
QUISUMBING, J.:

This petition seeks to annul and set aside the decision dated September 25, 1995 of the
National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 009101-95. Said
decision affirmed with modification the judgment dated March 16, 1995 of the Philippine
Overseas Employment Administration (POEA), ordering the herein petitioner and Pioneer
Insurance and Surety Corporation to pay private respondent jointly and severally the sum of
US$21,000 or its peso equivalent at the time of actual payment and P34,114.00 as
reimbursement for medical expenses plus 10% of the total award as attorneys fees in favor of
the private respondent. In its Resolution dated December 29, 1995, the NLRC also denied
petitioners motion for reconsideration.
The facts in this case are as follows:
On January 23, 1993, private respondent, Carlos Nietes filed a complaint against Philippine
Transmarine Carriers Inc. (PTC) for payment of disability benefit, sickness wages, refund of
medical expenses and attorneys fees. Pioneer Insurance and Surety Corp. was impleaded as
surety of respondent PTC.
Private respondent alleged that he was a licensed Captain and/or Master Mariner. For the
period March 1985 to May 17, 1990, he was employed by PTC. He last boarded M/V MA.
ROSARIO where he served as Master from April 11, 1990 to May 17, 1990. At that time he was
a member of good standing of the Associated Marine Officers and Seamens Union of the
Philippines (AMOSUP), an affiliate of the International Transport Federation (ITF) of
London. He paid his union dues, insurance premiums, etc., which were checked-off from his
salaries.
As Master on board, he received US$1,500.00 per month. From May 10, 1990 up to May
17, 1990, the date he was repatriated, he was hospitalized at the Moji Hospital in Moji, Japan, at
the instance of the vessels owners. Upon his arrival in the Philippines, he was instructed by
PTC and AMOSUP to report to the Seamens Hospital, a hospital owned and operated by
AMOSUP. On May 19, 1990, Dr. George Matti of the Seamens Hospital issued a medical
certification that he was unfit for work and was instructed to continue treatment/medication.
When he was refused admission at the Seamens Hospital, he was forced to secure medical
treatment at the Sto. Nio Medical Specialist and Emergency Clinic as an out-patient. His
attending physician was Dra. Geraldine B. Emperador. Her diagnosis showed he was unfit to
work as Master of the vessel.
On May 25, 1992, he referred his claims to Atty. Oscar Torres who
repeatedly informed PTC of the claim for benefits and refund. Sometime in July 1992, he was
informed by Atty. Torres that his claim was being handled by Atty. Augusto Arreza, Jr., PTCs
legal consultant and that they had submitted all the required documents to Atty. Arreza,
including the carbon original of the Medical Certificate issued by Dr. Matti of the Seamens
Hospital which certificate states that he was not fit to work.
From November 1992 up to the filing of this petition, Atty. Torres allegedly had not talked
to Atty. Arreza. Being a member of AMOSUP from 1985 to 1990, until he was declared unfit to
work, petitioner claimed he was entitled to permanent total disability benefit in the amount
equivalent to 86% of the US$18,000.00, sickness wage benefit in the sum of US$6,000.00 as per
Section C, Subsection (c) of the POEA Standard Format, plus ten percent (10%) of the total
judgment award and attorneys fee.
In his supplemental complaint, private respondent further asked for refund of medical
expenses incurred in the amount of P30,411.00 plus professional fee of P4,000.00 or a total of
P34,411.00. Receipts covering these payments were submitted as Annexes I and II.
On March 16, 1995, the POEA Adjudication Office issued its decision in favor of the private
respondent. It held that

WHEREFORE, judgment is hereby rendered, ordering respondents Philippine

Transmarine Carriers Inc. and Pioneer Insurance and Surety Corp. to pay complainant
jointly and severally the sum of TWENTY ONE THOUSAND US DOLLARS
(US$21,000.00) or its peso equivalent at the time of actual payment and P34,114.00
representing reimbursement of medical expenses plus ten percent (10%) thereof of the
total award by way of and/as attorneys fees.

All other causes or actions are dismissed for lack of merit.

SO ORDERED.

Petitioner appealed said decision to the NLRC which affirmed it except for the award of
attorneys fees which is deleted for lack of factual and legal basis. NLRC later denied
petitioners motion for reconsideration.
Petitioner now contends that the NLRC acted with grave abuse of discretion amounting to
lack or excess of jurisdiction in:
A

AWARDING DISABILITY BENEFIT TO PRIVATE

RESPONDENT DESPITE THE ABSENCE OF PROOF
OF HIS PERMANENT DISABILITY AND THE DEGREE THEREOF.
B

ARBITRARILY DISREGARDING THE WELL-ESTABLISHED FACT

THAT THE ABSENCE OF A DETERMINATION OF PRIVATE
RESPONDENTS PERMANENT DISABILITY AND THE
DEGREE THEREOF WAS DUE SOLELY TO HIS FAULT.
C

AWARDING SICK WAGES TO PRIVATE RESPONDENT FOR THE

FULL PERIOD OF 120 DAYS NOTWITHSTANDING THE ABSENCE OF A
 DECLARATION OF HIS UNFITNESS TO WORK OR A DETERMINATION
OF THE DEGREE OF HIS PERMANENT DISABILITY.
D

GRANTING THE REIMBURSEMENTS OF PRIVATE RESPONDENTS

MEDICAL EXPENSES DESPITE THE FACT THAT THE LATTERS
TREATMENT WAS DONE BY A PHYSICIAN NOT DESIGNATED OR
ACCREDITED BY PETITIONER IN VIOLATION OF THE POEA
STANDARD CONTRACT.

The main issue is whether the NLRC gravely abused its discretion in affirming with
modification, the judgment of the POEA Adjudication Office.
Petitioner admits that private respondent suffered illness which rendered him unfit for
work. However, it points out that private respondent did not submit proof of the extent of his
disability as required by Section C (4) [b] and [c] of the POEA Standard Contract for
Seamen.[1] Without this proof, petitioner argues that the NLRC gravely abused its discretion
when it affirmed the findings of the POEA.
Petitioner also contends that public respondents erred in awarding sick wages for 120 days
in favor of the private respondent without evidence on record establishing the extent of his
disability, which is essential in determining the correct amount of disability benefit. Further,
petitioner avers private respondents claim for refund of the medical expenses should have not
been granted by the public respondents on the ground that the physician who treated private
respondent was not accredited in violation of the POEA Standard Contract for Seamen.
Public respondents held that in effect, the complainant has substantially complied with the
POEA Standard of Employment Contract for Seamen when he submitted himself to the
Seamens Hospital three days after his repatriation from Japan. [2] They also found that private
respondent had in fact substantially complied with the post-employment requirements under
paragraph 4 [b] and [c] of Section c,[3] of the POEA Standard Employment Contract for
Seamen. We note that private respondent submitted himself, upon the instructions of the
petitioner and AMOSUP, to the Seamens Hospital, which is owned and operated by AMOSUP,
for medical assistance under the care of Dr. George Matti, a company accredited physician, three
days after his May 17, 1990 repatriation from Japan.
On record, private respondent was examined and diagnosed at the Seamens Hospital and
was found to be suffering from congestive heart failure and cardiomyopathy, so that he was
declared unfit to work by no less than a company accredited physician in the person of Dr.
George Matti.[4]
Petitioner was well aware of the private respondents hospitalization at Moji, Japan, as well
as his repatriation on May 17, 1990. It was upon the advice of petitioner that he was examined
and diagnosed at the Seamens Hospital. There Dr. George Matti, petitioners own accredited
physician, declared him unfit to work. Petitioner could not now feign ignorance of this
information. Two licensed physicians examined and diagnosed private respondent and both of
them had issued similar findings, that private respondent was afflicted with congestive heart
failure and cardiomyopathy making him unfit to work.
Strict rules of evidence are not applicable in claims for compensation. In NFD International
Manning Agents, Inc. vs. NLRC, 269 SCRA 486, 494 (1997), we said:

Strict rules of evidence, it must be remembered, are not applicable in claims for
compensation and disability benefits. Private respondent having substantially
established the causative circumstances leading to his permanent total disability to
have transpired during his employment, we find the NLRC to have acted in the
exercise of its sound discretion in awarding permanent total disability benefits to
private respondent. Probability and not the ultimate degree of certainty is the test of
proof in compensation proceedings.

Consistently the Court has ruled that disability should not be understood more on its
medical significance but on the loss of earning capacity. Permanent total disability means
disablement of an employee to earn wages in the same kind of work, or work of similar nature
that [he] was trained for or accustomed to perform, or any kind of work which a person of [his]
mentality and attainment could do. It does not mean absolute helplessness. [5] In disability
compensation, we likewise held, it is not the injury which is compensated, but rather it is the
incapacity to work resulting in the impairment of ones earning capacity. [6]
Finally, petitioner faults public respondent for allowing the reimbursements of private
respondents medical expenses despite the fact that the latters treatment was done by a physician
not designated or accredited by the petitioner in violation of the POEA Standard Contract for
Seamen. However, records of the case show that private respondent had initially sought
treatment at Seamens Hospital under the care of Dr. George Matti, a company accredited
physician. Only after he was refused admission thereat was he compelled to seek medical
assistance elsewhere. His life and health being at stake, private respondent did not have the
luxury to scout for a company-accredited physician nor was it fair at this late stage for his
employer to deny him such refund for medical services that previously he was admittedly
entitled to.
The POEA Standard Employment Contract for Seamen is designed primarily for the
protection and benefit of Filipino seamen in the pursuit of their employment on board ocean-
going vessels. Its provisions must, therefore, be construed and applied fairly, reasonably and
liberally in their favor. Only then can its beneficent provisions be fully carried into effect.[7]
WHEREFORE, the petition is DISMISSED. The assailed decision of public respondent
National Labor Relations Commission dated September 25, 1995 is AFFIRMED. Petitioner and
Pioneer Insurance and Surety Corporation are ordered to pay jointly and severally the following
amounts to private respondent Carlos Nietes: Twenty One Thousand US Dollars (US$21,000.00)
or its peso equivalent at the time of actual payment, as disability benefits and P34,114.00
representing reimbursement of medical expenses, plus the costs of suit.
SO ORDERED.
GERMAN MARINE AGENCIES, INC. and LUBECA MARINE
MANAGEMENT HK LTD., petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and FROILAN S. DE
LARA, respondents.

DECISION
GONZAGA-REYES, J.:

On 17 October 1994, private respondent was hired by petitioners to work as a radio officer
on board its vessel, the M/V T.A. VOYAGER. Sometime in June, 1995, while the vessel was
docked at the port of New Zealand, private respondent was taken ill. His worsening health
condition was brought by his crewmates to the attention of the master of the vessel. However,
instead of disembarking private respondent so that he may receive immediate medical attention
at a hospital in New Zealand, the master of the vessel proceeded to Manila, a voyage of ten days,
during which time the health of private respondent rapidly deteriorated. Upon arrival in Manila,
private respondent was not immediately disembarked but was made to wait for several hours
until a vacant slot in the Manila pier was available for the vessel to dock. Private respondent was
confined in the Manila Doctors Hospital, wherein he was treated by a team of medical specialists
from 24 June 1995 to 26 July 1995.
After private respondent was discharged from the hospital, he demanded from petitioners the
payment of his disability benefits and the unpaid balance of his sickness wages, pursuant to the
Standard Employment Contract of the parties. Having been assured by petitioners that all his
benefits would be paid in time, private respondent waited for almost a year, to no
avail. Eventually, petitioners told private respondent that, aside from the sickness wages that he
had already received, no other compensation or benefit was forthcoming.[1] Private respondent
filed a complaint with the National Labor Relations Commission (NLRC) for payment of
disability benefits and the balance of his sickness wages. On 31 July 1997, the labor arbiter
rendered a decision,[2] the pertinent parts of which are quoted hereunder

In the case at bar, there is no issue on the propriety or illegality of complainants

discharge or release from employment as Radio Operator. What complainant is
pursuing is limited to compensation benefits due a seaman pursuant to POEA
Standard Employment Contract, Part II, Section C, paragraph 4(c) and paragraph 5,
which reads:

SECTION C. COMPENSATION BENEFIT

x x x

4. The liabilities of the employer when the seaman suffers injury or illness during
the term of his contract are as follows:

x x x
c. The employer shall pay the seaman his basic wages from the time he leaves the
vessel for medical treatment. After discharge from the vessel, the seaman is entitled
to one hundred percent (100%) of his basic wages until he is declared fit to work or
the degree of permanent disability has been assessed by the company-designated
physician, but is [sic] no case shall this period exceed one hundred twenty (120)
days. For this purpose, the seaman shall submit himself to a post-employment
medical examination by the company-designated physician within three working days
upon his return, except when he is physically incapacitated to do so, in which case the
written notice to the agency within the same period is deemed as compliance x x x.

5. In case of permanent total or partial disability of the seamen [sic] [during] the
term of employment caused by either injury or illness, the seamen [sic] shall be
compensated in accordance with the schedule of benefits enumerated in Appendix 1
of this Contract. Computation of his benefits arising from an illness or disease shall
be governed by the rates and the rules of compensation applicable at the time of [sic]
the illness or disease was contracted.

The aforecited provisions of the POEA Standards [sic] Employment Contract is clear
and unmistakable that its literal meaning should be preserved.

Thus, the only question at which the liability of respondents is anchored is whether
complainant was really fit to work in his position as radio operator. If this is so, it
could mean that he is not entitled to disability compensation which respondents
vigorously disputed, citing in support the certification made by Dra. Victoria Forendo
[sic] Cayabyab, allegedly the officially accredited and designated physician of
respondents, which is likewise, accredited with the Philippine Overseas Employment
Administration where it is stated that Nothing [sic] his job description as a radio
operator, Mr. de Lara may be allowed to go back to work. (Annex D &
E). Complainant on the other hand disputes respondents above posture contending
that the more persuasive and authentic evidence for purposes of deciding his fitness or
lack of fitness to work is the certificate issued by Ms. Naneth [sic] Domingo-Reyes,
MD, FPMA where it appears that after submitting himself to another medical
examination by his attending physicians at the Manila Doctors Hospital on December
4, 1996, to verify possible mistake in his post treatment examination on March 25,
1996, firmly was classified under partial permanent disability and is not fit to go
back to his previous work due to mental state. (Annex C, complainants reply to
respondents position paper).

We have gone into a judicious study and analysis of the arguments and exhibits
particularly the ones relied upon by the parties and find that of the complainant
worthy of consideration. Looking closely at Annexes D and E of respondents
position paper, there is hardly any clear affirmation that complainant was fully fit to
resume his work as radio operator. Although the document alluded to, declares that
complainant may be allowed to go back to work, the tenor of the same seems
uncertain that complainant is fit to resume his work, and that assuming that such was
the message, the words may be can not be taken as overriding that coming from the
Manila Doctor Hospital which in the beginning handled the medical case of
complainant and to which respondents unconditionally referred him and by reason of
which six or seven medical especialists [sic] of the hospital took turn[s] studying and
reviewing his uncertain ailment after release by respondents. Otherwise stated, unlike
the message of annexes D to E of respondents, annex C of complainant is clear and
unmistakable and confirm complainants partial permanent disability and his definite
unfitness to go back to his previous work due to his mental health. Some
pronouncements in this exhibit mentions also that when complainant was admitted an
emerging basis for drowsiness, behavioral change and off and on fever and different
procedures were resorted along his case, like emergency CT scan on the brain and his
admission in June 24, 1995 was catastropic, whereas, more could be said in three
document[s] issued by Dra. Victoria Florendo Cayabyab.

Finally, respondents contend that the annexes issued by Dr. Domingo-Reyes of the
Manila Doctors Hospital should not be given weight because it is not issued by the
hospital or doctor duly accredited by the POEA. Neither would a close look on the
applicable provision for seamen show that a duly accredited hospital or doctor is
needed for purposes of the grant of compensation benefits to a such [sic] or ailing
seamen. We are more persuaded based on the arguments of the complainant among
others, that it is absurd to require an ailing seaman in high seas or in a foreign land to
still wait until the ship where he is working land in the country to secure treatment in
a duly accredited hospital or doctor.

On the basis of the above therefore, and convinced that complainants partial
permanent disability which was contracted in the course or on account of his
employment as radio operator in foreign principals vessel, he is entitled to disability
benefit in accordance with the schedule of benefits enumerated in Appendix 1 of the
Contract, the maximum of which is US $50,000. But since the amount prayed for is
US$25,000.00 which we presume has a more realistic basis, the same is hereby
granted.

Concerning the sickness wage, respondents averred that the same had already been
paid. However, there is no evidence that the same has been paid except the payment
to the complainant of P49,546.00. Since complainants salary as US$870 and a
seamans sick wage entitlement is fixed to a maximum of 120 days, his sickness
wages would rest to a total sum of US$3,480 or its peso equivalent. On this,
complainant has been paid only [P]49,546.00 (US$1,943), thereby leaving for
complainant a balance of US$1,537. Finally, it is also argued that as regards the
balance, the same has been paid citing as proof the Sickness Release and Quitclaim
signed by complainant (Annexes C & C-1). Complainant, on the other hand
denied this, and contended that the quitclaim and release is invalid. Considering that
there is no proof on record that this balance of US$1,537 was paid, unlike the
P49,546.00, the same is granted.

WHEREFORE, premises above-considered, a decision is hereby issued ordering

respondent German Marine Agencies Inc. to pay complainant the following sums:

(a) Disability benefit - - - - - - - - - - - - - - US$25,000.00

(b) Sickness wage balance - - - - - - - - - - US$1,137.00

all in the aggregate of Twenty Six Thousand One Hundred Thirty Seven Dollars
(US$26,137.00) or its peso equivalent, the claim for damages being hereby dismissed
for lack of merit, plus ten (10%) percent attorneys fees.

SO ORDERED.

On 29 July 1998, the NLRC[3] affirmed the labor arbiters decision in toto and declared that
the latters findings and conclusions were supported by substantial evidence. [4] After its motion
for reconsideration was denied by the NLRC on 20 May 1999, petitioners repaired to the Court
of Appeals.[5] The appellate courts assailed decision was promulgated on 1 December 1999,
upholding the decision of the NLRC, with the modification that petitioners were ordered to pay
private respondent exemplary damages in the amount of P50,000.00. The appellate court
reasoned out its decision,[6] thus -

The basic issue here is: Whether or not petitioner is liable to pay private respondents
claim as awarded by the NLRC, and whether or not there was abuse of discretion on
the part of the NLRC in affirming such decision on appeal? To resolve this issue, this
Court took time in looking closely at the pertinent provision of the Standard
Employment Contract Governing the Employment of Filipino Seafarers on Board
Ocean-Going Vessels, particularly PART II, SECTION C, par. no. 4 (c), and par. no.
5, which states as follows:

SECTION C. COMPENSATION AND BENEFITS

4. The liabilities of the employer when the seaman suffers injury or illness during
the term of his contract are as follows:

x x x x
c. The employer shall pay the seaman his basic wages from the time he leaves the
vessel for medical treatment. After discharge from the vessel the seaman is entitled to
hundred percent (100%) of his basic wages until he is declared fit to work or his
degree of permanent disability has been assessed by the company-designated
physician, but in no case shall this period exceed one hundred twenty (120) days. x x
xx

5. In case of permanent total or partial disability of the seaman during the term of
his employment caused by either injury or illness the seaman shall be compensated in
accordance with the schedule of benefits enumerated in Appendix 1 of his
Contract. Computation of his benefits arising from an illness or disease shall be
governed by the rates and the rules of compensation applicable at the time the illness
or disease was contracted.

x x x . . .

A cursory reading of these applicable contractual provisions and a thorough

evaluation of the supporting evidence presented by both parties, lends strong credence
to the contentions and arguments presented by private respondent.

The award of disability compensation has a clear and valid basis in the Standard
Employment Contract and the facts as supported by the medical certificate issued by
Dr. Nannette Domingo-Reyes of the Manila Doctors Hospital. Petitioners
contention, that Dr. Domingo-Reyes is not company designated is far from the
truth. The designation of the Manila Doctors Hospital by petitioners as the company
doctor for private respondent cannot be denied. Their very act of committing private
respondent for treatment at the Manila Doctors Hospital under the care of its
physician is tantamount to company designation. The very act of paying the hospital
bills by the petitioners constitutes their confirmation of such designation. Hence,
petitioners cannot resort to the convenience of denying this fact just to evade their
obligation to pay private respondent of his claims for disability benefit.

This Court also finds no basis on (sic) the petitioners contention that the company-
designated [physician] must also be accredited with the POEA before he can engage
in the medical treatment of a sick seaman. There is nothing in the Standard
Employment Contract that provides this accreditation requirement, and even if there
is, this would be absurd and contrary to public policy as its effect will deny and
deprive the ailing seaman of his basic right to seek immediate medical attention from
any competent physician. The lack of POEA accreditation of a physician who
actually treated the ailing seaman does not render the findings of such physician
(declaring the seaman permanently disabled) less authoritative or credible. To our
mind, it is the competence of the attending physician, not the POEA accreditation, that
determines the true health status of the patient-seaman, which in this instant case, is
[sic] the attending physicians from the Manila Doctors Hospital.

As to the award of the balance of wages, this Court is inclined not to disturb the
factual findings of the NLRC. The failure of the petitioners to present a strong and
credible evidence supporting the fact of alleged payment of the balance of sickness
justifies the award of such claim. The long standing doctrine in labor cases that in
case of doubt, the doubt is resolved in favor of labor applies. For there are
indications that the evidence presented by petitioners appears to be of dubious origin
as private respondent challenged the petitioners to present the original copy of the
quitclaim and the vouchers in a motion demanding from petitioners to produce the
original copy of those documents purporting to show that he had received the alleged
sum of P39,803.30, which allegedly shows the payment of the balance of his sickness
wages. This motion was vehemently opposed by petitioners. To our mind, such
opposition only created more doubts and eroded the veracity and credence of
petitioners documentary evidence.

As to the award of attorneys fees, the same is justified by the fact that private
respondent actually hired the services of a lawyer to vindicate his right to claim for his
disability benefit which is being arbitrarily denied to him by petitioners. Had it not
been for the arbitrary denial of petitioners, private respondent could not have been
compelled to hire the services of a lawyer to pursue his claims in court, for which he
is presumed to have incurred costs.

With respect to private respondents claim for damages, this Court finds that the
NLRC overlooked the attendance of negligence on the part of petitioners in their
failure to provide immediate medical attention to private respondent. It further
appears that negligence not only exists but was deliberately perpetrated by petitioners
by its arbitrary refusal to commit the ailing private respondent to a hospital in New
Zealand or at any nearest port deprived of his right to immediate medical attention by
petitioners, which resulted to the serious deterioration of his health that caused his
permanent partial disability. Such deprivation of immediate medical attention appears
deliberate by the clear manifestation from petitioners own words which states that,
the proposition of the complainant that respondents should have taken the
complainant to the nearest port of New Zealand is easier said than done. It is worthy
to note that deviation from the route of the vessel will definitely result to loss of a
fortune in dollars not only to the respondents but likewise to the owners of the cargoes
being shipped by the said vessel.

By petitioners own statement, they reveal their utter lack of concern for their Filipino
crew. This kind of attitude cannot be taken to pass by this Court without appropriate
sanction by way of payment of exemplary damages, if only to show that the life of a
Filipino crew must be accorded due attention and respect by the petitioners. For after
all, had it not been for the toils of this crew, among others, petitioners would not be
doing as good in their business and making fortunes in dollars.

In affirming the decision of the Labor Arbiter, this Court finds that the NLRC never
abused its discretion nor exceeded its jurisdiction.

Hence, this Court finds no valid basis to disturb the findings of the NLRC.

WHEREFORE, the decision of the NLRC dated 29 July 1998, and the Order dated 20
May 1999, are hereby AFFIRMED, and in addition thereto, petitioners are ordered to
pay exemplary damages to private respondent in the sum of Fifty Thousand Pesos
(P50,000.00).

SO ORDERED.

Petitioners motion for reconsideration was denied by the Court of Appeals in its Resolution
of 11 February 2000. Hence, the present appeal.
Disability Benefits
Petitioners contend that the existence and degree of a seamans disability must be declared
by a company-designated physician who must be accredited with the POEA. Following this
line of reasoning, petitioners claim that private respondent is not entitled to disability benefits
because he was found fit to return to work by Dr. Victoria Florendo Cayabyab, the designated
physician of petitioners, who is also accredited with the POEA. [7]
Disagreeing with petitioners stand, the labor arbiter ruled that, for purposes of determining
compensation benefits under the Standard Employment Contract, an ailing seaman need not have
his condition assessed by a doctor or hospital accredited with the POEA. Consequently, the
labor arbiter gave more weight to the opinion of the specialists from the Manila Doctors Hospital
who treated private respondent and declared him as having sustained a partial permanent
disability and unfit to go back to his previous work. [8] Meanwhile, the Court of Appeals held that
petitioners act of committing private respondent for treatment at the Manila Doctors Hospital
and of paying his hospital bills therein is tantamount to company-designation, and therefore,
the certificate issued by Dr. Nanette Domingo-Reyes of the Manila Doctors Hospital describing
private respondent as suffering from a partial permanent disability should be construed as
decisive in the matter of private respondents entitlement to disability benefits. The appellate
court also declared that nothing in the Standard Employment Contract requires the company-
designated physician or hospital to also be accredited with the POEA. [9]
In the case at bar, the parties are at odds as to the proper interpretation of the POEA
Standard Employment Contract Governing the Employment of All Filipino Seamen On Board
Ocean-Going Vessels (Standard Employment Contract), particularly Part II, Section C thereof,
which provides that
xxx xxx xxx
4. The liabilities of the employer when the seaman suffers injury or illness during the
term of his contract are as follows:

a. The employer shall continue to pay the seaman his basic wages during the time he
is on board the vessel;

b. If the injury or illness requires medical and/or dental treatment in a foreign port,
the employer shall be liable for the full cost of such medical, dental, surgical and
hospital treatment as well as board and lodging until the seaman is declared fit to
work or to be repatriated.

However, if after repatriation the seaman still requires medical attention arising from
said injury or illness, he shall be so provided at cost to the employer until such time he
is declared fit or the degree of his disability has been established by the company-
designated physician.

c. The employer shall pay the seaman his basic wages from the time he leaves the
vessel for medical treatment. After discharge from the vessel the seaman is entitled to
one hundred percent (100%) of his basic wages until he is declared fit to work or the
degree of permanent disability has been assessed by the company-designated
physician, but in no case shall this period exceed one hundred twenty (120) days. For
this purpose, the seaman shall submit himself to a post-employment medical
examination by the company-designated physician within three working days upon his
return except when he is physically incapacitated to do so, in which case a written
notice to the agency within the same period is deemed as compliance. Failure of the
seaman to comply with the mandatory reporting requirement shall result in his
forfeiture of the right to claim the above benefits.

xxx xxx xxx

5. In case of permanent total or partial disability of the seaman during the term of
employment caused by either injury or illness the seaman shall be compensated in
accordance with the schedule of benefits enumerated in Appendix 1 of his
Contract. Computation of his benefits arising from an illness or disease shall be
governed by the rates and the rules of compensation applicable at the time the illness
or disease was contracted.

xxx xxx xxx

Petitioners contention that the existence and grade of a seamans disability must be
pronounced by a physician accredited by the POEA does not find any support in the abovecited
provision, nor in any other portion of the Standard Employment Contract. In order to claim
disability benefits under the Standard Employment Contract, it is the company-designated
physician who must proclaim that the seaman suffered a permanent disability, whether total or
partial, due to either injury or illness, during the term of the latters employment. There is no
provision requiring accreditation by the POEA of such physician. In fact, aside from their own
gratuitous allegations, petitioners are unable to cite a single provision in the said contract in
support of their assertions or to offer any credible evidence to substantiate their claim. If
accreditation of the company-designated physician was contemplated by the POEA, it would
have expressly provided for such a qualification, by specifically using the term accreditation in
the Standard Employment Contract, to denote its intention. For instance, under the Labor Code
it is expressly provided that physicians and hospitals providing medical care to an injured or sick
employee covered by the Social Security System or Government Service Insurance System must
be accredited by the Employees Compensation Commission. [10] It is a cardinal rule in the
interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control. [11] There is
no ambiguity in the wording of the Standard Employment Contract the only qualification
prescribed for the physician entrusted with the task of assessing the seamans disability is that he
be company-designated. When the language of the contract is explicit, as in the case at bar,
leaving no doubt as to the intention of the drafters thereof, the courts may not read into it any
other intention that would contradict its plain import.[12]
The word designate means to specify, to mark out and make known, to identify by name,
to indicate, to show, to distinguish by mark or description, or to set apart for a purpose or
duty.[13] The Court agrees with the appellate courts ruling that petitioners act of committing
private respondent for treatment at the Manila Doctors Hospital and paying the hospital bills
therein is tantamount to company-designation. By such unequivocal acts, petitioners clearly set
apart and distinguished the Manila Doctors Hospital, together with its team of specialists, as the
ones qualified to assess the existence and degree of private respondents disability and thereby
resolve the question of the latters entitlement to disability benefits under the Standard
Employment Contract.
In addition to their having been effectively designated by petitioners, it was the physicians
from the Manila Doctors Hospital who examined and treated private respondent for a little more
than one month, subjecting the latter to a series of medical procedures, such as medical therapy,
neurological surgical drainage for brain abscess, bilateral thalamic area S/P craniotomy (Burr
Hole), and opthalmological (orbit) surgery for socket revision and reconstruction of his left
eye. The extensive medical attention given to private respondent enabled the Manila Doctors
Hospital specialists to acquire a detailed knowledge and familiarity with private respondents
medical condition.[14] No doubt such specialized knowledge enabled these physicians to arrive at
a much more accurate appraisal of private respondents condition, including the degree of any
disability which he might have sustained, as compared to another physician not privy to private
respondents case from the very beginning. Thus, the appellate court was not mistaken in giving
more weight to the certificate issued by Dr. Nanette Domingo-Reyes of the Manila Doctors
Hospital dated December 4, 1996, than to the one issued by Dr. Victoria Florendo Cayabyab.
On the strength of Dr. Domingo-Reyess medical certificate which stated that private
respondent can be classified under partial permanent disability and is not fit to go back to his
previous work due to his mental state, the labor arbiter awarded $25,000.00 as disability
benefits, which award was upheld by the NLRC and the appellate court. Petitioners insist that
there is no factual basis for the award of $25,000.00 since there is no finding as to the grade of
permanent partial disability sustained by private respondent, in accordance with Appendix 1 of
the Standard Employment Contract (Schedule of Disability or Impediment For Injuries Suffered
and Diseases or Illness Contracted), and therefore, no means of determining the exact amount of
compensation to which private respondent may be entitled. [15]
The Court does not agree with petitioners position. Under the Standard Employment
Contract the grade of disability suffered by the seaman must be ascertained in accordance with
Appendix 1 of such contract, which is partially reproduced herein -

Appendix 1

SCHEDULE OF DISABILITY OR IMPEDIMENT

FOR INJURIES SUFFERED AND OR ILLNESS CONTRACTED

HEAD

Traumatic head injuries that result to:

1. Apperture unfilled with bone not over

three (3) inches without brain injury . . . . . . . . . . . . . . . . Gr. 9
2. Apperture unfilled with bone over
three (3) inches without brain injury . . . . . . . . . . . . . . . . Gr. 3
3. Severe paralysis of both upper or
lower extremities or one upper and one
lower extremity . . . . . . . . . . . . . . . . . . . . . . . Gr. 1
4. Moderate paralysis of two (2) extremities
producing moderate difficulty in
movements with self care activities . . . . . . . . . . . . . . . . Gr. 6
5. Slight paralysis affecting one extremity
producing slight difficulty with self-care
activities ................. Gr. 10
6. Severe mental disorder or Severe Complex
Cerebral function disturbance or post
traumatic psychoneurosis which require
regular aid and attendance as to render worker
permanently unable to perform any work . . . . . . . . . . Gr. 1
7. Moderate mental disorder or moderate brain
 functional disturbance which limits worker
to the activities of daily living with some
directed care or attendance ............... Gr. 6
8. Slight mental disorder or disturbance that
requires little attendance or aid and which
interferes to a slight degree with the working
capacity of the claimant ............... Gr. 10
9. Incurable imbecility ..................... Gr. 1
Each grade under Appendix 1 has an equivalent disability allowance or benefit expressed in
terms of a percentage of the maximum amount of $50,000.00. This is specified in Appendix 1-A
of the Standard Employment Contract -

APPENDIX 1-A

SCHEDULE OF DISABILITY ALLOWANCES

Impediment Grace Impediment

1 Maximum Rate x 120.00%

2 x 88.81%

3 x 78.36%

4 x 68.66%

5 x 58.96%

6 x 50.00%

7 x 41.80%

8 x 33.59%

9 x 26.12%

10 x 20.15%

11 x 14.93%

12 x 10.45%
13 x 6.72%

14 x 3.74%

Maximum Rate: US$50,000.

To be paid in Philippine Currency equivalent at the exchange rate prevailing during

the time of payment.

Private respondent asked petitioner for disability benefits in the amount of $25,000.00, or
fifty percent (50%) of the maximum rate of $50,000.00, which, under Appendix 1-A, is awarded
when the seaman sustains a grade 6 disability. One of the grade 6 head injuries listed in
Appendix 1, specifically number seven (7), is described as a moderate mental disorder or
moderate brain functional disturbance which limits worker to the activities of daily living with
some directed care or attendance. This coincides with Dr. Domingo-Reyes diagnosis of private
respondents condition, as follows -
xxx xxx xxx

Work-ups and Management:

Patient was admitted on an emergency bases for drowsiness, behavioral change and
on and off fever. This started with headaches since the first week of June 1995 while
on duty (on voyage). Patient progressively deteriorated and arrived here already
dehydrated with high grade fever. (emphasis supplied)

Emergency CT Scan of the brain revealed rounded masses in both thalamus on the
brain; the larger mass was situated at the right.

Burr hole at the right parietal and drainage of the right thalamic abscess was done on
June 26, 1995. Repair of shallow fornix of left eye and biopsy was done for culture
studies thereafter.

Mr. De Lara stayed in the hospital for 33 days and was still in bedridden state when
discharge. He became ambulant on mid-August 1996 but his cerebral functions
(cognitive and behavioral) remain impaired.

This is his 18th month of illness. His admission last June 24, 1995 is considered
catastrophic. He now can be classified under partial permanent disability and is not fit
to go back to his previous work due to his mental state.[16] (emphasis supplied)

xxx xxx xxx

Thus, the medical certificate of Dr. Domingo-Reyes is more than sufficient basis for the award of
disability benefits in the amount of $25,000.00 in favor of private respondent.
Sickness wages

Petitioners assert that the award of $1,137.00, representing the balance of the sickness wages
owed to private respondent, is erroneous and in absolute disregard of their documentary evidence
- particularly the three check vouchers in the total amount of P89,354.80, all issued in 1995 in
favor of either private respondent or his wife, and the Sickwages Release & Quitclaim - which,
according to petitioners, taken together would prove that they had paid private respondent the
total amount of P89,354.80, or $3,480.00, corresponding to the 120 days sickness wages as
required under the Standard Employment Contract.
Contrary to petitioners assertions, the labor arbiter held that only P49,546.00 ($1,943.00)
was paid by petitioners and that private respondent is still entitled to the balance of the sickness
wages in the amount of $1,537.00. According to the labor arbiter, petitioners failed to prove that
they had paid this amount to private respondent, notwithstanding the document entitled
Sickness Release & Quitclaim introduced by petitioners in evidence, which was not given
credence.[17] The NLRC and the Court of Appeals concurred with the labor arbiter on this
issue. The appellate court held that the documentary evidence of petitioners was insufficient to
support their contentions.[18]
The Supreme Court has always accorded respect and finality to the findings of fact of the
NLRC, particularly if they coincide with those of the Labor Arbiter, when supported by
substantial evidence. The reason for this is that a quasi-judicial agency like the NLRC has
acquired a unique expertise because its jurisdiction is confined to specific matters. [19] Whether or
not petitioners actually paid the balance of the sickness wages to private respondent is a factual
question. In the absence of proof that the labor arbiter or the NLRC had gravely abused their
discretion, the Court shall deem conclusive and cannot be compelled to overturn this particular
factual finding.[20]

Damages

We affirm the appellate courts finding that petitioners are guilty of negligence in failing to
provide immediate medical attention to private respondent. It has been sufficiently established
that, while the M/V T.A. VOYAGER was docked at the port of New Zealand, private respondent
was taken ill, causing him to lose his memory and rendering him incapable of performing his
work as radio officer of the vessel. The crew immediately notified the master of the vessel of
private respondents worsening condition. However, instead of disembarking private respondent
so that he may receive immediate medical attention at a hospital in New Zealand or at a nearby
port, the master of the vessel proceeded with the voyage, in total disregard of the urgency of
private respondents condition. Private respondent was kept on board without any medical
attention whatsoever for the entire duration of the trip from New Zealand to the Philippines, a
voyage of ten days. To make matters worse, when the vessel finally arrived in Manila,
petitioners failed to directly disembark private respondent for immediate hospitalization. Private
respondent was made to suffer a wait of several more hours until a vacant slot was available at
the pier for the vessel to dock. It was only upon the insistence of private respondents relatives
that petitioners were compelled to disembark private respondent and finally commit him to a
hospital.[21] There is no doubt that the failure of petitioners to provide private respondent with the
necessary medical care caused the rapid deterioration and inevitable worsening of the latters
condition, which eventually resulted in his sustaining a permanent disability.
In light of the foregoing, petitioners are liable for moral damages for the physical suffering
and mental anguish caused to private respondent. [22] There is no hard and fast rule in the
determination of what would be a fair amount of moral damages, since each case must be
governed by its own peculiar circumstances. [23] In the present case, the Court considers the
amount of P50,000.00 in moral damages as proper.[24]
Meanwhile, exemplary damages are imposed by way of example or correction for the public
good, pursuant to Article 2229 of the Civil Code. They are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a negative incentive to curb socially
deleterious actions. While exemplary damages cannot be recovered as a matter of right, they
need not be proved, although plaintiff must show that he is entitled to moral, temperate, or
compensatory damages before the court may consider the question of whether or not exemplary
damages should be awarded.[25] In quasi-delicts, exemplary damages may be granted if the
defendant acted with gross negligence.[26] Coming now to the case at bar, the appellate court
found that

negligence not only exists but was deliberately perpetrated by petitioners by its
arbitrary refusal to commit the ailing private respondent to a hospital in New
Zealand or at any nearest port which resulted to the serious deterioration of his
health that caused his permanent partial disability. Such deprivation of immediate
medical attention appears deliberate by the clear manifestation from petitioners
own words which states that, the proposition of the complainant that
respondents should have taken the complainant to the nearest port of New
Zealand is easier said than done. It is worthy to note that deviation from the
route of the vessel will definitely result to loss of a fortune in dollars not only to
the respondents [petitioners herein] but likewise to the owners of the cargoes
being shipped by the said vessel.

Petitioners never denied making this statement. Given the prevailing circumstances, the
appellate courts award of P50,000.00 as exemplary damages is adequate, fair, and reasonable.[27]
Although the labor arbiter awarded attorneys fees, which award was subsequently affirmed
by the NLRC and the Court of Appeals, the basis for the same was not discussed in his decision
nor borne out by the records of this case, and should therefore be deleted. There must always be
a factual basis for the award of attorneys fees.[28] This is consistent with the policy that no
premium should be placed on the right to litigate. [29]
WHEREFORE, the 1 December 1999 Decision and 11 February 2000 Resolution of the
Court of Appeals are AFFIRMED, with the modification that petitioners must also pay private
respondent P50,000.00 as moral damages and the award of attorneys fees is deleted.
SO ORDERED.
Republic Act No. 9903

AN ACT GRANTING THE SOCIAL SECURITY SYSTEM A ONE - TIME AUTHORITY TO

CONDONE PENALTIES ON UNREMITTED OR DELINQUENT CONTRIBUTIONS BY
EMPLOYERS

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:

Section 1. Short Title. - This Act shall be known as the "Social Security Condonation Law of
2009".

Section 2. Condonation of Penalty. - Any employer who is delinquent or has not remitted all
contributions due and payable to the Social Security System (SSS), including those with pending
cases either before the Social Security Commission, courts or Office of the Prosecutor involving
collection of contributions and/or penalties, may within six (6) months from the effectivity of this Act:

(a) remit said contributions; or

(b) submit a proposal to pay the same in installments, subject to the implementing rules and
regulations which the Social Security Commission may prescribe: Provided, That the
delinquent employer submits the corresponding collection lists together with the remittance
or proposal to pay installments: Provided, further,That upon approval and payment in full or
in installments of contributions due and payable to the SSS, all such pending cases filed
against the employer shall be withdrawn without prejudice to the refiling of the case in the
event the employer fails to remit in full the required delinquent contributions or defaults in the
payment of any installment under the approved proposal.

Section 3. Installment Proposal. - In the event that a delinquent employer chooses to submit an
installment proposal, the SSS shall give due course to approve and grant the same, subject to the
implementing rules and regulations as the Social Security Commission shall
prescribe: Provided, That the employer shall remit, upon submission of the installment proposal, a
down payment of not less than five percent (5%) of its total contribution delinquency: Provided,
further, That the employer shall remit the balance thereof in equal monthly installments within a
period not exceeding forty - eight (48) months from the date of approval of the
proposal: Provided, finally, That the installment payments shall bear an interest of three percent
(3%) per annum.

Section 4. Effectivity of Condonation. - The penalty provided under Section 22(a) of Republic Act
No. 8282 shall be condoned by virtue of this Act when and until all the delinquent contributions are
remitted by the employer to the SSS: Provided, That, in case the employer fails to remit in full the
required delinquent contributions, or defaults in the payment of any installment under the approved
proposal, within the availment period provided in this Act, the penalties are deemed reimposed from
the time the contributions first become due, to accrue until the delinquent account is paid in
full: Provided, further, That for reason of equity, employers who settled arrears in contributions
before the effectivity of this Act shall likewise have their accrued penalties waived.lawphil

Section 5. Implementing Rules and Regulations. - Within thirty (30) days after the effectivity of this
Act, the Social Security Commission shall issue the necessary rules and regulations for the effective
implementation of this Act.
Section 6. Separability Clause. - In the event that any provision of this Act is declared
unconstitutional, the validity of the other provisions shall not be affected by such declaration.

Section 7. Repealing Clause. - All Jaws, decrees, orders, rules and regulations and other issuances
or parts thereof which are inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

Section 8. Effectivity. - This Act shall take effect fifteen (15) days following its publication in the
Official Gazette or in at least two (2) newspapers of general circulation.

Approved,

JUAN PONCE ENRILE PROSPERO C. NOGRALES

President of the Senate Speaker of the House of Representatives

This Act which is a consolidation of House Bill No. 5922 and Senate Bill No. 2454 was finally passed
by the House of Representatives and the Senate on October 14, 2009 and November 9, 2009.

EMMA LIRIO-REYES MARILYN B. BARUA-YAP

Secretary of the Senate Secretary General House of
Representatives

Approved: JAN. 07, 2010

GLORIA MACAPAGAL-ARROYO
President of the Philippines
 REPUBLIC ACT NO. 7699

AN ACT INSTITUTING LIMITED PORTABILITY SCHEME IN THE SOCIAL SECURITY INSURANCE SYSTEMS
BY TOTALIZING THE WORKERS' CREDITABLE SERVICES OR CONTRIBUTIONS IN EACH OF THE SYSTEMS.

SECTION 1. It is hereby declared the policy of the State to promote the welfare of our workers by recognizing their
efforts in productive endeavors and to further improve their conditions by providing benefits for their long years of
contribution to the national economy. Towards this end, the State shall institute a scheme for totalization and
portability of social security benefits with the view of establishing within a reasonable period a unitary social security
system.

Sec. 2. Definition of Terms. As used in this Act, unless the context indicates otherwise, the following terms shall
mean:

(a) "Contributions" shall refer to the contributions paid by the employee or worker to either the Government Service
Insurance System (GSIS) or the Social Security System (SSS) on account of the worker's membership;

(b) "Portability" shall refer to the transfer of funds for the account and benefit of a worker who transfers from one
system to the other;

(c) "Sector" shall refer to employment either in the public or private sector;

(d) "System" shall refer to either the SSS as created under Republic Act No. 1161, as amended or the GSIS as
created under Presidential Decree No. 1146, as amended; and

(e) "Totalization" shall refer to the process of adding up the periods of creditable services or contributions under each
of the Systems, for purposes of eligibility and computation of benefits.

Sec. 3. Provisions of any general or special law or rules and regulations to the contrary notwithstanding, a covered
worker who transfers employment from one sector to another or is employed in both sectors shall have his credible
services or contributions in both Systems credited to his service or contribution record in each of the Systems and
shall be totalized for purposes of old-age, disability, survivorship and other benefits in case the covered member does
not qualify for such benefits in either or both Systems without totalization: Provided, however, That overlapping
periods of membership shall be credited only once for purposes of totalization.

Sec. 4. All contributions paid by such member personally, and those that were paid by his employers to both Systems
shall be considered in the processing of benefits which he can claim from either or both Systems: Provided, however,
That the amount of benefits to be paid by one System shall be in proportion to the number of contributions actually
remitted to that System.

Sec. 5. Nothing in this Act shall be construed to diminish or reduce the benefits being enjoyed by a covered worker
arising from existing laws, issuances, and company policies or practices or agreements between the employer and
the employees.

Sec. 6. The Department of Labor and Employment for the private sector and the Civil Service Commission for the
government sector, together with the SSS and the GSIS shall, within ninety (90) days from the effectivity of this Act,
promulgate the rules and regulations necessary to implement the provisions hereof: Provided, That any conflict in the
interpretation of the law and the implementing rules and regulations shall be resolved in favor of the workers.

Sec. 7. All laws, decrees, orders, rules and regulations, or parts thereof, which are inconsistent with the provisions of
this Act are hereby repealed or modified accordingly.
Sec. 8. This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least
two (2) national newspapers of general circulation, whichever comes earlier.
Republic Act No. 1161 June 18, 1954

AN ACT TO CREATE A SOCIAL SECURITY SYSTEM PROVIDING SICKNESS,

UNEMPLOYMENT, RETIREMENT, DISABILITY AND DEATH BENEFITS FOR EMPLOYEES

SECTION 1. Short Title. This Act shall be known as the "Social Security Law" (As amended by
Sec. 1, P.D. No. 24, S-1972)."

Section 2. Declaration of Policy. It is the policy of the Republic of the Philippines to establish,
develop, promote and perfect a sound and viable tax-exempt social security service suitable to the
needs of the people throughout the Philippines which shall provide to covered employees and their
families protection against the hazards of disability, sickness, old age and death, with a view to
promoting their well-being in the spirit of social justice. (As amended by Sec. 1, R.A. 1792 and Sec.
2, P.D. No. 24, S-1972)

A. Administration

SECTION 3. Social Security System. (a) To carry out the purposes of this Act, the Social
Security System with principal place of business in Metro Manila, Philippines is hereby created. The
SSS shall be directed and controlled by a Social Security Commission composed of the Secretary of
Labor and Employment, the SSS Administrator and seven appointive members: three of whom shall
represent the labor group, one of whom shall be a woman; three, the management group, one of
whom shall be a woman; and, one, the general public, to be appointed by the President of the
Philippines. The Chairman of the Commission shall be designated by the President from among its
members. The term of the appointive members shall be three years: Provided, That the terms of the
first six appointive members shall be one, two and three years for every two members, respectively.

All vacancies, except through the expiration of the term, shall be filled for the unexpired term only.
The apppointive members of the Commission shall receive one thousand five hundred pesos per
diem for each meeting actually attended by them: Provided, That no compensation shall be paid for
more than eight meetings a month. Members of the Commission who hear cases pending before the
Commission, shall also receive a per diem of one thousand five hundred pesos. (As amended by
Sec. 2, R.A. 1792, Sec. 1, R.A. 2658, Sec. 1, R.A. 4857; Sec. 3, P.D. No. 24, S-1972; Sec. 1, P.D.
No. 347, S-1973; Sec. 1, P.D. 735, S-1975; Sec. 1, P.D. No. 1202, S-1977; Sec. 1, E.O. No. 102, S-
1986; and R.A. 7688)

(b) The general conduct of the operations and management functions of the SSS shall be vested in
the Administrator who shall serve as the chief executive officer immediately responsible for carrying
out the program of the SSS and the policies of the Commission. The administrator shall be a person
who has had previous experience in technical and administrative fields related to the purposes of
this Act. He shall be appointed by the President of the Philippines and shall receive a salary to be
fixed by the Commission with the approval of the President, payable from the funds of the SSS. (As
amended by Sec. 1, R.A. 2658; Sec. 3, P.D. No. 24, S-1972; and Sec. 1, P.D. No. 735, S- 1975)

(c) The Commission, upon the recommendation of the Administrator shall appoint an actuary, and
such other personnel as may be deemed necessary; fix their compensation; prescribe their duties
and establish such methods and procedures as may insure the efficient, honest and economical
administration of the provisions and purposes of this Act. Provided, however, That the personnel of
the SSS shall be selected only from civil service eligibles certified by the commissioner of civil
service and be subject to civil service rules and regulations. (As amended by Sec. 1, R.A. 2658 and
Sec. 1, P.D. No. 735, S-1975)
Section 4. Powers and Duties of the Commission. For the attainment of its main objectives as
set forth in section two hereof, the Commission shall have the following powers and duties:

(a) To adopt, amend and rescind, subject to the approval of the President, such rules and
regulations as may be necessary to carry out the provisions and purposes of this Act.

(b) To submit annually not later than March 31, a public report to the President of the
Philippines covering its activities in the administration and enforcement of this Act during the
preceding year including information and recommendations on broad policies for the
development and perfection of the program of the SSS. (As amended by Sec. 2, P.D. No.
735, S-1975)

(c) To require the Actuary to submit a valuation report on the SSS benefit program every five
years, or more frequently as may be necessary, and to undertake the necessary actuarial
studies and calculations concerning increases in benefits and the financial stability of the
SSS and to provide for the feasible increases in benefits and the addition of new ones under
such rules and regulations as the Commission may adopt subject to the approval of the
President: President, That the actuarial soundness of the reserve fund shall be guaranteed:
Provided, further, That such increases in benefits shall not require any increase in the rate of
contribution. (As amended by Sec. 1, P.D. No. 1636, S-1979 and Sec. 2, E.O. No. 102, S-
1986)

(d) To establish branches of the System whenever and wherever it may be expedient or
necessary, and to inspect or cause to be inspected periodically such branches.

(e) To enter into agreements or contracts for such service and aid, as may be needed for the
proper, efficient and stable administration of the System.

(f) To adopt from time to time a budget of expenditures including salaries of personnel,
against all funds available to the System under this Act. (As amended by Sec. 3, R.A. 1792)

(g) To set up its accounting system and provide the necessary personnel therefor. (As
amended by Sec. 3, R.A. 1792)

(h) To require reports, compilations and analyses of statistical and economic data and to
make investigations as may be needed for the proper administration and development of the
System.

(i) To acquire property, real or personal, which may be necessary or expedient for the
attainment of the purposes of this Act.

(j) To acquire, receive, or hold, by way of purchase, expropriation or otherwise, public or

private property for the purpose of undertaking housing projects preferably for the benefit of
low-salaried employees and for the maintenance of hospitals and institutions for the sick,
aged and infirm employees and immediate members of their families. (As amended by Sec.
2, R.A. 2658 and Sec. 2., P.D. No. 735, S-1975)

(k) To sue and be sued in court.

(l) To perform such other acts as it may deem appropriate for the proper enforcement of this
Act.
Section 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to
coverage, benefits, contributions and penalties thereon or any other matter related thereto, shall be
cognizable by the Commission, and any case filed with respect thereto shall be heard by the
Commission, or any of its members, or by hearing officers duly authorized by the Commission and
decided within twenty days after the submission of the evidence. The filing, determination and
settlement of disputes shall be governed by the rules and regulations promulgated by the
Commission. (As amended by Sec. 3, R.A. 2658; Sec. 2, R.A. 4857; and Sec. 3, P.D. No. 735, S-
1975)

(b) Appeal to Courts. Any decision of the Commission, in the absence of an appeal therefrom as
herein provided, shall become final fifteen days after the date of notification, and judicial review
thereof shall be permitted only after any party claiming to be aggrieved thereby has exhausted his
remedies before the Commission. The Commission shall be deemed to be a party to any judicial
action involving any such decision, and may be represented by an attorney employed by the
Commission, or when requested by the Commission, by the Solicitor General or any fiscal.

(c) Court Review. The decision of the Commission upon any disputed matter may be received
both upon the law and the facts by the Court of Appeals. For the purpose of such review the
procedure concerning appeals from the Court of First Instance shall be followed as far as practicable
and consistent with the purposes of this Act. Appeal from a decision of the Commission must be
taken within fifteen days from notification of such decision. If the decision of the Commission
involves only questions of law, the same shall be reviewed by the Supreme Court. No appeal bond
shall be required. The case shall be heard in a summary manner, and shall take precedence over all
cases, except that in the Supreme Court, criminal cases wherein life imprisonment or death has
been imposed by the trial court shall take precedence. No appeal shall act as a supersedeas or a
stay of the order of the Commission, unless the Commission itself, or the Court of Appeals or the
Supreme Court, shall so order.

(d) Execution of decisions Any decision or award of the Commission after the same has become
final and executory shall be enforced and executed in the same manner as decisions of Courts of
First Instance and the Commission shall have the power to issue to the City or provincial sheriff or
the sheriff whom it may appoint such writs of execution as may be necessary for the enforcement of
such decision or award and any person who shall fail or refuse to comply with such decision, award,
or writ, after being required to do so shall, upon application by the Commission, be punished by the
proper court for contempt. (As amended by Sec. 4, P.D. No. 24, S-1972)

Section 6. Auditor and Counsel. (a) The Commissioner on Auditor shall be the ex-officio Auditor
of the SSS. He or his representative shall check and audit all the accounts, funds and properties of
the SSS in the same manner and as frequently as the accounts, funds and properties of the
government are checked and audited under existing laws; and he shall have, as far as practicable,
the same powers and duties as he has with respect to the checking and auditing of public accounts,
funds and properties in general.

(b) The Secretary of Justice shall be the ex-officio counsel of the SSS. He or his representative shall
act as legal adviser and counsel thereof. (As amended by Sec. 4, P.D. No. 735, S-1975)

Section 7. Oaths, Witnesses, and Production of Records. When authorized by the

Commission, an official or employee thereof shall have the power to administer oath and affirmation,
take depositions, certify to official acts, and issue subpoena and subpoena duces tecum to compel
the attendance of witnesses and the production of books, papers, correspondence and other records
deemed necessary as evidence in connection with any question arising under this Act. Any case of
contumacy shall be dealt with in accordance with the provisions of section five hundred eighty of the
Administrative Code.

B. Definitions

SECTION 8. Terms Defined. For the purposes of this Act, the following terms shall, unless the
context indicates otherwise, have the following meanings:

(a) SSS The Social Security System created by this Act. (As amended by Sec. 2, P.D. No.
1636, S-1979)

(b) Commission The Social Security Commission as herein created.

(c) Employer Any person, natural or juridical, domestic or foreign, who carries on in the
Philippines any trade, business, industry, undertaking, or activity of any kind and uses the
services of another person who is under his orders as regards the employment, except the
Government and any of its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government: Provided, That a self-employed
professional shall be both employee and employer at the same time. (As amended by Sec.
2, P.D. No. 1636, S-1979)

(d) Employee Any person who performs services for an employer in which either or both
mental and physical efforts are used and who receives compensation for such services,
where there is an employer-employee relationship: Provided, That a self-employed
professional shall be both employee and employer at the same time. (As amended by Sec.
4, R.A. 2658 and Sec. 2, P.D. No. 1636, S-1979)

(e) Dependent The legitimate, legitimated or legally adopted child who is unmarried, not
gainfully employed, and not over twenty-one years of age, or over twenty-one years of age,
provided that he is congenitally incapacitated and incapable of self-support, physically or
mentally; the legitimate spouse dependent for support upon the employee; and the legitimate
parents wholly dependent upon the covered employee for regular support. (As amended by
Sec. 4, R.A. 2658; Sec. 3, R.A. 4857; and Sec. 5, P.D. No. 735, S-1975)

(f) Compensation All actual remuneration for employment, including the mandated cost of
living allowance, as well as the cash value of any remuneration paid in any medium other
than cash except that part of the remuneration in excess of three thousand pesos received
during the month. (As amended by Sec. 4, R.A. 1792; Sec. 4 R.A. 2658; Sec. 5, P.D. No. 24,
S-1972; and Sec. 3, E.O. No. 102, S-1986)

(g) Monthly salary credit The compensation base for contributions and benefits as
indicated in the schedule in section eighteen of this Act. (As amended by Sec. 4, R.A. 2658
and Sec. 5 P.D. No. 24, S-1972)

(h) Monthly The period from one end of the last payroll period of the preceding month to
the end of the last payroll period of the current month if compensation is on hourly, daily or
weekly basis; if on any other basis, "monthly" shall mean a period of one month.

(i) Contribution The amount paid to the SSS by the employee and by his employer in
accordance with section eighteen of this Act. (As amended by Sec. 5, P.D. No. 24, S-1972)
(j) Employment. Any service performed by an employee for his employer, except

1. Agricultural labor when performed by a share or leasehold tenant or worker who is

not paid any regular daily wage or base pay and who does not work for an
uninterrupted period of at least six months in a year; (As amended by Sec. 4, R.A.
2658)

2. Domestic service in a private home;

3. Employment purely casual and not for the purposes of occupation or business of
the employer;

4. Service performed by an individual in the employ of his son, daughter, or spouse,

and service performed by a child under the age of twenty-one years in the employ of
his parents;

5. Service performed on or in connection with an alien vessel by an employee if he is

employed when such vessel is outside the Philippines;

6. Service performed in the employ of the Philippine Government or an

instrumentality or agency thereof;

7. Service performed in the employ of a foreign government or international

organization, or their wholly-owned instrumentality: Provided, however, That his
exemption notwithstanding, any foreign government, international organization, or
their wholly-owned instrumentality employing workers in the Philippines or employing
Filipinos outside of the Philippines may enter into an agreement with the Philippine
Government for the inclusion of such employees in the SSS except those already
covered by their respective civil service retirement systems: Provided, further, That
the terms of such agreement shall conform with the provisions of this Act on
coverage and amount of payment of contributions and benefits: Provided, finally,
That the provisions of this Act shall be supplementary to any such agreement. (As
amended by Sec. 1, R.A. 3839; Sec. 3, RA 4857; and Sec. 5, P.D. No. 735, S-1975)

8. Such other services performed by temporary employees who may be excluded by

regulation of the Commission. Employees of bona fide independent contractors shall
not be deemed employees of the employer engaging the services of said contractors.
(As amended by Sec. 5, P.D. No. 735, S-1975)

(k) Beneficiaries The dependent spouse until he remarries and dependent children, who
shall be the primary beneficiaries. In their absence, the dependent parents and, subject to
the restrictions imposed on dependent children, the legitimate descendents and illegitimate
children who shall be the secondary beneficiaries. In the absence of any of the foregoing,
any other person designated by the covered employee as secondary beneficiary. (As
amended by Sec. 4, R.A. 2658; Sec. 3, R.A. 4857; Sec. 1, P.D. No. 177, S-1973; and Sec. 5,
P.D. No. 735, S-1975)

(l) Contingency The retirement, death, permanent disability, injury or sickness of the
covered employee. (As amended by Sec. 5, P.D. No. 735, S-1975)
 (m) Average monthly salary credit The result obtained by dividing the sum of the monthly
salary credits in the sixty-month period immediately preceding the semester of contingency
by the number of months of coverage in the same period, or the result obtained by dividing
the sum of all the monthly salary credits paid prior to the semester of contingency by the
number of calendar months of coverage in the same period, whichever is greater: except
where the month of contingency falls within eighteen months from the month of coverage, in
which case it is the result obtained by dividing the sum of all monthly salary credits paid prior
to the month of contingency by the total number of calendar months of coverage in the same
period: Provided, That the injury or sickness which caused the disability shall be deemed as
the permanent disability for the purpose of computing the average monthly salary credit. (As
amended by Sec. 3, R.A. 4857 and Sec. 5, P.D. No. 735, S-1975)

(n) Average daily salary credit The result obtained by dividing the sum of the six highest
monthly salary credits in the twelve-month period immediately preceding the semester of
contingency by one hundred eighty. (As amended by Sec. 3, R.A. 4857; Sec. 5, P.D. No.
735, S-1975; and Sec. 3, E.O. No. 102, S-1986)

(o) Semester A period of two consecutive quarters ending in the quarter of contingency.
(As amended by Sec. 5, P.D. No. 735, S-1975)

(p) Quarter A period of three consecutive calendar months ending on the last day of
March, June, September and December. (As amended by Sec. 3, R.A. 4857)

(q) Replacement ratio The sum of twenty per cent and the quotient obtained by dividing
three hundred by the sum of three hundred forty and the average monthly salary credit. (As
amended by Sec. 2, P.D. No. 1636, S-1979)

(r) Credited years of service For a member covered prior to January 1975, nineteen
hundred seventy five minus the calendar year of coverage plus the number of calendar years
in which six or more contributions have been paid from January 1975 up to the calendar year
containing the semester prior to the contingency. For a member covered in or after January
1975, the number of calendar years in which six or more contributions have been paid from
the year of coverage up to the calendar year containing the semester prior to the
contingency. (As amended by Sec. 2, P.D. No. 1636, S-1979)

C. Scope of the System

SECTION 9. Compulsory coverage. (a) Coverage in the SSS shall be compulsory upon all
employees not over sixty years of age and their employers: Provided, That any benefit already
earned by employees under private benefit plans existing at the time of the approval of this Act shall
not be discontinued, reduced or otherwise impaired: Provided, further, That private plans which are
existing and in force at the time of compulsory coverage shall be integrated with the plan of the SSS
in such a way where the employer's contribution to his private plan is more that that required of him
in this Act he shall pay to the SSS only the contribution required of him and he shall continue his
contribution to such private plan less his contribution to the SSS so that the employer's total
contribution to his private benefit plan and to the Social Security System shall be the same as his
contribution to his private benefit plan before the compulsory coverage: Provided, further, That any
changes, adjustments, modifications, eliminations or improvements in the benefits to be available
under the remaining private plan, which may be necessary to adopt by reason of the reduced
contribution thereto as a result of the integration, shall be subject to agreements between the
employers and employees concerned: Provided, further, That the private benefit plan which the
employer shall continue for his employees shall remain under the employer's management and
control unless there is an existing agreement to the contrary: Provided, finally, That nothing in this
Act shall be construed as a limitation on the right of employers and employees to agree on and
adopt benefits which are over and above those provided under this Act. (As amended by Sec. 5,
R.A. 1972; Sec. 5, R.A. 2658; and Sec. 2, R.A. 3839)

(b) Filipinos recruited in the Philippines by foreign-based employers for employment abroad may be
covered by the SSS on a voluntary basis. (As amended by Sec. 2, P.D. No. 177, S-1973 and Sec. 6,
P.D. No. 735, S-1975)

Section 9-A. Compulsory Coverage of the Self-employed. Coverage in the SSS shall also be
compulsory upon all self-employed persons earning P1,800 or more per annum: Provided, That the
effectivity of coverage of certain groups of self-employed shall be determined by the Commission
under such rules and regulations it may prescribe: Provided, further, That the effectivity of the
coverage of the following self-employed persons shall be in accordance with section ten (b) hereof:

1. All self-employed professionals licensed by the Professional Regulations Commission or

those licensed to practice law.

2. Partners and single proprietors of businesses.

3. Actors and actresses, directors, scriptwriters and news correspondents who do not fall
within the definition of the term "employee" in section eight (d) of this Act.

4. Professionals athletes, coaches, trainers licensed by the Games and Amusement Board
as well as jockeys and trainers licensed by the Philippine Racing Commission.

Unless otherwise specified herein, all provisions of the SSS Law applicable to covered employees
shall also be applicable to the covered self-employed persons. (As amended by Sec. 3, P.D. No.
1636, S-1979)

Section 10. Effective Date of Coverage. Compulsory coverage of the employer shall take effect
on the first day of his operation and that of the employee on the day of his employment: Provided,
That the compulsory coverage of self-employed persons referred to in paragraphs (1) to (4) shall
take effect on the first day of January following the calendar year they started the practice of their
profession or business operations but in no case earlier than January 1, 1980. (As amended by Sec.
6, R.A. 1972; Sec. 6, R.A. 2658; and Sec. 4, P.D. No. 1636, S-1979)

Section 11. Effect of Separation from Employment. When an employee under compulsory
coverage is separated from employment, his employer's contribution on his account and his
obligation to pay contributions arising from that employment shall cease at the end of the month of
separation, but said employee shall be credited with all contributions paid on his behalf and entitled
to benefits according to the provisions of this Act. He may, however, continue to pay the total
contributions to maintain his right to full benefit. (As amended by Sec. 4, R.A. 4857 and Sec. 7, P.D.
No. 735, S-1975)

Section 11-A. Effect of Interruption of Business or Professional Income. If the self-employed

realizes no net professional or business income in any calendar year, he shall not be required to pay
contributions for the succeeding year. He may, however, be allowed to continue paying contributions
under the same rules and regulations applicable to separated covered employees. (As amended by
Sec. 5, P.D. No. 1636, S-1979)
 D. Benefits

SECTION 12. Monthly Pension. (a) The monthly pension shall be the sum of the following:

The average monthly salary credit multiplied by the replacement ratio; and

One and a half per cent of the average monthly salary credit for each credited year of service in
excess of ten years.

(b) The monthly pension shall in no case be less than two hundred pesos nor paid in an aggregate
amount of less than sixty times the monthly pension except to a secondary beneficiary: Provided,
That the monthly pension of surviving pensioners as of December 31, 1986 shall be increased by
twenty per cent. (As amended by Sec. 7, R.A. 1792; Sec. 7, R.A. 2658; Sec. 5, R.A. 4857; Sec. 6,
P.D. No. 24, S-1972; Sec. 3, P.D. No. 177, S-1973; Sec. 8, P.D. No. 735, S-1975; Sec. 2, P.D. No.
1202, S-1977; Sec. 6, P.D. No. 1636, S-1979; Sec. 1, E.O. No. 28, S-1986; and Sec. 4, E.O. No.
102, S-1986)

Section 12-A. Dependents' Pension. The dependents' pension shall be equivalent to ten per
cent of the monthly pension for each dependent child but not exceeding five, beginning with the
youngest and without substitution. (As amended by Sec. 3, P.D. No. 1202, S-1977)

Section 12-B. Retirement Benefits. (a) A covered employee who has paid at least one hundred
twenty monthly contributions prior to the semester of retirement; and who (1) has reached the age of
sixty years and is not receiving monthly compensation of at least three hundred pesos or (2) has
reached the age of sixty-five years, shall be entitled for as long as he lives to the monthly pension:
Provided, That his dependents born before his retirement of a marriage subsisting when he was fifty-
seven years old shall be entitled to the dependents' pension. (As amended by Sec. 4, P.D. No. 1202,
S-1977)

(b) A covered member who is sixty years old at retirement and who does not qualify for pension
benefits under paragraph (a) above, shall be entitled to a lump sum benefit equal to the total
contributions paid by him and on his behalf: Provided, That he is separated from employment and is
not continuing payment of contributions to the SSS on his own.

(c) The monthly pension shall be reduced upon the re-employment of a retired employee who is less
than sixty-five years old by an amount equivalent to one-half his earnings over three hundred pesos.
He shall again be subject to section eighteen and his employer to section nineteen of this Act. (As
amended by Sec. 7, R.A. 1792; Sec. 7, R.A. 2658; Sec. 6, P.D. No. 24, S-1972; Sec. 3, P.D. No.
177, S-1973; Sec. 8, P.D. No. 735; S-1975; Sec. 4, P.D. No. 1202, S-1977; and Sec. 7, P.D. No.
1636, S-1979)

(d) Upon the death of the retired employee pensioner, his primary beneficiaries as of the date of his
retirement shall be entitled to eighty per cent of the monthly pension and his dependents to the
dependents' pension: Provided, That if he has no primary beneficiaries and he dies within sixty
months from the start of his monthly pension, his secondary beneficiaries shall be entitled to a lump
sum benefit equivalent to the bigger of (1) twenty times the monthly pension or (2) the difference of
sixty times the monthly pension and the total monthly pensions paid by the SSS excluding the
dependents' pension. (As amended by Sec. 7, P.D. No. 1636, S-1979 and E.O. No. 102, S-1986)

Section 13. Death Benefits. Upon the covered employee's death, his primary beneficiaries shall
be entitled to the monthly pension and his dependents to the dependents' pension: Provided, That
he has paid at least thirty-six monthly contributions prior to the semester of death: Provided, further,
That if the foregoing condition is not satisfied his primary beneficiaries shall be entitled to a lump
sum benefit equivalent to thirty-five times the monthly pension: Provided, further, That if he has no
primary beneficiaries, his secondary beneficiaries shall be entitled to a lump sum benefit equivalent
to twenty times the monthly pension: Provided, however, That the minimum death benefit shall not
be less than the total contributions paid by him and his employer on his behalf nor less than one
thousand pesos: Provided, finally, That the beneficiaries of the covered employee who dies without
having paid at least three monthly contributions shall be entitled to the minimum benefit. (As
amended by Sec. 5, P.D. No. 1202, S-1977 and Sec. 8, P.D. No. 1636, S-1979)

Section 13-A. Permanent disability benefits. (a) Upon the covered employee's permanent total
disability, if such disability occurs after he had paid at least thirty-six monthly contributions prior to
the semester of disability, he shall be entitled to the monthly pension and his dependents to the
dependents' Pension: Provided, That if the disability occurs before he has paid thirty-six monthly
contributions prior to the semester of disability, he shall be entitled to a lump sum benefit equivalent
to thirty-five times the monthly pension: Provided, further, That the minimum disability benefit shall
not be less than the total contributions paid by him and his employer on his behalf nor less than one
thousand pesos: Provided, further, That a covered employee who becomes permanently totally
disabled without having paid at least three monthly contributions shall be entitled to the minimum
benefit: Provided, finally, That a member who (1) received a lump sum benefit and (2) is re-
employed not earlier than one year from date of his disability shall again be subject to compulsory
coverage and considered a new member. (As amended by Sec. 6, P.D. No. 1202, S-1977)

(b) The monthly pension shall be reduced upon his re-employment by an amount equivalent to one-
half of his earnings over three hundred pesos. The monthly pension and dependents' pension shall
be suspended upon his recovery from the permanent total disability, or his failure to present himself
for examination at least once a year upon notice by the SSS. (As amended by Sec. 6, P.D. No.
1202, S-1977 and Sec. 9, P.D. No. 1636, S-1979)

(c) Upon the death of the permanent total disability pensioner, his primary beneficiaries as of the
date of disability shall be entitled to eighty per cent of the monthly pension and his dependents to the
dependents' pension: Provided, That if he has no primary beneficiaries and he dies within sixty
months from the start of his monthly pension, his secondary beneficiaries shall be entitled to a lump
sum benefit equivalent to the bigger of (1) twenty times the monthly pension or (2) the difference of
sixty times the monthly pension and the total monthly pensions paid by the SSS excluding the
dependents' pension. (As amended by Sec. 9, P.D. No. 1636, S-1979 and Sec. 6, E.O. No. 102, S-
1986)

(d) The following disabilities shall be deemed permanent total:

1. Complete loss of sight of both eyes;

2. Loss of two limbs at or above the ankle or wrists;

3. Permanent complete paralysis of two limbs;

4. Brain injury resulting to incurable imbecility or insanity; and,

5. Such cases as determined and approved by the SSS.

(As amended by Sec. 9, P.D. No. 1636, S-1979)

(e) If the disability is permanent partial, and such disability occurs before thirty-six monthly
contributions have been paid prior to the semester of disability, the benefit shall be such percentage
of the lump sum benefit described in the preceding paragraph with due regard to the degree of
disability as the Commission may determine. (As amended by Sec. 9, P.D. No. 1636, S-1979)

(f) If the disability is permanent partial and such disability occurs after thirty-six monthly contributions
have been paid prior to the semester of disability, the benefit shall be the monthly pension for
permanent total disability payable not longer than the period designated in the following schedule:

Complete and permanent Number of

loss of use of Months

One thumb 10

One index finger 8

One middle finger 6

One right finger 5

One little finger 3

One big toe 6

One hand 39

One arm 50

One foot 31

One leg 46

One ear 10

Both ears 20

Hearing of one ear 10

Hearing of both ears 20

Sight of one eye 25

(As amended by Sec. 10, P.D. No. 735, S-1975 and Sec. 9, P.D. No. 1636, S-1979)

(g) The percentage degree of disability, which is equivalent to the ratio that the designated number
of months of compensability bears to seventy-five, rounded to the next higher integer, shall not be
additive for distinct, separate and unrelated permanent partial disabilities, but shall be additive for
deteriorating and related permanent partial disabilities, to a maximum of one hundred per cent, in
which case the employee shall be deemed as permanently totally disabled. (As amended by Sec. 9,
P.D. No. 1636, S-1979)

Section 13-B. Funeral Benefit. A funeral grant of two thousand pesos shall be paid to help
defray the cost of funeral expenses upon the death of a covered member, permanently totally
disabled employee or retiree. (As amended by Sec. 11, P.D. No. 735, S-1975; Sec. 2, E.O. No. 28,
S-1986; and Sec. 7, E.O. No. 102, S-1986)

Section 14. Sickness Benefit. (a) A covered employee who has paid at least three monthly
contributions in the twelve-month period immediately preceding the semester of sickness and is
confined for more than three days in a hospital or elsewhere with the Commission's approval, shall,
for each day of compensable confinement or fraction thereof, be paid by his employer, or the SSS, if
such person is unemployed, an allowance equivalent to ninety per cent of his average daily salary
credit, subject to the following conditions: (As amended by Sec. 3, E.O. No. 28, S-1986)

(1) In no case shall the total amount of such daily allowance be less than seven pesos and
fifty centavos nor exceed seventy-five pesos nor paid longer than one hundred twenty days
in one calendar year; nor shall any unused portion of the one hundred twenty days of
sickness benefit granted under this section be carried forward and added to the total number
of compensable days allowable in the subsequent year; (As amended by Sec. 3, E.O. No.
28, S-1986 and Sec. 8, E.O. No. 102, S-1986)

(2) No employee shall be paid any sickness benefit for more than two hundred forty days on
account of the same confinement; and

(3) The employee shall notify his employer of the fact of his sickness or injury within five
calendar days after the start of his confinement unless such confinement is in a hospital or
the employee became sick or was injured while working or within the premises of the
employer in which case notification to the employer is not necessary: Provided, That if the
member is unemployed he shall directly notify the SSS of his confinement within five
calendar days after the start thereof unless such confinement is in a hospital in which case
notification is also not necessary: Provided, further, That in cases where notification is
necessary, the confinement shall be deemed to have started not earlier than the fifth day
immediately preceding the date of notification. (As amended by Sec. 9, R.A. 2658; Sec. 7,
R.A. 4857; Sec. 8, P.D. No. 24, S-1972; Sec. 12, P.D. No. 735, S-1975; and Sec. 10, P.D.
No. 1636, S-1979)

(b) The compensable confinement shall begin on the first day of sickness, and the payment of such
allowances shall be promptly made by the employer every regular payday or on the fifteenth and last
day of each month, and similarly in the case of direct payment by the SSS, for as long as such
allowances are due and payable: Provided, That such allowance shall begin only after all sick leaves
of absence with full pay to the credit of the employee shall have been exhausted. (As amended by
Sec. 9, R.A. 2658; Sec. 7, R.A. 4857; Sec. 8, P.D. No. 24, S-1972; Sec. 5, P.D. No. 177, S-1973;
and Sec. 14, P.D. No. 735, S-1975)

(c) One hundred per cent of the daily benefits provided in the preceding paragraph shall be
reimbursed by the SSS to said employer upon receipt of satisfactory proof of such payment and
legality thereof: Provided, That the employer has notified the SSS of the confinement within five
calendar days after receipt of the notification from the employee: Provided, further, That if the
notification to the SSS is made by the employer beyond five calendar days after receipt of the
notification from the employee, said employer shall be reimbursed only for each day of confinement
starting from the tenth calendar day immediately preceding the date of notification to the SSS:
Provided, finally, That the SSS shall reimburse the employer or pay the unemployed member only
for confinement within the one year period immediately preceding the date the claim for benefit or
reimbursement is received by the SSS, except confinement in a hospital in which case the claim for
benefit or reimbursement must be filed within one year from the last day of confinement. (As
amended by Sec. 9, R.A. 2658; Sec. 1, R.A. 4482; Sec. 7, R.A. 4857; and Sec. 8, P.D. No. 24, S-
1972)

(d) Where the employee has given the required notification but the employer fails to notify the SSS
of the confinement or to file the claim for reimbursement within the period prescribed in this section
resulting in the reduction of the benefit or denial of the claim such employer shall have no right to
recover the corresponding daily allowance he advanced to the employee as required in this section.
(As amended by Sec. 8, P.D. No. 24, S-1972 and Sec. 12, P.D. No. 735, S-1972)

(e) The claim of reimbursement shall be adjudicated by the SSS within a period of two months from
receipt thereof; Provided, That should no payment be received by the employer within one month
after the period prescribed herein for adjudication the reimbursement shall thereafter earn simple
interest of one per cent per month until paid. (As amended by Sec. 8, P.D. No. 24, S-1972)

(f) The provisions regarding the notification required of the covered employee and the employer as
well as the period within which the claim for benefit or reimbursement may be filed shall apply to all
claims filed with the SSS beginning January 1, 1973. (As amended by Sec. 8, P.D. No. 24, S-1972)

Section 14-A. Maternity Leave Benefit. A covered female employee who has paid at least three
monthly maternity contributions in the twelve-month period preceding the semester of her childbirth,
abortion, or miscarriage and who is currently employed shall be paid a daily maternity benefit
equivalent to one hundred per cent of her present basic salary, allowances and other benefits or the
cash equivalents of such benefits for sixty days subject to the following conditions:

(a) That the employee shall have notified her employer of her pregnancy and the probable
date of her childbirth which notice shall be transmitted to the SSS in accordance with the
rules and regulations it may provide;

(b) That the payment shall be advanced by the employer in two equal installments within
thirty days from the filing of the maternity leave application;

(c) That in case of caesarian delivery, the employees shall be paid the daily maternity benefit
for seventy-eight days;

(d) That payment of daily maternity benefits shall be a bar to the recovery of sickness
benefits provided by this Act for the same compensable period of sixty days for the same
childbirth, abortion, or miscarriage;

(e) That the maternity benefits provided under this section shall be paid only for the first four
deliveries after March 13, 1973;

(f) That the SSS shall immediately reimburse the employer of one hundred per cent of the
amount of maternity benefits advanced to the employee by the employer upon receipt of
satisfactory proof of such payment and legality thereof; and

(g) That if an employee should give birth or suffer abortion or miscarriage without the
required contributions having been remitted for her by her employer to the SSS, or without
the latter having been previously notified by the employer of time of the pregnancy, the
employer shall pay to the SSS damages equivalent to the benefits which said employee
would otherwise have been entitled to, and the SSS shall in turn pay such amount to the
 employee concerned. (As amended by Sec. 7, P.D. No. 1202, S-1977; Sec. 11, P.D. No.
1636, S-1979; and R.A. 7322)

Section 15. Non-transferability of Benefits. The SSS shall pay the benefits provided for in this
Act to such persons as may be entitled thereto in accordance with the provisions of this Act:
Provided, That the beneficiary who is a national of a foreign country which does not extend benefits
to a Filipino beneficiary residing in the Philippines, or which is not recognized by the Philippines,
shall not be entitled to receive any benefit under this Act: Provided, further, That notwithstanding the
foregoing, where the best interest of the SSS will be served, the Commission may direct payments
without regard to nationality or country of residence: Provided, further, That if the recipient is a minor
or a person incapable of administering his own affairs, the Commission shall appoint a
representative under such terms and conditions as it may deem proper: Provided, further, That such
appointment shall not be necessary in case the recipient is under the custody of or living with the
parents or spouse of the employee in which case the benefits shall be paid to such parents or
spouse, as representative payee of the recipient. Such benefits are not transferrable and no power
of attorney or other document executed by those entitled thereto, in favor of any agent, attorney, or
any other person for the collection thereof on their behalf shall be recognized, except when they are
physically unable to collect personally such benefits: Provided, further, That in case of death
benefits, if no beneficiary qualifies under this Act, said benefits shall be paid to the legal heirs in
accordance with the law of succession: Provided, finally, That notwithstanding any law to the
contrary, the payment of benefits under this Act shall bar the recovery of similar benefits under Title
II of Book IV of the Labor Code of the Philippines, as amended, during the period of such payment
for the same contingency, and conversely. (As amended by Sec. 10, R.A. 2658; Sec. 4, R.A. 3839;
Sec. 8, R.A. 4857; Sec. 8-A, P.D. No. 24, S-1972; and Sec. 13, P.D. No. 735, S-1975)

Section 16. Exemption from Tax, Legal Process and Lien. All laws to the contrary
notwithstanding the SSS and all its assets and properties, all contributions collected and all accruals
thereto and income or investment earnings therefrom as well as all supplies, equipment, papers or
documents which may be required in connection with the operation or execution of this Act shall be
exempt from any tax, assessment, fee, charge, or customs or import duty; and all benefit payments
made by the SSS shall likewise be exempt from all kinds of taxes, fees or charges, and shall not be
liable to attachments, garnishments, levy or seizure by or under any legal or equitable process
whatsoever, either before or after receipt by the person or persons entitled thereto, except to pay
any debt of the covered employee to the SSS. No tax measure hereafter enacted shall apply to the
SSS, unless it expressly revokes the declared policy of the State in section two hereof granting tax-
exemption to the SSS. Any tax assessment against, and still unpaid by the SSS shall be null and
void. (As amended by Sec. 9, P.D. No. 24, S-1972 and Sec. 14, P.D. No. 735, S-1975)

Section 17. Fee of Agents, Attorneys, etc. No agent, attorney or other person in charge of the
preparation, filing or pursuing any claim for benefit under this Act shall demand or charge for his
services any fee, and any stipulation to the contrary shall be null and void. The retention or
deduction of any amount from any benefit granted under this Act for the payment of fees for such
services is prohibited: Provided, however, That any member of the Philippine Bar who appears as
counsel in any case heard by the Social Security Commission shall be entitled to attorney's fees not
exceeding ten per cent of the benefits awarded by the Commission, which fees shall not be payable
before the actual payment of the benefits, and any stipulation to the contrary shall be null and void.

Any violation of the provisions of this Section shall be punished by a fine of not less than five
hundred pesos nor more than five thousand pesos, or imprisonment for not less than six months nor
more than one year, or both, at the discretion of the court. (As amended by Sec. 4, P.D. No. 347, S-
1973 and Sec. 8, P.D. No. 1202, S-1977)
 E. Sources of Funds Employment Records and Reports

SECTION 18. Employee's Contribution. (a) Beginning as of the last day of the calendar month
when an employee's compulsory coverage takes effect and every month thereafter during his
employment, the employer shall deduct and withhold from such employee's monthly salary, wage,
compensation or earnings, the employee's contribution in an amount corresponding to his salary,
wage, compensation or earnings during the month in accordance with the following schedule
effective on January 1, 1987:

Salary Range of Monthly Monthly Contribution

Bracket Compensation Salary Employer Employee Total
Number Credit
I P 1 - 149.99 P 125.00 P 6.40 P 4.10 P 10.50
II 150 - 199.99 175 9 5.7 14.7
III 200 - 249.99 225 11.4 7.5 18.9
IV 250 - 349.99 300 15.2 10 25.2
V 350 - 499.99 425 21.6 14.1 35.7
VI 500 - 699.99 600 30.4 20 50.4
VII 700 - 899.99 800 40.5 26.7 67.2
VIII 900 - 1099.99 1,000.00 50.7 33.3 84
IX 1100 - 1399.99 1,250.00 63.3 41.7 105
X 1400 - 1749.99 1,500.00 76 50 126
XI 1750 - 2249.99 2,000.00 101.3 66.7 168
XII 2250 - 2749.99 2,500.00 126.7 83.3 210
XIII 2750 - OVER 3,000.00 152 100 252

The tabulated schedule for the monthly contribution of the self-employed and voluntary members
effective January 1, 1987 shall be as follows:

Salary Range of Monthly Monthly

Bracket compensation Salary Credit Contribution
Number
I P 1 - 149.99 P 125.00 P 10.00
II 150 - 199.99 175 14
III 200 - 249.99 225 18
IV 250 - 349.99 300 24
V 350 - 499.99 425 34
VI 500 - 699.99 600 48
VII 700 - 899.99 800 64
VIII 900 - 1,099.99 1,000.00 80
IX 1,100 - 1,399.99 1,250.00 100
X 1,400 - 1,749.99 1,500.00 120
XI 1,750 - 2,249.99 2,000.00 160
XII 2,250 - 2,749.99 2,500.00 200
XIII 2,750 - OVER 3,000.00 240
The maximum covered earnings or compensation of all SSS members shall be limited to three
thousand pesos per month as provided in the foregoing schedules unless otherwise provided by the
Social Security Commission through rules and regulations taking into consideration actual
calculations and rate of benefits. (As amended by Sec. 10, R.A. 1792; Sec. 11, R.A. 2658; Sec. 10,
P.D. No. 24, S-1972; and Sec. 9, P.D. No. 1202, S-1986)

(b) Every employer shall issue a receipt for all contributions deducted from the employee's
compensation or shall indicate such deductions on the employee's pay envelopes. (As amended by
Sec. 12, P.D. No. 1636, S-1979)

Section 19. Employer's Contributions. (a) Beginning as of the last day of the month when an
employee's compulsory coverage takes effect and every month thereafter during his employment,
his employer shall pay, with respect to such covered employee, the employer's contribution in
accordance with the schedule indicated in section eighteen of this Act. Notwithstanding any contract
to the contrary, an employer shall not deduct, directly or indirectly, from the compensation of his
employees covered by the SSS or otherwise recover from them the employer's contributions with
respect to such employees.

(b) The remittance of such contributions by the employer shall be supported by a quarterly collection
list to be submitted to the SSS at the end of each calendar quarter indicating the correct ID number
of the employer, the correct names and SS numbers of the employees and the total contributions
paid for their account during the quarter. (As amended by Sec. 13, P.D. No. 1636, S-1979)

Section 19-A. Contributions of the Self-employed. The contributions to the SSS of the self-
employed shall be determined in accordance with section eighteen of this Act: Provided, That the
average monthly net earnings declared by the self-employed at the time of his registration with the
SSS shall be considered as his monthly compensation and he shall pay both the employer and
employee contributions.

Net earnings as understood under this section shall be the net income from his business or
profession as reflected in the income tax return for the immediately preceding year, excluding rental
income, dividend, interest investments and the like or all types of incomes which are not derived
from his business registered with the SSS or from the practice of his profession.

The average monthly net earnings declared by the self-employed member at the time of his
registration shall remain the basis of his monthly salary credit, unless he makes, at the start of the
year, another declaration of his average monthly net earnings based on his income tax returns for
the immediately preceding year, in which case such latest declaration becomes the new basis of his
monthly salary credit. (As amended by Sec. 14, P.D. No. 1636, S-1979)

Section 20. Government Contribution. As the contribution of the Government to the operation
of the System, the Congress shall annually appropriate out of any funds in the National Treasury not
otherwise appropriated, the necessary sum or sums to meet the estimated expenses of the System
for each ensuing year. In addition to this contribution, the Congress shall appropriate from time to
time such sum or sums as may be needed to assure the maintenance of an adequate working
balance of the funds of the System as disclosed by suitable periodic actuarial studies to be made of
the operations of the System.

Section 21. Government Guarantee. The benefits prescribed in this Act shall not be diminished
and to guarantee said benefits the Government of the Republic of the Philippines accepts general
responsibility for the solvency of the System. (As amended by Sec. 13, R.A. 1792)
Section 22. Remittance of Contributions. (a) The contribution imposed in the preceding section
shall be remitted to the SSS within the first seven days of each calendar month following the month
for which they are applicable or within such time as the Commission may prescribe. Every employer
required to deduct and to remit such contributions shall be liable for their payment and if any
contribution is not paid to the SSS as herein prescribed, he shall pay besides the contribution a
penalty thereon of three per cent per month from the date the contribution falls due until paid. If
deemed expedient and advisable by the Commission, the collection and remittance of contributions
shall be made quarterly or semi-annually in advance, the contributions payable by the employees to
be advanced by their respective employers: Provided, That upon separation of an employee, any
contribution so paid in advance but not due shall be credited or refunded to his employer. (As
amended by Sec. 12, P.D. No. 24, S-1972)

(b) The contributions payable under this Act in cases where an employer refuses or neglects to pay
the same shall be collected by the SSS in the same manner as taxes are made collectible under the
National Internal Revenue Code, as amended. Failure or refusal of the employer to pay or remit the
contributions herein prescribed shall not prejudice the right of the covered employee to the benefits
of the coverage.

The right to institute the necessary action against the employer may be commenced within twenty
years from the time the delinquency is known or the assessment is made by the SSS, or from the
time the benefit accrues, as the case may be. (As amended by Sec. 15, P.D. No. 1636, S-1979)

(c) Should any person, natural or juridical, default in any payment of contributions, the Commission
may also collect the same in either of the following ways:

(1) By an action in court, which shall hear and dispose of the case in preference to any other
civil action, or

(2) By issuing a warrant to the Sheriff of any province or city commanding him to levy upon
and sell any real and personal property of the debtor. The Sheriff's sale by virtue of said
warrant shall be governed by the same procedure prescribed for executions against property
upon judgments by a court of record.

(d) The last complete record of monthly contributions paid by the employer or the average of the
monthly contributions paid during the past three years as of the date of filing of the action for
collection shall be presumed to be the monthly contributions payable by and due from the employer
to the SSS for each of the unpaid month, unless contradicted and overcome by other evidence:
Provided, That the SSS shall not be barred from determining and collecting the true and correct
contributions due the SSS even after full payment pursuant to this paragraph, nor shall the employer
be relieved of his liability under section twenty-eight of this Act. (As amended by Sec. 12, P.D. No.
24, S-1972 and Sec. 11, P.D. No. 1202, S-1977)

(e) For purposes of this Section, any employer who is delinquent or has not remitted all the monthly
contributions due and payable may within six months from the issuance of this Executive Order remit
said contributions to the SSS and submit the corresponding collection lists herefore without incurring
the prescribed three per cent penalty. In case the employer fails to remit to the SSS the said
contributions within the six months grace period, the penalty of three per cent shall be imposed from
the time the contributions first became due as provided in paragraph (a) of this section. (As
amended by Sec. 12, P.D. No. 24, S-1972; Sec. 6, P.D. No. 177, S-1973; and Sec. 4, E.O. No. 28,
S-1986)
Section 22-A. Remittance of Contributions of Self-employed. Self-employed members shall
remit their monthly contributions quarterly on such dates and schedules, as the Commission may
specify through rules and regulations.

The penalty of three per cent per month for late payments provided for in paragraph (a) of section
twenty-two of this Act and the manner of collection of contributions specified in paragraphs (b), (c)
and (d) of section twenty-two of this Act are also applicable to the collection of penalties and
contributions of the covered self-employed. (As amended by Sec. 16, P.D. No. 1636, S-1979)

Section 23. Method of Collection and Payment. The SSS shall require a complete and proper
collection and payment of contributions and proper identification of the employer and the employee.
Payment may be made in cash, checks, stamp, coupons, tickets, or other reasonable devices that
the Commission may adopt. (As amended by Sec. 15, P.D. No. 735, S-1975)

Section 24. Employment Records and Reports. (a) Each employer shall immediately report to
the SSS the names, ages, civil status, occupations, salaries and dependents of all his employees
who are subject to compulsory coverage: Provided, That if an employee subject to compulsory
coverage should die or become sick or disabled or reach the age of sixty without the SSS having
previously received any report or written communication about him from his employer or a
contribution paid in his name by his employer, the said employer shall pay to the SSS the damages
equivalent to the benefits to which said employee would have been entitled had his name been
reported on time by the employer to the SSS, except that in case of pension benefits, the employer
shall be liable to pay the SSS damages equivalent to five year's monthly pension; including
dependents' pension: Provided, further, That if the contingency occurs within thirty days from the
date of employment, the employer shall be relieved of his liability for damages. (As amended by Sec.
15, R.A. 1792; Sec. 9, R.A. 4857; Sec. 13, P.D. No. 24, S-1972; Sec. 16, P.D. No. 735, S-1975; and
Sec. 12, P.D. No. 1202, S-1977)

(b) Should the employer misrepresent the true date of employment of his employees or remit to the
SSS contributions which are less than those required in this Act, resulting in a reduction of benefits,
the employer shall pay to the SSS damages to the extent of such reduction. (As amended by Sec.
13, P.D. No. 24, S-1972; Sec. 16, P.D. No. 735, S-1975; and Sec. 17, P.D. No. 1636, S-1979)

In addition to the liability mentioned in the preceding paragraphs (a) and (b) hereof, the employer
shall also be liable for the payment of the corresponding unremitted contributions and penalties
thereon. (As amended by Sec. 17, P.D. No. 1636, S-1979)

(c) The records and reports duly accomplished and submitted to the SSS by the employee or the
employer, as the case may be, shall be kept confidential by the SSS except in compliance with a
subpoena duces tecum issued by the Courts, shall not be divulged without the consent of the
Administrator or any official of the SSS duly authorized by him, shall be presumed correct as to the
data and other matters stated therein, unless the necessary corrections to such records and reports
have been properly made by the parties concerned before the right to the benefit being claimed
accrues, and shall be made the basis for the adjudication of the claim. If as a result of such
adjudication the SSS in good faith pays a monthly pension to a beneficiary who is inferior in right to
another beneficiary or with whom another beneficiary is entitled to share, such payments shall
discharge the SSS from liability, unless and until such other beneficiary notifies the SSS of his claim
prior to the payments. (As amended by Sec. 13, P.D. No. 24, S-1972 and Sec. 16, P.D. No. 735, S-
1975)

(d) Every employer shall keep true and accurate work records for such period and containing such
information as the Commission may prescribe, in addition to an "Annual Register of New and
Separated Employees" which shall be secured from the SSS wherein the employer shall enter on
the first day of employment or on the effective date of separation, the names of the persons
employed or separated from employment, their SSS numbers, and such other data that the
Commission may require and said annual register shall be submitted to the SSS in the month of
January of each year. Such records shall be open for inspection by the SSS or its authorized
representatives quarterly or as often as the SSS may require.

The SSS may also require each employer to submit, with respect to the persons in his employ,
reports needed for the effective administration of this Act. (As amended by Sec. 13, P.D. No. 24, S-
1972)

(e) Effective July 1, 1973, each employer shall require as a condition to employment, the
presentation of a registration number secured by the prospective employee from the SSS in
accordance with such procedure as the SSS may adopt: Provided, That in case of employees who
have earlier been assigned registration numbers by virtue of a previous employment, such numbers
originally assigned to them should be used for purposes of this section: Provided, further, That the
issuance of such registration numbers by the SSS shall not exempt the employer from complying
with the provisions of paragraph (a) of this section. (As amended by Sec. 13, P.D. No. 24, S-1972)

(f) Notwithstanding any law to the contrary, microfilm copies of original SSS records and reports,
duly certified by the official custodian thereof, shall have evidentiary value as the originals and be
admissible as evidence in all legal proceedings. (As amended by Sec. 16, P.D. No. 735, S-1975)

Section 24-A. Report and Registration of the Self-employed. Each covered self-employed
person shall, within thirty days from the effective date of coverage, report to the SSS his name, age,
civil status, and occupation, average monthly net income and his dependents: Provided, That if after
said period of thirty days, he should die or become sick, or disabled or reach the age of sixty without
the SSS having previously received such report, the SSS shall not pay him the corresponding
benefit. (As amended by Sec. 18, P.D. No. 1636, S-1979)

F. Funds of the System

Section 25. Deposit and Disbursements. All moneys paid to or collected by the SSS every year
under this Act, and all accruals thereto shall be deposited, administered and disbursed in the same
manner and under the same conditions and requirements as provided by law for other public special
funds: Provided, That not more than twelve per cent of the total yearly contributions plus three per
cent of other revenues shall be disbursed for salaries and wages, purchases of office equipment and
materials, operational expenses and the maintenance of regional offices of the SSS: Provided,
further, That if the expenses in any year are less than the maximum amount permissible, the
difference shall not be availed of as additional expenses in the following years. (As amended by Sec.
16, R.A. 2658; Sec. 5, R.A. 3839; Sec. 10, R.A. 4857; Sec. 13-A, P.D. No. 24, S-1972; Sec. 17, P.D.
No. 735, S-1975; and Sec. 10, E.O. No. 102, S-1986)

Section 26. Investment of Reserve Funds. All revenues of the SSS that are not needed to meet
the current administrative and operational expenses incidental to the carrying out of this Act shall be
accumulated in a fund to be known as the 'Reserve Fund'. Such portions of the Reserve Fund as are
not needed to meet the current benefit obligations thereof shall be invested to earn an average
annual income of at least nine per cent and shall be known as the 'Investment Reserve Fund' which
shall be invested in any or all of the following: (As amended by Sec. 14, P.D. No. 24, S-1972; Sec.
19, P.D. No. 1636, S-1979; and Sec. 11, E.O. No. 102, S-1986)
(a) In interest-bearing bonds or securities of the Government of the Philippines, or bonds or
securities for the payment of the interest and principal to which the faith and credit of the
Republic of the Philippines is pledged.

(b) In interest-bearing deposits or securities in any domestic bank doing business in the
Philippines: Provided, That such deposits shall not exceed at any time the unimpaired capital
and surplus or total private deposits of the depository bank, whichever is smaller: Provided,
further, That said bank shall first have been designated as the depository for this purpose by
the Monetary Board of the Bangko Sentral ng Pilipinas: Provided, finally, That such
investment in deposits or securities shall be equitably distributed to all designated banks. (As
amended by Sec. 14, P.D. No. 24, S-1972)

(c) In loans or interest-bearing advances to the National Government for the construction of
permanent toll bridges, toll roads or government office buildings in accordance with actuarial
considerations and the conditions prescribed by law in such cases: Provided, That the tolls
shall be collected by the SSS for a reasonable fee. (As amended by Sec. 14, P.D. No. 24, S-
1972)

(d) In direct housing loans to covered employees and group housing projects giving priority
to the low-income groups, up to a maximum of ninety per cent of the appraised value of the
properties to be mortgaged by the borrowers and in loans for the construction and the
maintenance of hospitals and institutions for the sick, aged and infirmed members and their
families, referred to in section 4 (j) of this Act: Provided, That such investment shall not
exceed thirty per cent of the Investment Reserve Fund. (As amended by Sec. 15, R.A. 2658;
Sec. 14, P.D. No. 24, S-1972; Sec. 18, P.D. No. 735, S-1975; and Sec. 11, E.O. No. 102, S-
1986)

(e) In short and medium term loans to covered employees such as salary, educational,
calamity and emergency loans: Provided, That not more than ten per cent of the Investment
Reserve Fund at any time shall be invested for this purpose. (As amended by Sec. 15, R.A.
2658; Sec. 14, P.D. No. 24, S-1972; and Sec. 11, E.O. No. 102, S-1986)

(f) In other income earning projects and investments secured by first mortgages on real
estate collaterals which, in the determination of the Commission, shall redound to the benefit
of the SSS, its members, as well as the public welfare: Provided, That any such investment
shall be made with due diligence and prudence to earn the highest possible interest
consistent with safety. (As amended by Sec. 17, R.A. 1792; Sec. 11, R.A. 4857; and Sec. 14,
P.D. No. 24, S-1972)

(g) As part of its investment operations, the SSS shall act as insurer of all or part of its
interests on SSS properties mortgaged to the SSS, or lives of mortgagors whose properties
are mortgaged to the SSS. For this purpose, the SSS shall establish a separate account to
be known as the "Mortgagors' Insurance Account." All amounts received by the SSS in
connection with the aforesaid insurance operations shall be placed in the Mortgagors'
Insurance Account. The assets and liabilities of the Mortgagors' Insurance Account shall at
all times be clearly identifiable and distinguishable from the assets and liabilities in all other
accounts of the SSS. Notwithstanding any provision of law to the contrary, the assets held in
the Mortgagors' Insurance Account shall not be chargeable with the liabilities arising out of
any other business the SSS may conduct but shall be held and applied exclusively for the
benefit of the owners or beneficiaries of the insurance contracts issued by the SSS under
this paragraph.
(h) The SSS may insure any of its interests or part thereof with any private company or
reinsurer. The Insurer Commission or its authorized representatives shall make an
examination into the financial condition and methods of transacting business of the SSS at
least once in two years, but such examination shall be limited to the insurance operation of
the SSS as authorized under this section and shall not embrace the other operations of the
SSS; and the report of said examination shall be submitted to the Commission and a copy
thereof shall be furnished the office of the President of the Philippines within a reasonable
time after the close of the examination: Provided, That for each examination, the SSS shall
pay to the Insurance Commission an amount equal to the actual expenses of the Insurance
Commission in the conduct of the examination including the salaries of the examiners and of
the actuary of the Insurance Commission who have been assigned to make such
examination for the actual time spent in said examination: Provided, further, That the general
law on insurance promulgated thereunder shall have suppletory application insofar as it is
not in conflict with the SS Law and its rules and regulations. (As amended by Sec. 14, P.D.
No. 24, S-1972; Sec. 1, P.D. No. 65; Sec. 7, P.D. No. 177, S-1973; and Sec. 18, P.D. No.
735, S-1975)

(i) In bonds, debentures or other evidences of indebtedness of any solvent corporation or

institution created or existing under the laws of the Philippines: Provided, That the issuing,
assuming or guaranteeing entity or its predecessors shall not have defaulted in the payment
of interest on any of its securities and that during each of any three including the last two of
the five fiscal years next preceding the date of acquisition by the SSS of such bonds,
debentures, or other evidences of indebtedness, the net earnings of the issuing, assuming or
guaranteeing institution available for its fixed charges, as hereinafter defined, shall have
been not less than one and one-quarter times the total of its fixed charges for such year:
Provided, further, That such investment shall not exceed 10 per cent of the Investment
Reserve Fund.

As used in this section, the term 'net earnings available for fixed charges' shall mean net
income after deducting operating and maintenance expenses, taxes other than income
taxes, depreciation and depletion; but excluding extraordinary non-recurring items of income
or expense appearing in the regular financial statement of the issuing, assuming or
guaranteeing institution. The Term 'fixed charges' shall include interest on funded and
unfunded debt, amortization of debt discount and rentals for leased properties. (As amended
by Sec. 12, E.O. No. 102, S-1986)

(j) In preferred stocks of any solvent corporation or institution created or existing under the
laws of the Philippines: Provided, That the issuing, assuming, or guaranteeing entity or its
predecessors has paid regular dividends upon its preferred or guaranteed stocks for a period
of at least three years next preceding the date of investment in such preferred or guaranteed
stocks: Provided, further, That if the stocks are guaranteed, the amount of stocks so
guaranteed is not in excess of fifty percentum of the amount of the preferred or common
stocks, as the case may be, of the issuing corporations: Provided, furthermore, That if the
corporation or institution has not paid dividends upon its preferred stocks, the corporation or
institution has sufficient retained earnings to declare dividends for at least two years on such
preferred stock: Provided, finally, That such investment shall not exceed 10 per cent of the
Investment Reserve Fund. (As amended by Sec. 12, E.O. No. 102, S-1986)

(k) In common stocks of any solvent corporation or institution created or existing under the
laws of the Philippines listed in the stock exchange with proven track record of profitability
and payment of dividends over the last three years: Provided, That such investment shall not
exceed ten per cent of the Investment Reserve Fund. (As amended by Sec. 12, E.O. No.
102, S-1986)
Section 27. Records and Reports. The administrator shall keep and cause to be keep records
of operations, of the funds of the System and of disbursements thereof and all accounts of payments
made out of said funds. During the month of January of each year, the Administrator shall prepare
for submission to the President and to the Congress of the Philippines a report of operations of the
System during the preceding year including statistical data on the number of persons covered and
benefited, their occupations and employment status, the duration and amount of benefits paid, the
finances of the System at the close of the said year, and recommendations. He shall also cause to
be published in two newspapers of general circulation in the Philippines a synopsis of the annual
report, showing in particular the status of the finances of the System and the benefits administered.

Section 28. Penal Clause. (a) Whoever, for the purpose of causing any payment to be made
under this Act, or under an agreement thereunder, where none is authorized to be paid, shall make
or cause to be made any false statement or representation as to any compensation paid or received
or whoever makes or causes to be made any false statement of a material fact in any claim for any
benefit payable under this Act, or application for loan with the SSS, or whoever makes or causes to
be made any false statement, representation, affidavit, or document in connection with such claim or
loan, shall suffer the penalties provided for in Art. one hundred seventy-two of the Revised Penal
Code. (As amended by Sec. 15, P.D. No. 24, S-1972; Sec. 8, P.D. No. 177, S-1973; and Sec. 5,
P.D. No. 347, S-1973)

(b) Whoever shall obtain or receive any money or check under this Act or any agreement
thereunder, without being entitled thereto with intent to defraud any covered employee, employer or
the SSS, shall be fined not less than five hundred pesos nor more than five thousand pesos and
imprisoned for not less than six months nor more than one year. (As amended by Sec. 15, P.D. No.
24, S-1972)

(c) Whoever buys, sells, offers for sale, uses, transfers, takes or gives in exchange, or pledges or
gives in pledge, except as authorized in this Act or in regulations made pursuant thereto, any stamp,
coupon, ticket, book or other device, prescribed pursuant to section twenty-three hereof by the
Commission for the collection or payment of contributions required herein, shall be fined not less
than five hundred pesos nor more than five thousand pesos, or imprisoned for not less than six
months nor more than one year, or both, at the discretion of the court.

(d) Whoever, with intent to defraud, alters, forges, makes or counterfeits any stamp, coupon, ticket,
book or other device prescribed by the Commission for the collection or payment of any contribution
required herein, or uses, sells, lends, or has in his possession any such altered, forged, or
counterfeited materials or makes, uses, sells, or has in his possession any such altered, forged
material in imitation of the material used in the manufacture of such stamp, coupon, ticket, book, or
other device, shall be fined not less than one thousand pesos nor more than ten thousand pesos or
imprisoned for not less than one year nor more than five years, or both, at the discretion of the court.

(e) Whoever fails or refuses to comply with the provisions of this Act or with the rules and regulations
promulgated by the Commission, shall be punished by a fine of not less than five hundred pesos nor
more than five thousand pesos, imprisonment for not less than six months nor more than one year,
or both, at the discretion of the court: Provided, That where the violation consists in failure or refusal
to register employees or himself, in case of the covered self-employed or to deduct contributions
from employee's compensation and remit the same to the SSS, the penalty shall be a fine of not less
than five hundred pesos nor more than five thousand pesos and imprisonment for not less than six
months nor more than one year. (As amended by Sec. 19, R.A. 1792; Sec. 16, R.A. 2658, Sec. 8,
P.D. No. 177, S-1973; and Sec. 20, P.D. No. 1636, S-1979)
(f) If the act or omission penalized by this Act be committed by an association, partnership,
corporation or any other institution, its managing head, directors or partners shall be liable to the
penalties provided in this Act for the offense.

(g) Any employee of the System who receives or keeps funds or property belonging, payable or
deliverable to the System and who shall appropriate the same, or shall take or misappropriate or
shall consent, or through abandonment or negligence shall permit any other person to take such
property or funds, wholly or partially, or shall otherwise be guilty of misappropriation of such funds or
property, shall suffer the penalties provided in Art. two hundred seventeen of the Revised Penal
Code. (As amended by Sec. 16, R.A. 2658)

(h) Any employer who after deducting the monthly contributions or loan amortizations from his
employee's compensation; fails to remit the said deductions to the SSS within thirty days from the
date they became due shall be presumed to have misappropriated such contributions or loan
amortizations and shall suffer the penalties provided in Art. three hundred fifteen of the Revised
Penal Code. (As amended by Sec. 15, P.D. No. 24, S-1972)

(i) Criminal action arising from a violation of the provisions of this Act may be commenced by the
SSS or the employee concerned either under this Act or in appropriate cases under the Revised
Penal Code: Provided, That such criminal action may be filed by the SSS in the city or municipality
where the SSS provincial or regional office is located if the violation was committed within its
territorial jurisdiction or in Metro Manila, at the option of the SSS. (As amended by Sec. 15, P.D. No.
24, S-1972; Sec. 19, P.D. No. 735, S-1975; and Sec. 13, P.D. No. 1202, S-1977)

Section 29. Government Aid. The establishment of the Social Security System shall not
disqualify the covered employees and employers from receiving such government assistance,
financial or otherwise, as may be provided.

Section 30. Separability Clause. In the event any provision of this Act or the application of such
provision to any person or circumstance is declared invalid, the remainder of this Act or the
application of said provision to other persons or circumstances shall not be affected by such
declaration.

Section 31. Saving Clause. The Assembly hereby reserves the right to amend, alter, or repeal
any provision of this Act, and no person shall be or shall be deemed to be vested with any property
or other right by virtue of the enactment or operation of this Act. (As amended by Sec. 21, R.A. 1792
and Sec. 20, P.D. No. 735, S-1975)

Section 32. Effectivity. This Act shall take effect upon its approval.

Approved: June 18, 1954 1awphil@alf

 PRESIDENTIAL DECREE NO. 1921

PRESIDENTIAL DECREE NO. 1921 - FURTHER AMENDING CERTAIN PROVISIONS OF TITLE

II, BOOK FOUR OF THE LABOR CODE OF THE PHILIPPINES

WHEREAS, the Employees' Compensation Commission, in pursuance of its objectives to achieve labor
justice for victims of employment-related contingencies, must constantly keep pace with and remain
responsive to challenges of emerging concepts of employees' compensation in particular, and social
security in general, and the changing patterns of social and economic development;

WHEREAS, as a result of discussions and consultations with the SSS, GSIS and PMCC, it is necessary
to harmonize, simplify and correlate provisions of the Labor Code of the Philippines with other laws,
decrees and issuances administered and implemented by administering agencies the Employees'
Compensation Program;

WHEREAS, the present economic crisis requires the Government to institute emergency and
extraordinary measures toward providing forth protection and financial relief to workers and their
families, to help mitigate the harsh effects of inflation on their living expenses; and

WHEREAS, through judicious management of the State Insurance Fund that the Social Security
System and the Government Service Insurance System administer for the private sector and the
public service, respectively, the Fund has accumulated enough reserves to enlarge the benefit
structure of covered employees without the need for additional premium contributions from
employers.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by virtue of
the powers vested in me by law and the Constitution, do hereby order and decree:

Section 1. Paragraphs (i), (j), (k), and (ee) of Article 167 of the Labor Code of the Philippines (PD
442, Amended) are hereby amended further to read as follows:

"Art. 167. Definition of Terms. As used in this Title, unless the context indicates otherwise:

"(i) "Dependents" means the legitimate, legitimated, legally adopted or acknowledged natural child
who is unmarried, not gainfully employed, and not over twenty-one years of age or over twenty-one
years of age provided he is incapable of self-support due to a physical or mental defect which is
congenital or acquired during minority; the legitimate spouse living with the employee and the parents
of said employee wholly dependent upon him for regular support."

"(j) "Beneficiaries" means the dependent spouse until he/she remarries and dependent children, who
are the primary beneficiaries. In their absence, the dependent parents and subject to the restrictions
imposed on dependent children and legitimate descendents who are the secondary beneficiaries.
Provided, that the dependent acknowledged natural child shall be considered as a primary beneficiary
when there are no other dependent children who are qualified and eligible for monthly income
benefit."

"(k) "Injury" means any harmful change in the human organism from any accident arising out of and
in the course of the employment."

"(ee) "Monthly income benefit" means the amount equivalent to one hundred fifteen percent of the
sum of:

"The average monthly salary credit multiplied by the replacement ratio; and
"One and a half percent of the average monthly salary credit for each credited year of service in
excess of ten years;

"Provided, That the monthly income benefit shall in no case be less than Two Hundred Fifty pesos.

Sec. 2. Article 173 of PD 442, as Amended is hereby amended further to read as follows:

"Art. 173. Extent of liability. Unless otherwise provided, the liability of the State Insurance Fund
under this Title shall be exclusive and in place of all other liabilities of the employer to the employee
or his dependents or anyone otherwise entitled to recover damages on behalf of the employee of his
dependents. The payment of compensation under this Title shall not bar the recovery of benefits as
provided for in Sec. 699 of the Revised Administrative Code, Republic Act numbered eleven hundred
sixty-one, as amended, Republic Act numbered six hundred ten, as amended, Republic Act numbered
forty-eight hundred sixty-four, as amended, and other laws whose benefits are administered by the
System or by other agencies of the government."

Sec. 3. Paragraph (g) of Art. 177 of PD 442, as Amended, hereby amended further to read as follows:

"Art. 177. Powers and duties. . . .

"(g) To adopt annually a budget of expenditures of the Commission and its staff chargeable against
the State Insurance Fund: Provided, that the SSS and GSIS shall advance on a quarter basis the
remittances of allotment of the loading fund for the commission's operational expenses based on its
annual budget duly approved by the Ministry of the Budget and Management."

Sec. 4. Paragraphs (a), (b), and (d) of Arts. 194 of PD 442, Amended, are hereby amended further to
read as follows:

"Art. 194. Death. Under such regulations as the Commission may approve, the System shall pay to
the primary beneficiaries upon the death of the covered employee under this Title an amount
equivalent to his monthly income benefit, plus (10%) percent thereof for each dependent child, but
not exceeding five beginning with the youngest and without substitution except of provided for in
paragraph (j) of Article 167 hereof: Provided, however, That the monthly income benefit shall be
guaranteed for five years: Provided, Further, That if he has no primary beneficiary, the System shall
pay to his secondary beneficiaries the monthly income benefit but not to exceed sixty months.
Provided, Finally, That the minimum death benefit shall not be less than Fifteen thousand Pesos;

"(b) Under such regulations as the Commission may approve, the System shall pay to the primary
beneficiaries upon the death of a covered employee who is under permanent total disability under this
Title, eighty percent of the monthly income benefit and his dependents to the dependents' pension:
Provided, That the marriage must have been validly subsisting at the time of disability: Provided,
Further, That if he has no primary beneficiaries, the System shall pay to his secondary beneficiaries
the monthly pensions excluding the dependents' pension, of the remaining balance of the five-year
guaranteed period: Provided, Finally, That the minimum death benefit shall be less than fifteen
thousand pesos."

"(d) Funeral Benefit. A funeral benefit of One Thousand Five Hundred Pesos shall be paid upon the
death of a covered employee or permanently totally disabled pensioner.

Sec. 5. Art. 201 of PD 442, as Amended, is hereby amended further to read as follows:

"Art. 210. Prescriptive Period. No claim for Compensation shall be given due course unless said
claim is filed with the System within three years from the time the cause of action accrued."

Sec. 6. Repeal of laws. All laws, decrees, letters of instructions and executive orders inconsistent
with, or contrary to this Decree are hereby repealed.

Sec. 7. Effectivity. This Decree shall take effect June 1, 1984.

Done in the City of Manila, this 1st day of May, in the Year of Our Lord, Nineteen Hundred and Eighty-
Four.

SOCIAL SECURITY G.R. No. 167050

COMMISSION,
Petitioner,
Present:

CORONA, C.J.,
Chairperson
VELASCO, JR.,
-versus- LEONARDO-DE CASTRO,
PERALTA,* and
PEREZ, JJ.

RIZAL POULTRY and LIVESTOCK

ASSOCIATION, INC., BSD AGRO
INDUSTRIAL DEVELOPMENT
CORPORATION and BENJAMIN SAN Promulgated:
DIEGO,
Respondents. June 1, 2011
x ----------------------------------------------------------------------------------------x
DECISION

PEREZ, J.:

This petition for certiorari challenges the Decision[1] dated 20 September

2004 and Resolution[2] dated 9 February 2005 of the Court of Appeals. The instant
case stemmed from a petition filed by Alberto Angeles (Angeles) before the Social
Security Commission (SSC) to compel respondents Rizal Poultry and Livestock
Association, Inc. (Rizal Poultry) or BSD Agro Industrial Development Corporation
(BSD Agro) to remit to the Social Security System (SSS) all contributions due for
and in his behalf. Respondents countered with a Motion to Dismiss[3] citing rulings
of the National Labor Relations Commission (NLRC) and Court of Appeals
regarding the absence of employer-employee relationship between Angeles and the
respondents.
 As a brief backgrounder, Angeles had earlier filed a complaint for illegal
dismissal against BSD Agro and/or its owner, Benjamin San Diego (San
Diego). The Labor Arbiter initially found that Angeles was an employee and that
he was illegally dismissed. On appeal, however, the NLRC reversed the Labor
Arbiters Decision and held that no employer-employee relationship existed
between Angeles and respondents. The ruling was anchored on the finding that the
duties performed by Angeles, such as carpentry, plumbing, painting and electrical
works, were not independent and integral steps in the essential operations of the
company, which is engaged in the poultry business. [4] Angeles elevated the case to
the Court of Appeals via petition for certiorari. The appellate court affirmed the
NLRC ruling and upheld the absence of employer-employee
[5]
relationship. Angeles moved for reconsideration but it was denied by the Court
of Appeals.[6] No further appeal was undertaken, hence, an entry of judgment was
made on 26 May 2001.[7]

At any rate, the SSC did not take into consideration the decision of the
NLRC. It denied respondents motion to dismiss in an Order dated 19 February
2002. The SSC ratiocinated, thus:

Decisions of the NLRC and other tribunals on the issue of existence of

employer-employee relationship between parties are not binding on the
Commission. At most, such finding has only a persuasive effect and does not
constitute res judicata as a ground for dismissal of an action pending before
Us. While it is true that the parties before the NLRC and in this case are the
same, the issues and subject matter are entirely different. The labor case is for
illegal dismissal with demand for backwages and other monetary claims, while
the present action is for remittance of unpaid SS[S] contributions. In other words,
although in both suits the respondents invoke lack of employer-employee
relationship, the same does not proceed from identical causes of action as one is
for violation of the Labor Code while the instant case is for violation of the SS[S]
Law.

Moreover, the respondents arguments raising the absence of employer-

employee relationship as a defense already traverse the very issues of the case at
bar, i.e., the petitioners fact of employment and entitlement to SS[S]
coverage. Generally, factual matters should not weigh in resolving a motion to
dismiss when it is based on the ground of failure to state a cause of action, but
rather, merely the sufficiency or insufficienciy of the allegations in the
complaint. x x x. In this respect, it must be observed that the petitioner very
categorically set forth in his Petition, that he was employed by the respondent(s)
from 1985 to 1997.[8]
 A subsequent motion for reconsideration filed by respondents was likewise
denied on 11 June 2002. The SSC reiterated that the principle of res judicata does
not apply in this case because of the absence of the indispensable element of
identity of cause of action.[9]

Unfazed, respondents sought recourse before the Court of Appeals by way

of a petition for certiorari. The Court of Appeals reversed the rulings of the SSC
and held that there is a common issue between the cases before the SSC and in the
NLRC; and it is whether there existed an employer-employee relationship between
Angeles and respondents. Thus, the case falls squarely under the principle of res
judicata, particularly under the rule on conclusiveness of judgment, as enunciated
in Smith Bell and Co. v. Court of Appeals.[10]

The Court of Appeals disposed, thus:

WHEREFORE, the petition is GRANTED. The Order dated February

19, 2000 and the Resolution dated June 11, 2002 rendered by public respondent
Social Security Commissoin in SSC Case No. 9-15225-01 are
hereby REVERSED and SET ASIDE and the respondent commission is ordered
to DISMISS Social Security Commission Case No. 9-15225-01.[11]

After the denial of their motion for reconsideration in a Resolution [12] dated
9 February 2005, petitioner filed the instant petition.

For our consideration are the issues raised by petitioner, to wit:

WHETHER OR NOT THE DECISION OF THE NLRC AND THE

COURT OF APPEALS, FINDING NO EMPLOYER-EMPLOYEE
RELATIONSHIP, CONSTITUTES RES JUDICATA AS A RULE ON
CONCLUSIVENESS OF JUDGMENT AS TO PRECLUDE THE
RELITIGATION OF THE ISSUE OF EMPLOYER-EMPLOYEE
RELATIONSHIP IN A SUBSEQUENT CASE FILED BEFORE THE
PETITIONER.

WHETHER OR NOT RESPONDENT COURT OF APPEALS MAY

ORDER OUTRIGHT THE DISMISSAL OF THE SSC CASE IN THE
CERTIORARI PROCEEDINGS BEFORE IT.[13]

SSC maintains that the prior judgment rendered by the NLRC and Court of
Appeals, that no employer-employee relationship existed between the parties, does
not have the force of res judicata by prior judgment or as a rule on the
conclusiveness of judgment. It contends that the labor dispute and the SSC claim
do not proceed from the same cause of action in that the action before SSC is for
non-remittance of SSS contributions while the NLRC case was for illegal
dismissal. The element of identity of parties is likewise unavailing in this case,
according to SSC. Aside from SSS intervening, another employer, Rizal Poultry,
was added as respondent in the case lodged before the SSC. There is no showing
that BSD Agro and Rizal Poultry refer to the same juridical entity. Thus, the
finding of absence of employer-employee relationship between BSD Agro and
Angeles could not automatically extend to Rizal Poultry. Consequently, SSC
assails the order of dismissal of the case lodged before it.

SSC also claims that the evidence submitted in the SSC case is different
from that adduced in the NLRC case. Rather than ordering the dismissal of the
SSC case, the Court of Appeals should have allowed SSC to resolve the case on its
merits by applying the Social Security Act of 1997.

Respondents assert that the findings of the NLRC are conclusive upon the
SSC under the principle of res judicata and in line with the ruling in Smith Bell v.
Court of Appeals. Respondents argue that there is substantially an identity of
parties in the NLRC and SSC cases because Angeles himself, in his Petition,
treated Rizal Poultry, BSD Agro and San Diego as one and the same entity.

Respondents oppose the view proffered by SSC that the evidence to prove
the existence of employer-employee relationship obtaining before the NLRC and
SSS are entirely different. Respondents opine that the definition of an employee
always proceeds from the existence of an employer-employee relationship.

In essence, the main issue to be resolved is whether res judicata applies so

as to preclude the SSC from resolving anew the existence of employer-employee
relationship, which issue was previously determined in the NLRC case.

Res judicata embraces two concepts: (1) bar by prior judgment as enunciated
in Rule 39, Section 47(b) of the Rules of Civil Procedure; and (2) conclusiveness
of judgment in Rule 39, Section 47(c).[14]

There is bar by prior judgment when, as between the first case where the
judgment was rendered and the second case that is sought to be barred, there is
identity of parties, subject matter, and causes of action. In this instance, the
judgment in the first case constitutes an absolute bar to the second action. [15]

But where there is identity of parties in the first and second cases, but no
identity of causes of action, the first judgment is conclusive only as to those
matters actually and directly controverted and determined and not as to matters
merely involved therein. This is the concept of res judicata known as
conclusiveness of judgment. Stated differently,any right, fact or matter in issue
directly adjudicated or necessarily involved in the determination of an action
before a competent court in which judgment is rendered on the merits is
conclusively settled by the judgment therein and cannot again be litigated between
the parties and their privies, whether or not the claim, demand, purpose, or subject
matter of the two actions is the same.[16]

Thus, if a particular point or question is in issue in the second action, and the
judgment will depend on the determination of that particular point or question, a
former judgment between the same parties or their privies will be final and
conclusive in the second if that same point or question was in issue and adjudicated
in the first suit. Identity of cause of action is not required but merely identity of
issue.[17]

The elements of res judicata are: (1) the judgment sought to bar the new
action must be final; (2) the decision must have been rendered by a court having
jurisdiction over the subject matter and the parties; (3) the disposition of the case
must be a judgment on the merits; and (4) there must be as between the first and
second action, identity of parties, subject matter, and causes of action. Should
identity of parties, subject matter, and causes of action be shown in the two cases,
then res judicata in its aspect as a bar by prior judgment would apply. If as
between the two cases, only identity of parties can be shown, but not identical
causes of action, then res judicata as conclusiveness of judgment applies.[18]

Verily, the principle of res judicata in the mode of conclusiveness of

judgment applies in this case. The first element is present in this case. The NLRC
ruling was affirmed by the Court of Appeals. It was a judicial affirmation through
a decision duly promulgated and rendered final and executory when no appeal was
undertaken within the reglementary period. The jurisdiction of the NLRC, which
is a quasi-judicial body, was undisputed. Neither can the jurisdiction of the Court
of Appeals over the NLRC decision be the subject of a dispute. The NLRC case
was clearly decided on its merits; likewise on the merits was the affirmance of the
NLRC by the Court of Appeals.

With respect to the fourth element of identity of parties, we hold that there is
substantial compliance.

The parties in SSC and NLRC cases are not strictly identical. Rizal Poultry
was impleaded as additional respondent in the SSC case. Jurisprudence however
does not dictate absolute identity but only substantial identity. [19] There is
substantial identity of parties when there is a community of interest between a
party in the first case and a party in the second case, even if the latter was not
impleaded in the first case.[20]

BSD Agro, Rizal Poultry and San Diego were litigating under one and the
same entity both before the NLRC and the SSC. Although Rizal Poultry is not a
party in the NLRC case, there are numerous indications that all the while, Rizal
Poultry was also an employer of Angeles together with BSD Agro and San
Diego. Angeles admitted before the NLRC that he was employed by BSD Agro
and San Diego from 1985 until 1997.[21] He made a similar claim in his Petition
before the SSC including as employer Rizal Poultry as respondent. [22] Angeles
presented as evidence before the SSC his Identification Card and a Job Order to
prove his employment in Rizal Poultry. He clarified in his Opposition to the
Motion to Dismiss[23] filed before SSC that he failed to adduce these as evidence
before the NLRC even if it would have proven his employment with BSD
Agro. Most significantly, the three respondents, BSD Agro, Rizal Poultry and San
Diego, litigated as one entity before the SSC. They were represented by one
counsel and they submitted their pleadings as such one entity. Certainly, and at the
very least, a community of interest exists among them. We therefore rule that
there is substantial if not actual identity of parties both in the NLRC and SSC
cases.

As previously stated, an identity in the cause of action need not obtain in

order to apply res judicata by conclusiveness of judgment. An identity of issues
would suffice.
 The remittance of SSS contributions is mandated by Section 22(a) of the
Social Security Act of 1997, viz:

SEC. 22. Remittance of Contributions. - (a) The contributions imposed in

the preceding Section shall be remitted to the SSS within the first ten (10) days of
each calendar month following the month for which they are applicable or within
such time as the Commission may prescribe. Every employer required to deduct
and to remit such contributions shall be liable for their payment and if any
contribution is not paid to the SSS as herein prescribed, he shall pay besides the
contribution a penalty thereon of three percent (3%) per month from the date the
contribution falls due until paid. x x x.

The mandatory coverage under the Social Security Act is premised on the
existence of an employer-employee relationship.[24] This is evident from Section
9(a) which provides:

SEC. 9. Coverage. - (a) Coverage in the SSS shall be compulsory upon all
employees not over sixty (60) years of age and their employers: Provided, That in
the case of domestic helpers, their monthly income shall not be less than One
thousand pesos (P1,000.00) a month x x x.

Section 8(d) of the same law defines an employee as any person who
performs services for an employer in which either or both mental or physical
efforts are used and who receives compensation for such services, where there is
an employer-employee relationship. The illegal dismissal case before the NLRC
involved an inquiry into the existence or non-existence of an employer-employee
relationship. The very same inquiry is needed in the SSC case. And there was no
indication therein that there is an essential conceptual difference between the
definition of employee under the Labor Code and the Social Security Act.

In the instant case, therefore, res judicata in the concept of conclusiveness

of judgment applies. The judgment in the NLRC case pertaining to a finding of
an absence of employer-employee relationship between Angeles and respondents is
conclusive on the SSC case.

A case in point is Smith Bell and Co. v. Court of Appeals[25] which, contrary
to SSC, is apt and proper reference. Smith Bell availed of the services of private
respondents to transport cargoes from the pier to the company's warehouse. Cases
were filed against Smith Bell, one for illegal dismissal before the NLRC and the
other one with the SSC, to direct Smith Bell to report all private respondents to the
SSS for coverage. While the SSC case was pending before the Court of Appeals,
Smith Bell presented the resolution of the Supreme Court in G.R. No. L-44620,
which affirmed the NLRC, Secretary of Labor, and Court of Appeals finding that
no employer-employee relationship existed between the parties, to constitute as bar
to the SSC case. We granted the petition of Smith Bell and ordered the dismissal
of the case. We held that the controversy is squarely covered by the principle
of res judicata, particularly under the rule on conclusiveness of
judgment. Therefore, the judgment in G.R. No. L-44620 bars the SSC case, as
the relief sought in the latter case is inextricably related to the ruling in G.R. No. L-
44620 to the effect that private respondents are not employees of Smith Bell.

The fairly recent case of Co v. People,[26] likewise applies to the present

case. An information was filed against Co by private respondent spouses who
claim to be employees of the former for violation of the Social Security Act,
specifically for non-remittance of SSS contributions. Earlier, respondent spouses
had filed a labor case for illegal dismissal. The NLRC finally ruled that there was
no employer-employee relationship between her and respondent spouses. Co then
filed a motion to quash the information, arguing that the facts alleged in the
Information did not constitute an offense because respondent spouses were not her
employees. In support of her motion, she cited the NLRC ruling. This Court
applied Smith Bell and declared that the final and executory NLRC decision to the
effect that respondent spouses were not the employees of petitioner is a ruling
binding in the case for violation of the Social Security Act. The Court further
stated that the doctrine of conclusiveness of judgment also applies in criminal
cases.[27]

Applying the rule on res judicata by conclusiveness of judgment in

conjunction with the aforecited cases, the Court of Appeals aptly ruled, thus:

In SSC Case No. 9-15225-01, private respondent Angeles is

seeking to compel herein petitioners to remit to the Social Security
System (SSS) all contributions due for and in his behalf, whereas in
NLRC NCR CA 018066-99 (NLRC RAB-IV-5-9028-97 RI) private
respondent prayed for the declaration of his dismissal illegal. In SSC
 No. 9-15225-01, private respondent, in seeking to enforce his alleged
right to compulsory SSS coverage, alleged that he had been an employee
of petitioners; whereas to support his position in the labor case that he
was illegally dismissed by petitioners BSD Agro and/or Benjamin San
Diego, he asserted that there was an employer-employee relationship
existing between him and petitioners at the time of his dismissal in
1997. Simply stated, the issue common to both cases is whether there
existed an employer-employee relationship between private respondent
and petitioners at the time of the acts complaint of were committed both
in SSC Case No. 9-15225-01 and NLRC NCR CA 018066-99 (NLRC
RAB-IV-5-9028-977-RI).

The issue of employer-employee relationship was laid to rest in

CA GR. SP. No. 55383, through this Courts Decision dated October 27,
2000 which has long attained finality. Our affirmation of the NLRC
decision of May 18, 1999 was an adjudication on the merits of the case.

Considering the foregoing circumstances, the instant case falls

squarely under the umbrage of res judicata, particularly, under the rule
on conclusiveness of judgment. Following this rule, as enunciated
in Smith Bell and Co. and Carriaga, Jr. cases, We hold that the relief
sought in SSC Case No. 9-15225-01 is inextricably related to Our ruling
in CA GR SP No. 55383 to the effect that private respondent was not an
employee of petitioners.[28]

The NLRC decision on the absence of employer-employee relationship

being binding in the SSC case, we affirm the dismissal by Court of Appeals of the
SSC case.

WHEREFORE, premises considered, the petition is DENIED. The Court

of Appeals Decision dated 20 September 2004, as well as its Resolution dated 9
February 2005, is AFFIRMED.

SO ORDERED.

G.R. No. 170195 March 28, 2011

SOCIAL SECURITY COMMISSION and SOCIAL SECURITYSYSTEM,

Petitioner,vs.

TERESA G. FAVILA,

Respondent.

Topic: Joint obligation to support

DOCTRINE:

A spouse who claims entitlement to death benefits as a primarybeneficiary under the Social Security
Law must establish two qualifyingfactors, to wit: (1) that he/she is the legitimate spouse; and (2) that
he/she isdependent upon the member for support. A person separated de facto fromher husband is not
a dependent, unless the contrary is shown.

FACTS:

January 17, 1970 - Teresa married Florante Favila

June 30, 1970 - Florante designated Teresita to be his sole beneficiary inSSS

He likewise named their common children as beneficiaries whenthey later had children

Feb 1, 1997 - Florante died; his pension benefits under the SSS weregiven to their only minor child at
that time, Florante II, but only until hisemancipation at age 21

Teresa then filed claim to the benefits as the surviving legal spouse butwas denied by the SSS; SSS
claimed that Teresa was not entitled

SSS answered that Teresa as guardian was paid a total periodof 57 months and that sister of Florante
wrote that Teresa hasbeen separated from Florante because former had an affair witha married man,
have sex 4 times a week and the couple livedtogether for 10 years only

o
Interview of SSS - Teresa did not live with anybody but rumoredto have an affair

Ruling of SSS Commission

: death benefits dependent on 2 factors(1)legality of the marital relationship; and (2) dependency for
support, which, in

SSCs opinioin, is affected by factors such as separation

de facto

of thespouses, marital infidelity and such other grounds sufficient to disinherit aspouse under the law.

SSC ruled that she is disqualified from claimingbenefits because she is not dependent for support from
Florante due toher marital infidelity.

Also, she has been separated from Florante for 17years before his death. She only contested her non-
entitlement of benefitswhen the pension was stopped

CA Ruling:

found Teresa's petition impressed with merit. It gave weight tothe fact that she is a primary beneficiary
because she is the lawful survivingspouse of Florante and in addition, she was designated by Florante as
suchbeneficiary. There was no legal separation or annulment of marriage thatcould have disqualified her
from claiming the death benefits as her designation as beneficiary had not been invalidated by any court
of law.

ISSUE:

Is Teresa a primary beneficiary in contemplation of the SocialSecurity Law as to be entitled to death

benefits accruing from the death of Florante?

HELD:

NO. CA order set aside. Teresa is not dependent spouse within thecontemplation of the SSL

nder the SSS Law (RA 1161), the term dependent is defined asxxx;

the legitimate spouse dependent for support upon theemployee

; xxx
In

Re: Application for Survivors Benefits of Manlavi,

dependen

t is "onewho derives his or her main support from another [or] relying on, or subject to, someone else
for support; not able to exist or sustain oneself,or to perform anything without the will, power or aid of
someone else."

Likewise under the same law,

beneficiaries

, is defined as

the

dependent spouse

until he remarries and dependent children, whoshall be the primary beneficiaries. xxx

For a spouse to qualify as a primary beneficiary the SSS Law he/shemust not only be a legitimate spouse
but also a dependent asdefined, that is, one who is dependent upon the member for support

SC agreed with Teresa that her alleged affair with another man was notsufficiently established and
Florante was actually the one who has acommon wife; however,

Teresa is still not entitled as she has beenseparated in fact from Florante for 17 years prior to his death
From prevailing jurisprudence

: a wife who is already separated

de facto

from her husband cannot be said

to be dependent for support upon the husband, absent any showing to the contrary

"[w]hoever claims entitlement to the benefits provided by law should

establish his or her right thereto by substantial evidence In this case, as

held in

Aguas,

the wife-claimant had the burden to prove that all thestatutory requirements have been complied with,
particularly her dependency on her husband at the time of his death

Aside from Teresas bare allegation that she was dependent upon her

husband for support and her misplaced reliance on the presumption of dependency by reason of her
valid and then subsisting marriage withFlorante, Teresa has not presented sufficient evidence to
discharge her burden of proving that she was dependent upon her husband for supportat the time of his
death. She could have done this by submitting affidavitsof reputable and disinterested persons who
have knowledge that during her separation with Florante, she does not have a known trade,business,
profession or lawful occupation from which she derives incomesufficient for her support and such other
evidence tending to prove her claim of dependency.

Hence, for Teresas failure to show that despite their separation she was
dependent upon Florante for support at the time of his death, Teresacannot qualify as a primary
beneficiary. Hence, she is not entitled to the

death benefits accruing on account of Florantes death.

MERCURY DRUG G.R. No. 164050

CORPORATION,
Petitioner, Present:

CARPIO, J.,
Chairperson,
-versus- LEONARDO DE CASTRO,*
BRION,
PERALTA,** and
PEREZ, JJ.

COMMISSIONER OF INTERNAL Promulgated:

REVENUE,
Respondent. July 20, 2011
x ----------------------------------------------------------------------------------------x
DECISION

PEREZ, J.:

This petition for review on certiorari calls for an interpretation of the term
cost as used in Section 4(a) of Republic Act No. 7432, otherwise known as An
Act to Maximize the Contribution of Senior Citizens to Nation Building, Grant
Benefits and Special Privileges and For Other Purposes.

A rundown of the pertinent facts is presented below.

Pursuant to Republic Act No. 7432, petitioner Mercury Drug Corporation

(petitioner), a retailer of pharmaceutical products, granted a 20% sales discount to
qualified senior citizens on their purchases of medicines. For the taxable year
April to December 1993 and January to December 1994, the amounts representing
the 20% sales discount
totalledP3,719,287.68[1] and P35,500,593.44,[2] respectively, which petitioner
claimed as deductions from its gross income.

Realizing that Republic Act No. 7432 allows a tax credit for sales discounts
granted to senior citizens, petitioner filed with the Commissioner of Internal
Revenue (CIR) claims for refund in the amount of P2,417,536.00 for the year 1993
and P23,075,386.00 for the year 1994. Petitioner presented a computation[3] of its
overpayment of income tax, thus:

TAXABLE YEAR 1993

SALES, Net P10,228,518,335.00

Add: Cost of 20% Discount to Senior Citizens 3,719,288.00

SALES, Gross P10,232,237,623.00

COST OF SALES
Merchandise Inventory, Beg. P2,427,972,150.00
Purchases 8,717,393,710.00
Goods Available for Sales P11,145,365,860.00
Merchandise Inventory, End 2,458,743,127.00 8,686,622,733.00

GROSS PROFIT P1,545,614,890.00

Add: Miscellaneous Income 58,247,973.00

TOTAL INCOME P1,603,862,863.00

OPERATING EXPENSES 1,226,816,343.00

NET INCOME BEFORE TAX P 377,046,520.00

Less: Income subjected to final income tax 20,966,602.00

NET TAXABLE INCOME P 356,079,918.00

INCOME TAX PAYABLE P 124,627,972.00

LESS: TAX CREDIT (20% Sales

Discount to Senior Citizens) P 3,719,288.00
TAX ACTUALLY PAID 123,326,220.00 127,045,508.00

TAX REFUNDABLE P 2,417,536.00

xxxx

TAXABLE YEAR 1994

 SALES, Net P 11,671,366,402.00
Add: Cost of 20% Sales Discount 35,500,594.00
to Senior Citizens

SALES, Gross P11,706,866,996.00

COST OF SALES
Merchandise Inventory, Beg.
Purchases
Goods Available for Sales
Less: Merchandise Inventory, End
P2,458,743,127.00
10,316,941,308.00
P12,775,684,435.00
2,928,397,228.00 9,847,287,207.00

GROSS PROFIT P1,859,579,789.00

Add: Miscellaneous Income 68,809,864.00

TOTAL INCOME P1,928,389,653.00

OPERATING EXPENSES 1,499,422,645.00

NET INCOME BEFORE TAX 428,967,008.00

Less: Income subjected to final Income tax 25,591,586.00

NET TAXABLE INCOME P 403, 375,422.00

INCOME TAX PAYABLE P 141,181,398.00

LESS: TAX CREDIT (Cost of 20%

Discount to Senior Citizens) P 35,500,594.00
TAX ACTUALLY PAID 128,756,190.00 164,256,784.00

TAX REFUNDABLE P 23,075,386.00

When the CIR failed to act upon petitioners claims, the latter filed a petition
for review with the Court of Tax Appeals. On 6 September 2000, the Court of Tax
Appeals rendered the following judgment:[4]
WHEREFORE, in view of the foregoing, the instant Petition for Review is
hereby PARTIALLY GRANTED. Accordingly, Revenue Regulations No. 2-94
of the Respondent is declared null and void insofar as it treats the 20% discount
given by private establishments as a deduction from gross sales. Respondent is
hereby ORDERED to GRANT A REFUND OR ISSUE A TAX CREDIT
CERTIFICATE to Petitioner in the reduced amount of P1,688,178.43
representing the latters overpaid income tax for the taxable year 1993. However,
the claim for refund for taxable year 1994 is denied for lack of merit.[5]
 The Court of Tax Appeals favored petitioner by declaring that the 20% sales
discount should be treated as tax credit rather than a mere deduction from gross
income. The Court of Tax Appeals however found some discrepancies and
irregularities in the cash slips submitted by petitioner as basis for the tax
refund. Hence, it disallowed the claim for taxable year 1994 and some portion of
the amount claimed for 1993 by petitioner, viz:

So, contrary to the allegation of Petitioner that it granted 20% sales

discounts to senior citizens in the total amount of P3,719,888.00 for taxable year
1993 and P35,500,554.00 for taxable year 1994, this Courts study and evaluation
of the evidence show that for taxable year 1993 only the amounts
of P3,522,123.25 and for 1994, the amount of P8,789,792.27 were properly
substantiated. The amount of P3,522,123.25 corresponding to 1993 will be
further reduced to P2,989,930.43 as this Courts computation is based on the cost
of the 20% discount and not on the total amount of the 20% discount based on the
decision of the Court of Appeals in Commissioner of Internal Revenue v. Elmas
Drug Corporation, CA-SP No. 49946 promulgated on October 19, 1999, where it
ruled:

Thus the cost of the 20% discount represents the actual amount spent by
drug corporations in complying with the mandate of RA 7432. Working on
this premise, it could not have been the intention of the lawmakers to grant
these companies the full amount of the 20% discount as this could be
extending to them more than what they actually sacrificed when they gave
the 20% discount to senior citizens. (Underscoring supplied).

Similarly the amount of P8,789,792.27 corresponding to taxable year 1994

will be reduced to P7,393,094.28 based on the aforequoted Court of Appeals
decision. These reductions are illustrated as follows:

TAXABLE YEAR 1993

Cost of Sales P 8,686,622,733.00
Divided by Gross Sales 10,232,237,623.00
Cost of Sales Percentage 84.89%
Adjusted Amount of 20% Discount given
to Senior Citizens 3,522,123.25
Multiply by 84.89%
Allowable Tax Credit P 2,989,930.43

TAXABLE YEAR 1994

Cost of Sales P9,847,287,207.00

Divided by Gross Sales 11,706,866,996.00
Cost of Sales Percentage 84.11%
Adjusted Amount of 20% Discount given
to Senior Citizens P 8,789,792.27
Multiply by 84.11%
Allowable Tax Credit P 7,393,094.28

With the foregoing changes in the amount of discounts granted by

Petitioner in 1993 and 1994, it necessarily follows that adjustments have to be
made in the computation of the refundable amount which is entirely different
from the computation presented by the Petitioner. This Courts conclusion is that
Petitioner is only entitled to a tax credit of P1,688,178.43 for taxable year 1993
detailed as follows:

TAXABLE YEAR 1993

Sales, Net P10,228,518,335.00

Add: Cost of 20% Discount
given to Senior Citizens 3,719,288.00

SALES, Gross P10,232,237,623.00

COST OF SALES
Merchandise Inventory, Beg. P2,427,972,150.00
Add: Purchases 8,717,393,710.00
Total goods available for sale P1,145,365,860.00
Less: Merchandise Inventory, End 2,458,743,127.00 8,686,622,733.00

GROSS PROFIT P 1,545,614,890.00

Add: Miscellaneous Income 58,247,973.00

TOTAL INCOME P 1,603,862,863.00

OPERATING EXPENSES 1,226,816,343.00

NET INCOME BEFORE TAX P 377,046,520.00

Less: Income subjected to final income tax 20,966,602.00

NET TAXABLE INCOME P 356,079,918.00

INCOME TAX PAYABLE P 124,627,972.00

LESS: TAX CREDIT (20% Sales Discount
given to Senior Citizens) P 2,989,930.43
TAX ACTUALLY PAID 123,326,220.00 126,316,150.43

TAX REFUNDABLE P 1,688,178.43

 and no refund or tax credit for taxable year 1994 as the computation below shows
that Petitioner, instead of having a tax credit of P23,075,386.00 as claimed in the
Petition, still has a tax due of P5,032,113.72 detailed as follows:

TAXABLE YEAR 1994

SALES, Net P11,671,366,402.00

Add: Cost of 20% Sales Discount given
to Senior Citizens 35,500,594.00

SALES, Gross 11,706,866,996.00

COST OF SALES
Merchandise Inventory, Beg. P2,458,743,127.00
Add: Purchases 10,316,941,308.00
Total goods available for sale P12,775,684,435.00
Less: Merchandise Inventory, End 2,928,397,228.00 9,847,287,207.00

GROSS PROFIT P 1,859,579,789.00

Add: Miscellaneous Income 68,809,864.00

TOTAL INCOME P 1,928,389,653.00

OPERATING EXPENSES 1,499,422,645.00

NET INCOME BEFORE TAX P 428,967,008.00

Less: Income subjected to final income 25,591,586.00
Tax

NET TAXABLE INCOME P 403,375,422.00

INCOME TAX PAYABLE P 141,181,398.00

LESS: TAX CREDIT (Cost of 20%

Discount given to Senior Citizens) P7,393,094.28
TAX ACTUALLY PAID 128,756,190.00 136,149,284.28

TAX STILL DUE P 5,032,113.72

The conclusion of tax liability instead of tax overpayment pertaining to

taxable year 1994 has the effect of negating the tax refund of Petitioner because
the basis of such refund is the fact that there is tax credit. Under the
circumstances, instead to tax credit, Petitioner has a tax liability of P5,032,113.72,
hence the refund for the period must fail.[6]
Moreover, the Court of Tax Appeals stated that the claim for tax credit must
be based on the actual cost of the medicine and not the whole amount of the 20%
senior citizens discount. It applied the formula: cost of sales/gross sales x amount
of 20% sales discount.
 Petitioner moved for partial reconsideration. In a Resolution dated 20
December 2000, the Court of Tax Appeals modified its earlier ruling by increasing
the creditable tax amount to P18,038,489.71, inclusive of the taxable years 1993
and 1994. The Court of Tax Appeals finally granted the claim for refund for the
taxable year 1994 on the basis of the cash slips submitted by petitioner, in the sum
of P16,350,311.28, thus:

TAXABLE YEAR 1994

a) Computation of adjusted amount of 20% discount given to senior citizens:

Sales discount to be considered as basis for disallowance P35,414,211.68

Less: Disallowances
a) Sales discount without supporting documents P224,269.15
b) Sales discounts twice recorded 7,462.66
c) Overstatement of sales discount 648,988.28 880,720.09

Adjusted amount of 20% sales discount P34,211,769.45

b) Computation of the allowable tax credit on the 20% sales discount:

Cost of Sales P9,847,287,207.00

Divided by Gross Sales 11,706,866,996.00
Cost of Sales Percentage 84.11%

Adjusted Amount of 20% discount given to

Senior Citizens P34,211,769.45
Multiply by 84.11%
P28,775,519.28
c) Computation of the refundable amount:

SALES, Net P11,671,366,402.00

Add: Cost of 20% Sales discount given
to Senior Citizens 35,500,594.00

SALES, Gross P11,706,866,996.00

COST OF SALES 9,847,287,207.00

GROSS PROFIT P 1,859,579,789.00

Add: Miscellaneous Income 68,809,864.00

TOTAL INCOME P 1,928,389,653.00

 OPERATING EXPENSES 1,499,422,645.00

NET INCOME BEFORE TAX 428,967,008.00

Less: Income subjected to final income tax 25,591,586.00

NET TAXABLE INCOME P 403,375,422.00

INCOME TAX PAYABLE P 141,181,398.00

LESS: TAX CREDIT (Cost of 20%

Discount given to Senior Citizens) P28,775,519.28
TAX ACTUALLY PAID 128,756,190.00 157,531,709.28

AMOUNT REFUNDABLE FOR

TAXABLE YEAR 1994 P 16,350,311.28[7]

Petitioner elevated the case to the Court of Appeals via a Petition for Review
under Rule 43. Petitioner sought a partial modification of the above resolution
raising as legal issue the basis of the computation of tax credit. Petitioner
contended that the actual discount granted to the senior citizens, rather than the
acquisition cost of the item availed by senior citizens, should be the basis for
computation of tax credit.

On 20 October 2003, the Court of Appeals rendered a Decision [8] sustaining

the Court of Tax Appeals and dismissing the petition. Citing the Court of Appeals
cases ofCommissioner of Internal Revenue v. Elmas Drug Corporation and Trinity
Franchising and Management Corp. v. Commissioner of Internal Revenue, the
appellate court interpreted the term cost as used in Section 4(a) of Republic Act
No. 7432 to mean the acquisition cost of the medicines sold to senior
citizens. Therefore, it upheld the computation provided by the Court of Tax
Appeals in its 20 December 2000 Resolution.

Petitioner filed a motion for partial reconsideration which the Court of

Appeals denied in a Resolution[9] dated 23 June 2004. This prompted petitioner to
file the instant petition for review. Petitioner raises the following legal grounds for
the allowance of its petition:

I.
LIMITING THE TAX CREDIT ON THE ACQUISITION COST OF THE
MEDICINES SOLD AMOUNTS TO A TAKING OF PROPERTY FOR
PUBLIC USE WITHOUT JUST COMPENSATION.
 II.
FORCING PETITIONER TO GRANT 20% DISCOUNT ON SALE OF
MEDICINE TO SENIOR CITIZENS WITHOUT FULLY REIMBURSING IT
FOR THE AMOUNT OF DISCOUNT GRANTED VIOLATES THE DUE
PROCESS CLAUSE FOR BEING OPPRESSIVE, UNREASONABLE,
CONFISCATORY, AND AN UNDUE RESTRAINT OF TRADE.

III.
EVEN THE COURT OF APPEALS HAD AN INTERPRETATION OF THE
TERM COST THAT IS DIFFERENT FROM, AND BROADER THAN
THE INTERPRETATION OF THE COURT OF TAX APPEALS. YET, THE
COURT OF APPEALS AFFIRMED IN TOTO THE COURT OF TAX
APPEALS DECISION.

IV.
THE COURT MAY CONSIDER THE SPIRIT AND REASON OF THE LAW
WHERE A LITERAL MEANING WOULD LEAD TO INJUSTICE OR
DEFEAT THE CLEAR INTENT OF THE LAWMAKERS.

V.
RESPONDENT MUST ACCORD PETITIONER THE SAME TREATMENT
AS MAR-TESS DRUG IN ACCORDANCE WITH THE PRINCIPLE OF
EQUAL PROTECTION OF LAWS. [10]

Petitioner adopts a two-tiered approach towards defending its thesis. First,

petitioner explains that in addition to the direct expenses incurred in acquiring the
medicine intended for re-sale to senior citizens, operating expenses or
administrative overhead are likewise incurred. Limiting the tax credit on the
acquisition cost of the medicines sold amounts to a taking of property for public
use without just compensation, petitioner argues. Moreover, petitioner contends
that to compel it to grant 20% discount on sale of medicine to senior citizens
without fully reimbursing it for the amount of discount granted violates the due
process clause for being oppressive, unreasonable, confiscatory and an undue
restraint of trade. In the second tier, petitioner maintains that the term cost
should at least include all business expenses directly incurred to produce the
merchandise and to bring them to their present location and use. Petitioner alleges
that while the Court of Appeals subscribes to the above interpretation, it
nevertheless affirmed in toto the Court of Tax Appeals erroneous decision.

In lieu of its Comment, the Office of the Solicitor General (OSG) filed a
Manifestation and Motion supporting petitioners theory that the amount of tax
credit should be computed based on sales discounts properly substantiated by
petitioner. The OSG adverted to the case of Bicolandia Drug Corporation
(Formerly Elmas Drug Corporation) v. Commissioner of Internal
Revenue[11] wherein we held that the term cost refers to the amount of the 20%
discount extended by a private establishment to senior citizens in their purchase of
medicines, which amount should be applied as a tax credit. The OSG opines that
the allowance of claim for additional tax credits should be based on sales discounts
properly substantiated before the Court of Appeals.

The main thrust of the petition is to determine whether the claim for tax
credit should be based on the full amount of the 20% senior citizens discount or
the acquisition cost of the merchandise sold.

Preliminarily, Republic Act No. 7432 is a piece of social legislation aimed to

grant benefits and privileges to senior citizens. Among the highlights of this Act is
the grant of sales discounts on the purchase of medicines to senior
citizens. Section 4(a) of Republic Act No. 7432 reads:

SEC. 4. Privileges for the Senior Citizens. The senior citizens shall be
entitled to the following:

a) the grant of twenty percent (20%) discount from all establishments relative to
the utilization of transportation services, hotels and similar lodging
establishments, restaurants and recreation centers and purchase of medicines
anywhere in the country: Provided, That private establishments may claim the
cost as tax credit;

The burden imposed on private establishments amounts to the taking of private

property for public use with just compensation in the form of a tax credit. [12]

The foregoing proviso specifically allows the 20% senior citizens' discount
to be claimed by the private establishment as a tax credit and not merely as a tax
deduction from gross sales or gross income. The law however is silent as to how
the cost of the discount as tax credit should be construed.

Indeed, there is nothing novel in the issues raised in this petition. Our
rulings in Bicolandia Drug Corporation (Formerly Elmas Drug Corporation) v.
Commissioner of Internal Revenue,[13] Cagayan Valley Drug Corporation v.
Commissioner of Internal Revenue, [14] and M.E. Holding Corporation v. Court of
Appeals[15] operate as stare decisis[16] with respect to this legal question.
 In Bicolandia, we construed the term cost as referring to the amount of the
20% discount extended by a private establishment to senior citizens in their
purchase of medicines.[17] The Court of Appeals decision in Commissioner of
Internal Revenue v. Elmas Drug Corporation dated 19 October 1999 was relied
upon by the Court of Appeals as basis for its interpretation of the term cost when
it decided the instant case in 20 October 2003. As correctly pointed out by the
OSG, said case had been elevated to this Court and had been eventually resolved
with finality on 22 June 2006 in the case entitled Bicolandia Drug Corporation v.
Commissioner of Internal Revenue.

We reiterated this ruling in the 2008 case of Cagayan Valley Drug by

holding that petitioner therein is entitled to a tax credit for the full 20% sales
discounts it extended to qualified senior citizens. This holds true despite the fact
that petitioner suffered a net loss for that taxable year. [18]

The most recent case in point is M.E. Holding Corporation which bears a
strikingly similar set of facts and issues with the case at bar. Both petitioners filed
their respective income tax return initially treating the 20% sales discount to senior
citizens as deductions from its gross income. When advised that the discount
should be treated as tax credit, they both filed a claim for overpayment. The
Bureau of Internal Revenue on both occasions failed to act timely on the claims,
hence they appealed before the Court of Tax Appeals. The Court of Tax Appeals
in M.E. Holding concedes that the 20% sales discount granted to qualified senior
citizens should be treated as tax credit but it placed reliance on the Court of
Appeals decision in Commissioner of Internal Revenue v. Elmas Drug
Corporation where the term cost of the discount was interpreted to mean only
the direct acquisition cost, excluding administrative and other incremental
costs. This was the very same case relied upon by the Court of Appeals in the
present case. We finally affirmed in M.E. Holding that the tax credit should be
equivalent to the actual 20% sales discount granted to qualified senior citizens.

It is worthy to mention that Republic Act No. 7432 had undergone two (2)
amendments; first in 2003 by Republic Act No. 9257 and most recently in 2010 by
Republic Act No. 9994. The 20% sales discount granted by establishments to
qualified senior citizens is now treated as tax deduction and not as tax credit. As
we have likewise declared inCommissioner of Internal Revenue v. Central Luzon
Drug Corporation,[19] this case covers the taxable years 1993 and 1994, thus,
Republic Act No. 7432 applies.
 Based on the foregoing, we sustain petitioners argument that the cost of
discount should be computed on the actual amount of the discount extended to
senior citizens. However, we give full accord to the factual findings of the Court of
Tax Appeals with respect to the actual amount of the 20% sales discount, i.e., the
sum of P3,522,123.25. for the year 1993 and P34,211,769.45 for the year
1994. Therefore, petitioner is entitled to a tax credit equivalent to the actual
amounts of the 20% sales discount as determined by the Court of Tax Appeals. A
new computation for tax refund is in order, to wit:

TAXABLE YEAR 1993

SALES, Net P10,228,518,335.00

Add: Cost of 20% Discount to Senior Citizens 3,522,123.25

SALES, Gross P10,232,040,458.25

COST OF SALES
Merchandise Inventory, Beg. P2,427,972,150.00
Purchases 8,717,393,710.00
Goods Available for Sales P11,145,365,860.00
Merchandise Inventory, End 2,458,743,127.00 8,686,622,733.00

GROSS PROFIT P1,545,417,725.25

Add: Miscellaneous Income 58,247,973.00

TOTAL INCOME P1,603,665,698.25

OPERATING EXPENSES 1,226,816,343.00

NET INCOME BEFORE TAX P 376,849,349.25

Less: Income subjected to final income tax 20,966,602.00

NET TAXABLE INCOME P 355,882,747.25

INCOME TAX PAYABLE P 124,558,961.54

LESS: TAX CREDIT (20% Sales

Discount to Senior Citizens) P 3,522,123.25
TAX ACTUALLY PAID 123,326,220.00 126,848,343.25

TAX REFUNDABLE P 2,289,381.71

TAXABLE YEAR 1994

 SALES, Net P 11,671,366,402.00
Add: Cost of 20% Sales Discount
to Senior Citizens 34,211,769.45

SALES, Gross P11,705,578,171.45

COST OF SALES
Merchandise Inventory, Beg.
Purchases
Goods Available for Sales
Less: Merchandise Inventory, End
P2,458,743,127.00
10,316,941,308.00
P12,775,684,435.00
2,928,397,228.00 9,847,287,207.00

GROSS PROFIT P1,858,290,964.45

Add: Miscellaneous Income 68,809,864.00

TOTAL INCOME P1,927,100,828.45

OPERATING EXPENSES 1,499,422,645.00

NET INCOME BEFORE TAX 427,678,183.45

Less: Income subjected to final Income tax 25,591,586.00

NET TAXABLE INCOME P 402,086,597.45

INCOME TAX PAYABLE P 140,730,309.11

LESS: TAX CREDIT (Cost of 20%

Discount to Senior Citizens) P 34,211,769.45
TAX ACTUALLY PAID 128,756,190.00 162,967,959.45

TAX REFUNDABLE P 22,237,650.34

WHEREFORE, the petition is GRANTED. The assailed Decision

and Resolution of the Court of Appeals are REVERSED and SET
ASIDE. Respondent Commissioner of Internal Revenue is ORDERED to
issue tax credit certificates in favor of petitioner in the amounts
of P2,289,381.71 and P22,237,650.34.

SO ORDERED.
 JOSE PORTUGAL PEREZ
Associate Justice

WE CONCUR: