Delinquent Employers Can Be Sentenced up to 20 Years in Jail

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My lengthy write-up last week which ate half a page of the Baguio Herald Express should be reason enough to warn delinquent employers not to take the Social Security contributions of their employees for granted.

The mandatory obligation to deduct and to remit SSS contributions rests upon the employers under RA 8282. The employer cannot use as an excuse that his bookkeeper failed to remit the contributions on his behalf or that he cannot get his employees to cooperate because they do not want to be deducted in their salaries or that they have not secured an SSS number. These defenses can not hold water in court.

If at all my write-up did not leave an impact, especially on hardcore contribution evading employers, this week and the following weeks, let me cite actual cases decided by the Supreme Court who upheld convictions laid by the Regional Trial Courts.

Our first conviction pertains to a president of a corporation who the Supreme Court sentenced to suffer a maximum jail term of 20 years of reclusion temporal, the same penalty for the crime of homicide.

Rico, President of ABC Industries, Inc. (names were changed to avoid further embarrassment) failed to remit the premiums of his employees amounting to P421,151.09, inclusive of 3 percent penalty for the delay in the full payment of premiums. Rico proposed to settle in 18 months and the SSS approved. However, Rico failed to settle the installments despite several extensions given to him by the SSS. One of Rico’s defenses was, his corporation closed during the assessed period because of economic decline. The Trial Court convicted Rico and meted out a penalty of 6 years and 1 day to 8 years. He was also ordered to pay the contributions with its accrued penalties.

On appeal, the Court of Appeals (CA) affirmed the decision of the trial court and dismissed as without merit the errors raised by the convicted employer. The CA cited that RA 8282 or the SS Act of 1997 is a special law, thus, lack of criminal intent or good faith is not a defense in its violation. Rico who further raised that he should not be held personally liable for the corporation because he was merely a conduit of it, desperately tried to exculpate himself by claiming that he was charged as a proprietor and not as a director who according to him should be the one held liable as provided for by RA 8282. If we read the exact provision, paragraph (f) of Section 28 states:

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 for the penalties provided in this Act for the offense.

In its ruling, the Supreme Court said this provision of the law is very clear and unambiguous. It held: To heed petitioner’s reasoning would allow unscrupulous businessmen to conveniently escape liability by the creative adoption of managerial titles. This is where dummies of corporations should be wary of. Their principals whose names do not appear on the General Information Sheet or Articles of Incorporation with the Securities and Exchange Commission cannot be recognized until they are indeed identified as the owners. Meanwhile, the dummies should assume the SSS liability as managing heads, directors or partners, or whatever title they may wish to be called.

So Rico, our corporation president appealed to the Supreme Court to pray for a shorter jail term contending that there were mitigating and alternative circumstances present that should warrant him a lesser number of years in prison, like: “his being vicariously liable; his good faith in failing to remit the contributions; his payment of the premium contributions of (his corporation) out of his personal funds.”

He even went on to say that he should not be penalized that long because he is “economically useful, given his academic credentials, he having graduated from a prime university in Manila and being a reputable businessman.”

The reasoning did not suit well with the Supreme Court who decided that the penalty for an employer who deducts contributions and misappropriates the same by not remitting to SSS should be the penalty provided under Art. 315 of the Revised Penal Code for the crime of Estafa. Since Rico misappropriated P421,151.09, the Supreme Court said the Indeterminate Sentence Law should apply, thus, instead of a maximum of eight (8) years, Rico’s indeterminate prison term was increased to four (4) years and two (2) months of prision correccional, as minimum, to twenty (20) years of reclusion temporal, as maximum.

It was also in this case that the CA quoted the Supreme Court in its decision in United Christian Missionary Society vs. Social Security Commission (G.R. No. L-26712-16, December 27, 1969, 30 SCRA 982) on the three percent (3%) penalty which many employers would want to be condoned, thinking it is at the behest of anybody at the SSS or the SSC. The Supreme Court reiterated:

“No discretion or alternative is granted respondent Commission in the enforcement of the laws mandate that the employer who fails to comply with the legal obligation to remit the premiums to the System within the prescribed period shall pay a penalty of three 3% per month. The prescribed penalty is evidently of a punitive character, provided by the legislature to assure that employers do not take lightly the State’s exercise of the police power in the implementation of the Republic’s declared policy to develop, establish gradually and perfect a social security system which shall be suitable to the needs of the people throughout the Philippines and (to) provide protection to employers against the hazards of disability, sickness, old age and death.” x x x

From the moment the remittance of premiums due is delayed, the penalty immediately attaches to the delayed premium payments by force of law.

The SSS people are thus, not bluffing when they say the penalty cannot be condoned nor compromised as only a law, meaning that which was passed by legislators (Congress and Senate) and approved by the President of the Republic of the Philippines could allow such condonation.

Some members may think it is easy to collect from delinquent employers and that we are taking their violations lightly. Our Account Officers and even us lawyers have been harassed, threatened and put in dangerous situations because we stood our ground and fought for employee members even if they did not wish to be helped. We understand especially for workers who have to make their keep for their daily subsistence, that SSS will be among the least of their concerns. They need their job and we cannot promise that they can keep it after earning the ire of their employer whose compliance we insist on. Employees can always report to us that their employer has rehearsed them on what to tell the SSS people every time we come for ocular inspections, or that their employer tried to cramp all ten of them inside a tiny comfort room to make it appear that he only has one person under his employ and that employee is even his son. We know that employers can produce ‘sanitized’ documents to show us salaries lower than the paltry pay of a kasambahay when the employee is into construction work. We have heard all sorts of lies from employers whose employees have no choice but to keep mum lest they be oppressed or terminated. Hiding your employment records or downgrading your employees’ salaries to suit your budget are violations of the SS law and we do file cases for non-production of records or non-reporting of employees. Most importantly, the SSS is not precluded from computing the correct premiums and the accrued penalties regardless of lapse of time.

Thus, despite the lack of cooperation from the employee-members, we still prosecute. We have taken collection to Courts, our ally in enforcing SS Law violations. Coercively, the Courts can issue warrants of arrest or convict the employer.

Having cited one case, I hope employers who think they can ignore our Account Officers should have reconsidered their continued non-compliance by now. SSS collection and prosecution for delinquency are real. Employers have been convicted and made to pay not only in thousands but millions in penalties. The SSS commits to boost its collection efforts while there are employers who still believe they can get away with their violation.  I hope more members will likewise take on this challenge until we have empowered the labor sector to impose on their SSS benefits.

Reference: Romarico J. Mendoza vs. People of the Philippines (G.R. No. 183891, August 3, 2010)

The Lord detests dishonest scales, but accurate weights find favor with him. Proverbs 11: 11