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Cooperative Employment Dispute

This document summarizes a Supreme Court case from the Philippines regarding whether the owners-members of a cooperative are considered employees that are required to contribute to social security. The Social Security System argued the cooperative should register as the employer of its owners-members since it had service contracts to provide workers. However, the cooperative claimed its owners are also the owners of the cooperative, so there is no employer-employee relationship. The Supreme Court ruled the Social Security Commission does have jurisdiction to determine if an employer-employee relationship exists, as that is central to the compulsory coverage of social security. It remanded the case back to the Commission to determine the nature of the relationship between the cooperative and its owners-members.

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0% found this document useful (0 votes)
133 views4 pages

Cooperative Employment Dispute

This document summarizes a Supreme Court case from the Philippines regarding whether the owners-members of a cooperative are considered employees that are required to contribute to social security. The Social Security System argued the cooperative should register as the employer of its owners-members since it had service contracts to provide workers. However, the cooperative claimed its owners are also the owners of the cooperative, so there is no employer-employee relationship. The Supreme Court ruled the Social Security Commission does have jurisdiction to determine if an employer-employee relationship exists, as that is central to the compulsory coverage of social security. It remanded the case back to the Commission to determine the nature of the relationship between the cooperative and its owners-members.

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Republic v. Asiapro Cooperative, G.R. No.

172101, November 23, 2007, 563 PHIL 979-1003


FACTS:
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body
authorized by law to resolve disputes arising under RA 1161, as amended by RA 8282. Petitioner SSS
is a government corporation created by virtue of Republic Act No. 1161, as amended. On the other
hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative created pursuant
to Republic Act No. 6938 and duly registered with the Cooperative Development Authority (CDA).
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-
members are of two categories, to wit: (1) regular member, who is entitled to all the rights and
privileges of membership; and (2) associate member, who has no right to vote and be voted upon and
shall be entitled only to such rights and privileges provided in its by-laws. Its primary objectives are to
provide savings and credit facilities and to develop other livelihood services for its owners-members. In
the discharge of the aforesaid primary objectives, respondent cooperative entered into several Service
Contracts with Stanfilco — a division of DOLE Philippines, Inc. and a company based in Bukidnon.
The owners-members do not receive compensation or wages from the respondent cooperative. Instead,
they receive a share in the service surplus which the respondent cooperative earns from different areas
of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The
owners-members get their income from the service surplus generated by the quality and amount of
services they rendered, which is determined by the Board of Directors of the respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the
respondent cooperative, who were assigned to Stanfilco requested the services of the latter to register
them with petitioner SSS as self-employed and to remit their contributions as such. Also, to comply
with Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS
contributions of the said owners-members were equal to the share of both the employer and the
employee.
Petitioner SSS sent a letter to the respondent cooperative, addressed to its Chief Executive Officer
(CEO) and General Manager Leo G. Parma, informing the latter that based on the Service Contracts it
executed with Stanfilco, respondent cooperative is actually a manpower contractor supplying
employees to Stanfilco and for that reason, it is an employer of its owners-members working with
Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an employer and
make the corresponding report and remittance of premium contributions in accordance with the Social
Security Law of 1997.
Respondent cooperative sent a reply to petitioner SSS's letter asserting that it is not an employer
because its owners-members are the cooperative itself; hence, it cannot be its own employer. Again,
petitioner SSS sent a letter to respondent cooperative ordering the latter to register as an employer and
report its owners-members as employees for compulsory coverage with the petitioner SSS. Respondent
cooperative continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, filed a Petition before petitioner SSC against the respondent cooperative
and Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to
register as an employer and to report respondent cooperative's owners-members as covered employees
under the compulsory coverage of SSS and to remit the necessary contributions in accordance with
the Social Security Law of 1997. Respondent cooperative filed its Answer with Motion to Dismiss
alleging that no employer-employee relationship exists between it and its owners-members, thus,
petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco, on the other hand, filed an
Answer with Cross-claim against the respondent cooperative.
Petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative.
Respondent cooperative filed a Petition for Certiorari before the CA.
The CA granted the petition filed by the respondent cooperative.
Hence, this Petition.
ISSUE:
Whether or not the Court of Appeals erred in not finding that the SSC has jurisdiction over the
subject matter and it has a valid basis in denying respondent's Motion to Dismiss. The said issue is
supported, among others, by the following argument:
 There is an employer-employee relationship between [respondent cooperative] and its
[owners-members].
PETITIONER’S CLAIMS: that SSC has jurisdiction over the petition-complaint filed before it by
petitioner SSS as it involved an issue of whether or not a worker is entitled to compulsory coverage
under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as amended by Republic
Act No. 8282, expressly confers upon petitioner SSC the power to settle disputes on compulsory
coverage, benefits, contributions and penalties thereon or any other matter related thereto. Likewise,
Section 9 of the same law clearly provides that SSS coverage is compulsory upon all employees.
Petitioners contend that there is an employer-employee relationship between the respondent cooperative
and its owners-members. The respondent cooperative is the employer of its owners-members
considering that it undertook to provide services to Stanfilco, the performance of which is under the full
and sole control of the respondent cooperative.
RESPONDENT’S CONTENTIONS: respondent cooperative alleges that its owners-members own
the cooperative, thus, no employer-employee relationship can arise between them. The persons of the
employer and the employee are merged in the owners-members themselves. Likewise, respondent
cooperative's owners-members even requested the respondent cooperative to register them with the
petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction over the petition-
complaint filed before it by petitioner SSS.
RULING:
Petitioner SSC's jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in
Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 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,
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. — Any dispute arising under the Social Security Act with respect to
coverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or
any other matter related thereto, shall be cognizable by the Commission after the SSS through its
President, Manager or Officer-in-charge of the Department/Branch/Representative Office concerned
had first taken action thereon in writing.
It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the
SSS is well within the exclusive domain of the petitioner SSC. It is important to note, though, that the
mandatory coverage under the SSS Law is premised on the existence of an employer-employee
relationship except in cases of compulsory coverage of the self-employed.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the
respondent cooperative and Stanfilco alleges that the owners-members of the respondent cooperative
are subject to the compulsory coverage of the SSS because they are employees of the respondent
cooperative. Consequently, the respondent cooperative being the employer of its owners-members must
register as employer and report its owners-members as covered members of the SSS and remit the
necessary premium contributions in accordance with the Social Security Law of 1997. Accordingly,
based on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case
clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by the
respondent cooperative challenged the jurisdiction of the petitioner SSC on the alleged lack of
employer-employee relationship between itself and its owners-members, the same is not enough to
deprive the petitioner SSC of its jurisdiction over the petition-complaint filed before it. Thus, the
petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-complaint of the
petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship between the respondent
cooperative and its owners-members was put in issue and considering that the compulsory coverage of
the SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC to
determine if there is really an employer-employee relationship that exists between the respondent
cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not within the exclusive
jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the Labor
Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. — (a) . . . .
xxx xxx xxx
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from employer-
employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily
include issues on the coverage thereof, because claims are undeniably rooted in the coverage by the
system. Hence, the question on the existence of an employer-employee relationship for the purpose of
determining the coverage of the Social Security System is explicitly excluded from the jurisdiction
of the NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty of
settling disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of
compulsory coverage of the owners-members of the respondent cooperative, this Court agrees with the
petitioner SSC when it declared in its Order that as an incident to the issue of compulsory coverage, it
may inquire into the presence or absence of an employer-employee relationship without need of waiting
for a prior pronouncement or submitting the issue to the NLRC for prior determination.
Although as a rule, in the exercise of the Supreme Court's power of review, the Court is not a trier of
facts and the findings of fact of the Court of Appeals are conclusive and binding on the Court,  said rule
is not without exceptions. One of these exceptions finds application in this present case which is, when
the findings of fact are conflicting. There are, indeed, conflicting findings espoused by the petitioner
SSC and the appellate court relative to the existence of employer-employee relationship between the
respondent cooperative and its owners-members, which necessitates a departure from the oft-repeated
rule that factual issues may not be the subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the following elements are
considered: (1) the selection and engagement of the workers; (2) the payment of wages by whatever
means; (3) the power of dismissal; and (4) the power to control the worker's conduct, with the latter
assuming primacy in the overall consideration.  The most important element is the employer's
control of the employee's conduct, not only as to the result of the work to be done, but also as to
the means and methods to accomplish.  The power of control refers to the existence of the power and
not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise
the performance of duties of the employee; it is enough that the employer has the right to wield that
power.  All the aforesaid elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative
which has the exclusive discretion in the selection and engagement of the owners-members as
well as its team leaders who will be assigned at Stanfilco. Second. Wages are defined as
"remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained, on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for service rendered or to be
rendered." In this case, the weekly stipends or the so-called shares in the service surplus given by the
respondent cooperative to its owners-members were in reality wages, as the same were equivalent to
an amount not lower than that prescribed by existing labor laws, rules and regulations, including the
wage order applicable to the area and industry; or the same shall not be lower than the prevailing rates
of wages. It cannot be doubted then that those stipends or shares in the service surplus are indeed
wages, because these are given to the owners-members as compensation in rendering services to
respondent cooperative's client, Stanfilco. Third. It is also stated in the above-mentioned Service
Contracts that it is the respondent cooperative which has the power to investigate, discipline and
remove the owners-members and its team leaders who were rendering services at Stanfilco. 
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control
test" is the most important. In the case at bar, it is the respondent cooperative which has the sole
control over the manner and means of performing the services under the Service Contracts
with Stanfilco as well as the means and methods of work.  Also, the respondent cooperative is
solely and entirely responsible for its owners-members, team leaders and other representatives at
Stanfilco. All these clearly prove that, indeed, there is an employer-employee relationship between
the respondent cooperative and its owners-members. DIETHS
As previously pointed out by this Court, an employee-employer relationship actually exists between
the respondent cooperative and its owners-members. The four elements in the four-fold test for the
existence of an employment relationship have been complied with. The respondent cooperative must
not be allowed to deny its employment relationship with its owners-members by invoking the
questionable Service Contracts provision, when in actuality, it does exist. The existence of an
employer-employee relationship cannot be negated by expressly repudiating it in a contract,
when the terms and surrounding circumstances show otherwise. The employment status of a
person is defined and prescribed by law and not by what the parties say it should be.
In sum, having declared that there is an employer-employee relationship between the
respondent cooperative and its owners-member, we conclude that the petitioner SSC has jurisdiction
over the petition-complaint filed before it by the petitioner SSS. This being our conclusion, it is no
longer necessary to discuss the issue of whether the respondent cooperative was estopped from
assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Orders of the
petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The
petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed before it by the
petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-
members. No costs. ISO ORDERED.

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