Luzon Stevedoring Corporation vs Social Security System (1966)

G.R. No. L-20088 – 16 SCRA 6 – Labor Law – Labor Standards – Coverage of the Social Security Act

Luzon Stevedoring Corporation (LSC) is engaged in the business of stevedoring, lightering, and towing in the cities of Iloilo and Bacolod. It owns, maintains and operates towboats, barges and a drydock. In 1959, it carried in its payrolls temporary employees of 1,752 and 2,552 stevedores in the cities of Iloilo and Bacolod, respectively, who were hired on rotation and on vessel-by- vessel basis. They were paid daily with the understanding of being laid off at the end of each day. On the average, each stevedore worked for 14 days during the year. In October 1960, LSC petitioned to the SSS that the temporary employees be exempt from SSS contributions on the ground that they “work only intermittently and are not in a position to maintain membership in the Social Security System long enough to be fully entitled to the law’s sickness, disability, death and retirement benefits”. And that the law could not have intended them to be covered without enjoying the benefits of the program. SSS however denied LSC’s petition and it ordered LSC to pay back premiums. LSC countered stating that the compulsory coverage of the SSS contributions only covers permanent employees. LSC invoked Section 9 of the Social Security Act as amended by Republic Act No. 1792 which states that an employee must at least have been with the company for six months to be covered by the compulsory coverage. LSC also invoked Sec. 8 of the same law which defines employment covered by the Social Security Act and also provides exemption therefrom. Paragraph 10 of that section would state that services by temporary employees may be excluded by regulations of the Social Security Commission. This is interpreted by LSC as a provision that Congress has delegated to the Social Security Commission the issuance of regulations bearing on the exemption of services performed by temporary employees from social security coverage.

ISSUE: Whether or not the temporary employees are exempt from the compulsory coverage.

HELD: No. The Social Security Act was amended by Republic Act No. 2658 on June 18, 1960. The amendment broadened the coverage of the Social Security System, increased its benefits and liberalized the terms and conditions for their enjoyment.  Sections 9 and 10 were made to read as follows:

“SEC. 9. Compulsory Coverage. – Coverage in the System shall be compulsory upon all employees between the ages of sixteen and sixty, inclusive, and their employers: . . .”

“SEC. 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 date of his employment.”

Eliminated was the six months’ service requirement. Without such requirement, all employees regardless of tenure, such as the employees in question, would qualify for compulsory membership in the SSS; except of course those classes of employees contemplated in Section 8(j) of the Social Security Act. With such removal, it is the intent of Congress to broaden and include temporary workers to the compulsory coverage. On the other hand, in regards section 8, paragraph 10 being invoked by LSC, no such regulation has been cited to buttress the claim for exemption. Perforce, no exemption could be granted as there is no way of telling whether or not the employees in question belong to a group or class designated by regulation of the Social Security Commission as exempt.

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