G.R. No. 16704. March 17, 1962
VICTORIAS MILLING COMPANY, INC., PETITIONER-APPELLANT, VS. SOCIAL SECURITY COMMISSION, RESPONDENT-APPELLEE.
BARRERA, J.:
“Effective November 1, 1958, all Employers in
computing the premiums due the System, will take into consideration and
include in the Employee’s remuneration all bonuses and overtime pay,
as well as the cash value of other media of remuneration. All these
will comprise the Employee’s remuneration or earnings, upon which the
3-1/2% and 2-1/2% contributions will be based, up to a maximum of P500
for any one month.”
Upon receipt of a copy thereof, petitioner Victorias Milling
Company, Inc., through counsel, wrote the Social Security Commission in
effect protesting against the circular as contradictory to a previous
Circular No. 7, dated October 7,1957 expressly excluding overtime pay
and bonus in the computation of the employers’ and employees’
respective monthly premium contributions, and submit ting, “In order to
assist your System in arriving at a proper interpretation of the term compensation for the purposes of such computation, their observations
on Republic Act 1161 and its amendment and on the general interpretation
of the words “compensation”, “remuneration” and “wages Counsel
Further questioned the validity of the circular for lack of authority
on the part of the Social Security Commission to promulgate it without
the approval of the President and for lack of publication in the
Official Gazette.
Overruling these objections, the Social Security Commission ruled
that Circular No. 22 is not a rule or regulation that needed the
approval of the President and ; publication in the Official Gazette to
be effective, but a mere administrative interpretation of the statute,
a mere statement of general policy or opinion as to how the law should
be construed.
Not satisfied with this ruling, petitioner comes to this Court on appeal.
The single issue involved in this appeal is whether of not Circular
No. 22 is a rule or regulation, as contemplated in Section 4 (a) of
Republic Act 1161 empowering the Social Security Commission “to adopt,
amend and repeal 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.”
There can be no doubt that there is a distinction between an
administrative rule or regulation and an administrative interpretation
of a law whose enforcement is entrusted to an administrative body. When
an administrative agency promulgates rules and regulations, it “makes”
a new law with the force and effect of a valid law, while when it
renders an opinion or gives a statement of policy, it merely interprets
a pre-existing law (Parker, Administrative Law, p. 197; Davis,
Administrative Law, p. 194). Rules and regulations when promulgated in
pursuance of the procedure or authority conferred upon the
administrative agency by law, partake of the nature of a statute, and
compliance therewith may be enforced by a penal sanction provided in
the law. This is so because statutes are usually couched in general
terms, after expressing the policy, purposes, objectives, remedies and
sanction) intended by the legislature. The details and the manner of
carrying out the law are often times left to the administrative agency
entrusted with its enforcement. In this sense, it has been said that
rules and regulations are the product; of a delegated power to create
new or additional legal provisions that have the effect of law. (Davis,
op. cit. p. 194.)
A rule is binding on the courts so long as the procedure fixed for
its promulgation is followed and its scope is within the statutory
authority granted by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate wisdom (Davis,
op. cit. pp. 195-197). On the other hand, administrative interpretation
of the law is at best merely advisory, for it is the courts that
finally determine what the law means.
Circular No. 22 in question was issued by the Social Security
Commission, in view of the amendment of the provisions of the
Social Security Law defining the term. “compensation” contained Section
.8(f) ,of Republic Act. No. 1161 which, before its amendment, reads as
follows:
“(f) Compensation — All remuneration, for employment
include the cash value of any remuneration, paid, in ;any medium other
than) cash except (1) that part of the renumeration in excess of P500
received during the month; (2) bonuses, allowances or overtime pay; and
(3) dismissal and all other payments which the employer may make,
although not legally required to do so,”
Republic Act No. 1792 changed the definition of “compensation” to:
“(f) Compensation — All renumeration for employment
include the cash value of any renumeration paid in any medium other
than cash except that part of the renumeration in excess of P500.00
received during the month.”
It will thus be seen that whereat) prior to amendment, bonuses,
allowances, and overtime pay given in addition to the regular or base
pay were expressly excluded or exempted from the definition of the term
“compensation”, such exemption or exclusion was deleted by the
amendatory law. It thus became necessary for the Social Security
Commission to interpret the; effect of suck deletion or elimination.
Circular No, 22 was, therefore, issued to apprise those concerned of
the interpretation or understanding of the Commission,, of the, law as
amended, which it was its duty to enforce. It did not add any duty or
detail that was not already in the.law as amended. It merely stated and
circularized the opinion of the Commission as to how the law should be
construed.
The case of People vs. Jolliffe ( G.R. No. L-9553, promulgated on
May 30, 1959) cited by appellant, does not support its contention that
the circular in question is a rule or regulation. What was there said
was merely that a regulation may be incorporated in the form of a
circular. Such statement simply meant that the substance and not the
form of a regulation is decisive in determining its nature. It does not
lay down a general proposition of law that any circular, regardless of
its substance and even if it is only interpretative, constitutes a rule
or regulation which must be published in the Official Gazette before it
could take effect.
The case of People vs. Que Po Lay ( 50 O.G. 2850) also cited by
appellant is not applicable to the present case, because the penalty
that may be incurred by employers and employees if they refuse to pay
the corresponding premiums on bonus, overtime pay, etc. which the
employer pays to his employees, is not by reason of non-compliance with
Circular No. 22, but for violation of the specific legal provisions
contained in Section 27 (e) and (f) of Republic Act No. 1161.
We find, therefore, that Circular No. 22 purports merely to advise
employers-members of the System of what, in the light of the amendment
of the law, they should include in determining the monthly compensation
of their employees upon which the social security contributions should
be based, and that such circular did not require presidential approval
and publication in the Official Gazette for its effectivity.
It hardly need be said that the Commission’s interpretation of the
amendment embodied in its Circular No. 22, is correct. The express
elimination among the exemptions excluded in the old law, of all
bonuses, allowances and overtime pay in the determination of the
“compensation” paid to employees makes it imperative that such bonuses
and overtime pay must now be included in the employee’s remuneration in
pursuance of the amendatory law. It is true that in previous cases,
this Court has held that bonus is not demandable because it is not part
of the wage, salary, or compensation of the employee. But the question
in the instant case is not whether bonus is demandable or not as part
of compensation, but whether, after the employer does, in fact, give or
pay bonus to his employees, such bonuses shall be considered
compensation, under the Social Security Act after they have been
received by the employees. While it is true that terms or words are to
be interpreted in accordance with their well-accepted meaning in law,
nevertheless, when such term or word is specifically defined in a
particular law, such interpretation must be adopted in enforcing that
particular law, for it can not be gainsaid that a particular phrase or
term may have one meaning for one purpose and another meaning for some
other purpose. Such is the case that is now before us. Republic Act
1161 specifically defined what “compensation” should mean “For the purposes of this Act”.
Republic Act 1792 amended such definition by deleting some exceptions
authorized in the original Act. By virtue of this express substantial
change in the phraseology of the law, whatever prior executive or
judicial construction may have been given to the phrase in question
should give way to the clear mandate of the new law.
In view of the foregoing, the Resolution appealed from is hereby affirmed, with costs against appellant. So ordered.
Bengzon, C.J., Padilla, Baustista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon, and De Leon, JJ., concur.