THE INSULAR LIFE ASSURANCE COMPANY, LTD., AS EMPLOYER OF AGUSTIN O. BENITEZ (SSS No. 03-095312), PETITIONER AND APPELLANT, VS. SOCIAL SECURITY COMMISSION, RESPONDENT AND APPELLEE.

Appeal
from Resolution No. 890 of the Social Security Commission, adopted on
August 27, 1959, denying the request of petitioners-appellant herein
The Insular Life Assurance Co., Ltd. for refund of the total amount of
P36.14, representing the premiums paid by the petitioner for the
account of its employee, Agustin 0. Benitez, for the period from May
15, 1959 to August 30, 1959, when said employee was on leave of absence
without pay.

The petitioner, in two separate letters to the
Social Security Commission dated May 13, 1959 and June 16, 1959,
objected to the enforcement of Circular No. 21 of the Commission,
promulgated on October 15, 1959, which Circular requires employers to
remit to the Commission their contributions for employees who are on
leave of absence without pay. The petitioner also asked for the refund
of the contributions already remitted by it. Notwithstanding its
objections and pursuant to said Circular, the petitioner continued to
remit its contributions to the Commission for its employee, Agustin O.
Benitez, from May 15, 1959 to August 30, 1959.

On June 25,
1959, the Social Security Commission denied the objections, holding
that Circular No. 21 is a valid interpretation of the provisions of the
Social Security Act. On July 6, 1959, petitioner asked for a
reconsideration of the stand of the Commission and it reiterated the
same in its subsequent letters of June 7, 1959 and September 7, 1959.

Acting
upon these requests of the petitioner, the Commission on August 27,
1959 adopted Resolution No. 890, which is appealed from and which was
transmitted to the petitioner in the Commission’s letter to it dated
September 1, 1959. The pertinent provisions of the resolution are as
follows:

“To be sure, a person who does not
render any service to someone, and consequently does not receive any
compensation, is not an employee for Social Security coverage purposes;
likewise, a person, whether natural or juridical, is not to be
considered as an employer if he or it does not use the services of
another in his employment and pays compensation therefor. But nowhere
in the Act is it required, or necessary, that the employee must render
actual service to the employer and receive actual compensation for such
service, and that the employer must enjoy the employee’s service at all
times during the employment relationship, the existence of which is the
basis for the obligation to pay the prescribed contributions. As
provided for in Sections 18 and 19, the obligation to pay the monthly
contribution commences ‘as of the last day of the calendar month
preceding the month when an employee’s compulsory coverage takes effect
and every month thereafter during his employment. * * *’.

*                *               *

“Indeed
a careful reading of the Act shows that the Act itself foresees the
circumstances when an employee may temporarily be deprived of his
compensation and the employer may be deprived of the enjoyment of the
employee’s services without the employment of relation being
terminated. This can readily be seen by a reading of Section 14. Under
this provision, an employee is entitled to sickness allowances only
when he does not receive his compensation. It is provided, however,
that during the period of his sickness, the premiums becoming due and
payable by the covered employee shall be deducted in installments from
the sickness allowances payable to the employee, thereby clearly
demonstrating that even if the employee is temporarily deprived of his
compensation, his obligation to pay his monthly social security
contributions exists because even during the period of his sickness he
remains a member thereof. And although the law mentions only the
deduction of the employee’s contributions from the daily allowance
payable to him, the assessment pertaining to the employer, namely the
3½% monthly contribution, should also be paid to the System to make up
the full six per cent monthly premium contribution assessed by the Act
for the membership of the employee therein.

*                *               *

“The
next contention of the Company, namely, that under the Act, the
liability of the employer for contributions is contingent upon receipt
of compensation by the employee, citing Sections 18 and 19 of the Act
as well as Sections 8(f) and (j) with respect to the
definition, respectively, of the terms ‘compensation’ and ’employment’,
is likewise erroneous. According to the Company, these provisions indicate the necessity of the employee receiving compensation as a
pre-requisite to the obligation to pay premiums.’ But as we have
already demonstrated above, non-receipt of compensation is not
determinative of the continued obligation to pay the prescribed
contribution, so long as the employment relationship continuous to
exist and until the same is terminated, as clearly provided for in
Section 11 and as may farther be gleaned from Section 22. (Italics
supplied.)

“It is true that Section 8(f) and (j)
define, respectively, ‘compensation’ as ‘All remuneration for
employment, including the cash value of any remuneration paid in any
medium other than cash except that part of the remuneration in excess
of five hundred pesos received during the month’ (Rep. Act No. 1161, as
amended by Rep. Act No. 1792) and ’employment’ as ‘Any services
performed by an employee for his employer, except * * *.’ (Ibid) But by their very nature, however, paragraphs (f) and (j)
of Section 8 merely declare, respectively, what shall be considered as
‘compensation’ and what shall be considered as ’employment’; as has
been stated and demonstrated above, said definitions do not determine
the basis of the obligation to pay the required premiums and that
non-receipt of compensation is not material for the payment of
contributions. (Resolution No. 41, current series.)

“The
Commission, therefore, does not agree with your claim that while the
employer’s and the employee’s obligation to remit their respective
contributions exists, there is no basis on which to compute the
respective contributions prescribed in the Act. An employee’s
compensation is not lost simply because said employee is on leave
without pay, although he may not, of course, be entitled to said
compensation inasmuch as he does not perform any service entitling him
to the same.” (Record on Appeal, pp: 26-30)

Before this Court, the petitioner has presented two questions of law for resolution.

The
first question is whether or not payment of compensation to an employee
is a requirement to his employer’s liability for social security
contributions. Petitioner claims that such payment is a requisite
because the compensation is the basis of computation of the premiums
and contributions. Petitioner also claims that such payment is a
requirement in the United States, citing the case of Magruder vs. Yellow Cab Co., 152 A. L. R. 516.

The above arguments can not be sustained. We have held in the case of Roman Archbishop of Manila vs.
Social Security System, (110 Phil., 616; 59 Off. Gaz. [33]5277), that
payment of contributions by an employer is compulsory during its
coverage, and in accordance with the provisions of Section 9 of the
Social Security Act, coverage is determined solely by the existence of
an employer-employee relationship. While an employee is on leave, even
without pay, he is still an employee of his employer, their contract of
employment has not yet terminated. So much so that the employee may
still return to work and the employer is still bound to accept him. His
responsibility as an employee still exists. He is still entitled to the
benefits of the System as a member thereof and is still liable to pay
premiums when he returns. Consequently, his employer is still liable to
pay his contribution to the Commission on account of its employee who
is on leave without pay.

With respect to the case of Magruder vs. Yellow Cab, Co., supra,
relied upon by the petitioner-appellant, We agree with the Solicitor
General and with the Commission that the decision therein is not
applicable to this case. As correctly observed by the Commission, we
did not adopt the American method of collecting contributions to the
System. Our method is different, for while in the United States,
contributions are treated as taxes, collectible only whan the employee
is paid his salary or wage, in our country, we consider such
contributions as premiums collectible even when the employee is not
actually paid his wage or salary.

The other question is
whether or not said Circular No. 21 is an administrative rule or
regulation, or only an administrative interpretation or implementation
of the provisions of the law. Petitioner impugns the validity of said
circular, claiming that the Commission has thereby exercised
legislative powers because it imposes a liability which is not imposed
by the Social Security Act.

We can not agree to this
contention. We are more inclined to accept as correct the argument of
the Solicitor General that said Circular only interprets or implements
the clear and express provisions of the law. As already adverted to
above, the Social Security Act in its Sections 9, 11, 22 and 28(e)
clearly imposes an obligation to contribute upon the employer as long
as the relationship of employer and employee exists. Said Circular only
lays down the amount and basis of, and the manner of collecting said
contributions when the employee is on leave without pay. Said circular
is not, therefore, an administrative rule or regulation, the
effectivity of which is subject to the President’s approval and to its
publication in the Official Gazette, but is merely an interpretation
and implementation by the Commission of the express and clear mandate
of the law.

Wherefore, the Resolutions of the Social Security
Commission sought herein to be annulled are hereby declared legal and
valid. With costs against petitioner-appellant.

Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, and De Leon, JJ., concur.