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G.R. No. 200114. August 24, 2015.*

 
SOCIAL SECURITY SYSTEM, petitioner, vs. DEBBIE
UBAÑA, respondent.

Labor Law; Job Contracting; In legitimate job contracting, no

employer-employee relation exists between the principal and the
job contractor’s employees. The principal is responsible to the job
contractor’s employees only for the proper payment of wages.—In
Home Development Mutual Fund v. Commission on Audit, 440
SCRA 643 (2004), it was held that while they performed the work
of regular government employees, DBP Service Corporation
personnel are not government personnel, but employees of DBP
Service Corporation acting as an independent contractor.
Applying the foregoing pronouncement to the present case, it can
be said that during respondent’s stint with petitioner, she never
became an SSS employee, as she remained an employee of DBP
Service Corporation and SSS Re-

_______________

*  SECOND DIVISION.

 
 

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Social Security System vs. Ubaña

tirees Association — the two being independent contractors

with legitimate service contracts with SSS. Indeed, “[i]n
legitimate job contracting, no employer-employee relation exists
between the principal and the job contractor’s employees. The
principal is responsible to the job contractor’s employees only for
the proper payment of wages.”
Same; Labor Arbiter; Employer-Employee Relationship; For
Article 217 of the Labor Code to apply, and in order for the Labor
Arbiter (LA) to acquire jurisdiction over a dispute, there must be
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an employer-employee relation between the parties thereto.—For

Article 217 of the Labor Code to apply, and in order for the Labor
Arbiter to acquire jurisdiction over a dispute, there must be an
employer-employee relation between the parties thereto.
Administrative Agencies; Social Security System; If the Social
Security System (SSS) cannot guarantee the security of those who
work for it, it is doubtful that it can even discharge its directive to
promote the social security of its members in line with the
fundamental mandate to promote social justice and to insure the
well-being and economic security of the Filipino people.—There
being no employer-employee relation or any other definite or
direct contract between respondent and petitioner, the latter
being responsible to the former only for the proper payment of
wages, respondent is thus justified in filing a case against
petitioner, based on Articles 19 and 20 of the Civil Code, to
recover the proper salary due her as SSS Processor. At first
glance, it is indeed unfair and unjust that as Processor who has
worked with petitioner for six long years, she was paid only
P5,038.00 monthly, or P229.00 daily, while a regular SSS
employee with the same designation and who performs identical
functions is paid a monthly salary of P18,622.00, or P846.45 daily
wage. Petitioner may not hide under its service contracts to
deprive respondent of what is justly due her. As a vital
government entity charged with ensuring social security, it should
lead in setting the example by treating everyone with justice and
fairness. If it cannot guarantee the security of those who work for
it, it is doubtful that it can even discharge its directive to promote
the social security of its members in line with the fundamental
mandate to promote social justice and to insure the well-being
and economic security of the Filipino people.
Labor Law; Wages; In this jurisdiction, the “long honored
legal truism of ‘equal pay for equal work’” has been “impregnably
institu-

 
 
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Social Security System vs. Ubaña

tionalized”; “persons who work with substantially equal

qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries.”—In this jurisdiction,
the “long honored legal truism of ‘equal pay for equal work’” has
been “impregnably institutionalized”; “[p]ersons who work with
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substantially equal qualifications, skill, effort and responsibility,

under similar conditions, should be paid similar salaries.” “That
public policy abhors inequality and discrimination is beyond
contention. Our Constitution and laws reflect the policy against
these evils. The Constitution in the Article on Social Justice and
Human Rights exhorts Congress to ‘give highest priority to the
enactment of measures that protect and enhance the right of all
people to human dignity, reduce social, economic, and political
inequalities.’ The very broad Article 19 of the Civil Code requires
every person, ‘in the exercise of his rights and in the performance
of his duties, [to] act with justice, give everyone his due, and
observe honesty and good faith.’”
JARDALEZA, J., Dissenting Opinion:
Labor Law; Labor Disputes; Words and Phrases; View that
Article 212(1) of the Labor Code defines a labor dispute to include
“any controversy or matter concerning terms or conditions of
employment or the association or representation of persons in
negotiating, fixing, maintaining, changing or arranging the terms
and conditions of employment regardless of whether or not the
disputants stand in the proximate relations of employer and
employee.”—Both parties agree that there is no employer-
employee relation between them, respondent being an employee of
independent service contractors hired by the SSS. This fact alone,
however, does not preclude the controversy between them from
being a labor dispute. Article 212(1) of the Labor Code defines a
labor dispute to include “any controversy or matter concerning
terms or conditions of employment or the association or
representation of persons in negotiating, fixing, maintaining,
changing or arranging the terms and conditions of employment
regardless of whether or not the disputants stand in the
proximate relations of employer and employee.”

 
 

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Administrative Agencies; Social Security System; View that

the Social Security System (SSS) is a government-controlled
corporation created by Republic Act (RA) No. 1161.—The SSS is a
government-controlled corporation created by Republic Act (RA)
No. 1161. Pursuant to Section 2(1), Article IX of the Constitution,
a labor dispute involving the SSS is cognizable by the CSC. Thus:
… that the action below is for damages under Articles 19, 20 and
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21 of the Civil Code would not suffice to keep the case within the
jurisdictional boundaries of regular Courts. That claim for
damages is interwoven with a labor dispute existing
between the parties and would have to be ventilated
before the administrative machinery established for the
expeditious settlement of those disputes. To allow the action
filed below to prosper would bring about “split jurisdiction” which
is obnoxious to the orderly administration of justice.
Labor Law; Management Prerogative; Independent
Contractors; Contractualization; View that the Supreme Court
(SC) has recognized that an employer has “the proprietary right ...
to exercise an inherent management prerogative and its best
business judgment to determine whether it should contract out the
performance of some of its work to independent contractors.”—This
Court has recognized that an employer has “the proprietary right
… to exercise an inherent management prerogative and its best
business judgment to determine whether it should contract out
the performance of some of its work to independent contractors.”
This right, in my view, flows from the constitutional liberty of an
employer to determine whether to perform its work itself or
through independent contractors that meet the requirements of
the law.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
  Joselito A. Vivit, Dorenda M. Dasmariñas and Joseph
C. Desunia for petitioner.
  Fernando F. Dialogo for respondent.

 
 

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Social Security System vs. Ubaña

DEL CASTILLO, J.:

 
This Petition for Review on Certiorari1 assails: 1) the
July 29, 2011 Decision2 of the Court of Appeals (CA)
denying the Petition for Certiorari in C.A.-G.R. S.P. No.
110006 and affirming the March 6, 2007 Order3 of the
Regional Trial Court (RTC) of Daet, Camarines Norte,
Branch 39 in Civil Case No. 7304; and 2) the CA’s January
10, 2012 Resolution4 denying petitioner’s Motion for
Reconsideration of the herein assailed Decision.
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Factual Antecedents
 
On December 26, 2002, respondent Debbie Ubaña filed a
civil case for damages against the DBP Service
Corporation, petitioner Social Security System (SSS), and
the SSS Retirees Association5 before the RTC of Daet,
Camarines Norte. The case was docketed as Civil Case No.
7304 and assigned to RTC Branch 39.
In her Complaint,6 respondent alleged that in July 1995,
she applied for employment with the petitioner. However,
after passing the examinations and accomplishing all the
requirements for employment, she was instead referred to
DBP Service Corporation for “transitory employment.” She
took the preemployment examination given by DBP Service
Corporation and passed the same. On May 20, 1996, she
was told to report for training to SSS, Naga City branch,
for immediate deployment to SSS Daet branch. On May 28,
1996, she was

_______________

1  Rollo, pp. 3-18.

2  CA Rollo, pp. 90-96; penned by Associate Justice Samuel H. Gaerlan
and concurred in by Associate Justices Rosmari D. Carandang and Ramon
R. Garcia.
3  Records, pp. 189-190; penned by Judge Winston S. Racoma.
4  CA Rollo, p. 118.
5  Should be “SSS Retirees Service Corporation.”
6  Records, pp. 1-7.

 
 

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made to sign a six-month Service Contract Agreement7 by

DBP Service Corporation, appointing her as clerk for
assignment with SSS Daet branch effective May 27, 1996,
with a daily wage of only P171.00. She was assigned as
“Frontliner” of the SSS Members Assistance Section until
December 15, 1999. From December 16, 1999 to May 15,
2001, she was assigned to the Membership Section as Data
Encoder. On December 16, 2001, she was transferred to the
SSS Retirees Association as Processor at the Membership
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Section until her resignation on August 26, 2002. As

Processor, she was paid only P229.00 daily or P5,038.00
monthly, while a regular SSS Processor receives a monthly
salary of P18,622.00 or P846.45 daily wage. Her May 28,
1996 Service Contract Agreement with DBP Service
Corporation was never renewed, but she was required to
work for SSS continuously under different assignments
with a maximum daily salary of only P229.00; at the same
time, she was constantly assured of being absorbed into the
SSS plantilla. Respondent claimed she was qualified for
her position as Processor, having completed required
training and passed the SSS qualifying examination for
Computer Operations Course given by the National
Computer Institute, U.P. Diliman from May 16 to June 10,
2001, yet she was not given the proper salary. Because of
the oppressive and prejudicial treatment by SSS, she was
forced to resign on August 26, 2002 as she could no longer
stand being exploited, the agony of dissatisfaction, anxiety,
demoralization, and injustice. She asserted that she
dedicated six years of her precious time faithfully serving
SSS, foregoing more satisfying employment elsewhere, yet
she was merely exploited and given empty and false
promises; that defendants conspired to exploit her and
violate civil service laws and regulations and Civil Code
provisions on Human Relations, particularly Articles 19,
20, and

_______________

7  Id., at p. 14.

 
 
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Social Security System vs. Ubaña

21.8 As a result, she suffered actual losses by way of

unrealized income, moral and exemplary damages,
attorney’s fees and litigation expenses.
Respondent prayed for an award of P572,682.67 actual
damages representing the difference between the legal and
proper salary she should have received and the actual
salary she received during her six-year stint with
petitioner; P300,000.00 moral damages; exemplary
damages at the discretion of the court; P20,000.00
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attorney’s fees and P1,000.00 appearance fees; and other

just and equitable relief.
Petitioner and its codefendants SSS Retirees Association
and DBP Service Corporation filed their respective motions
to dismiss, arguing that the subject matter of the case and
respondent’s claims arose out of employer-employee
relations, which are beyond the RTC’s jurisdiction and
properly cognizable by the National Labor Relations
Commission (NLRC).
Respondent opposed the motions to dismiss, arguing
that pursuant to civil service rules and regulations, service
contracts such as her Service Contract Agreement with
DBP Service Corporation should cover only a) lump sum
work or services such as janitorial, security or consultancy
services, and b) piece work or intermittent jobs of short
duration not exceeding six months on a daily basis.9 She
posited that her service contract involved the performance
of sensitive work, and not merely janitorial, security,
consultancy services, or work

_______________

8  Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
Art. 20. Every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same.
Art. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
9   Civil Service Commission Resolution No. 020790, Re: Policy
Guidelines for Contract of Services, June 5, 2002.

 
 
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of intermittent or short duration. In fact, she was made to

work continuously even after the lapse of her 6-month
service contract. Citing Civil Service Commission
Memorandum Circular No. 40, respondent contended that
the performance of functions outside of the nature provided
in the appointment and receiving salary way below that
received by regular SSS employees amount to an abuse of

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rights; and that her cause of action is anchored on the

provisions of the Civil Code on Human Relations.
 
Ruling of the Regional Trial Court
 
On October 1, 2003, the RTC issued an Order10
dismissing respondent’s complaint for lack of jurisdiction,
stating that her claim for damages “has a reasonable
causal connection with her employer-employee relations
with the defendants”11 and “is grounded on the alleged
fraudulent and malevolent manner by which the
defendants conspired with each other in exploiting [her],
which is a clear case of unfair labor practice,”12 falling
under the jurisdiction of the Labor Arbiter of the NLRC.
Thus, it decreed:

WHEREFORE, premises considered, the aforementioned

Motion to Dismiss the complaint of the herein plaintiff for lack of
jurisdiction is hereby GRANTED. The above entitled complaint is
hereby DISMISSED.
SO ORDERED.13

 
Respondent moved for reconsideration. On March 6,
2007, the RTC issued another Order14 granting
respondent’s motion for reconsideration. The trial court
held:

_______________

10  Records, pp. 153-154; penned by Judge Winston S. Racoma.

11  Id., at p. 154.
12  Id.
13  Id.
14  Id., at pp. 189-190.

 
 
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Social Security System vs. Ubaña

Section 2(1), Art. IX-B, 1987 Constitution, expressly provides

that “the civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the government, including
government-owned or -controlled corporation[s] with original
charters.” Corporations with original charters are those which
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have been created by special law[s] and not through the general
corporation law. In contrast, labor law claims against
government-owned and -controlled corporations without original
charters fall within the jurisdiction of the Department of Labor
and Employment and not the Civil Service Commission. (Light
Rail Transit Authority v. Perfecto Venus, March 24, 2006)
Having been created under an original charter, RA No. 1161 as
amended by R.A. 8282, otherwise known as the Social Security
Act of 1997, the SSS is governed by the provision[s] of the Civil
Service Commission. However, since the SSS denied the existence
of an employer-employee relationship, and the case is one for
Damages, it is not the Civil Service Commission that has
jurisdiction to try the case, but the regular courts.
A perusal of the Complaint filed by the plaintiff against the
defendant SSS clearly shows that the case is one for Damages.
Paragraph 15 of her complaint states, thus:
x x x. Likewise, they are contrary to the Civil Code provisions
on human relations which [state], among others, that “Every
person, must in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due and observe
honesty and good faith” (Article 19) and that “Every person who,
contrary to law, willfully or negligently [causes] damages to
another, shall indemnify the latter for the same.” (Art. 20)
“Article 19 provides a rule of conduct that is consistent with an
orderly and harmonious relationship between and among men and
women. It codifies the concept of what is justice and fair play so
that abuse of right by a person will be prevented. Art. 20 speaks of
general sanction for all other provisions of law which do not
especially

 
 
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Social Security System vs. Ubaña

provide their own sanction. Thus, anyone, who, whether willfully

or negligently, in the exercise of his legal right or duty, causes
damage to another, shall indemnify his or her victim for injuries
suffered thereby.” (Sta. Maria,Melencio, Jr., Persons and Family
Relations, pp. 31-32 [2004])
Wherefore, all premises considered, the Motion for
Reconsideration is hereby GRANTED. The case against defendant
Social Security System represented by its President is hereby
reinstated in the docket of active civil cases of this court.
SO ORDERED.15 [Italics in the original]

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Petitioner moved for reconsideration, but the RTC stood
its ground in its June 24, 2009 Order.16
 
Ruling of the Court of Appeals
 
In a Petition for Certiorari17 filed with the CA and
docketed as C.A.-G.R. S.P. No. 110006, petitioner sought a
reversal of the RTC’s June 24, 2009 and March 6, 2007
Orders and the reinstatement of its original October 1,
2003 Order dismissing Civil Case No. 7304, insisting that
the trial court did not have jurisdiction over respondent’s
claims for “unrealized salary income” and other damages,
which constitute a labor dispute cognizable only by the
labor tribunals. Moreover, it claimed that the assailed
Orders of the trial court were issued with grave abuse of
discretion. It argued that the trial court gravely erred in
dismissing the case only as against its codefendants DBP
Service Corporation and SSS Retirees Association and
maintaining the charge against it, considering that its
grounds for seeking dismissal are similar to those raised by
the two. It maintained that DBP Service Corpora-

_______________

15  Id.
16  Id., at pp. 206-207.
17  CA Rollo, pp. 3-25.

 
 

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tion and SSS Retirees Association are legitimate

independent job contractors engaged by it to provide
manpower services since 2001, which thus makes
respondent an employee of these two entities and not of
SSS; and that since it is not the respondent’s employer,
then there is no cause of action against it.
On July 29, 2011, the CA issued the assailed Decision
containing the following pronouncement:
Hence, petitioner seeks recourse before this Court via
this Petition for Certiorari challenging the RTC Orders. For
the resolution of this Court is the sole issue of:
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WHETHER OR NOT THE RTC HAS JURISDICTION TO

HEAR AND DECIDE CIVIL CASE NO. 7304.
The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter
thereof, as well as, which court or agency of the government has
jurisdiction over the same, are determined by the material
allegations of the complaint in relation to the law involved and
the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A
prayer or demand for relief is not part of the petition of the cause
of action; nor does it enlarge the cause of action stated or change
the legal effect of what is alleged. In determining which body has
jurisdiction over a case, the better policy is to consider not only
the status or relationship of the parties but also the nature of the
action that is the subject of their controversy.
A careful perusal of Ubaña’s Complaint in Civil Case No. 7304
unveils that Ubaña’s claim is rooted on the principle of abuse of
right laid in the New Civil Code. She was claiming damages based
on the alleged exploitation [perpetrated] by the defendants
depriving her of her rightful income. In asserting that she is
entitled to the damages claimed, [she] invoked not the provisions
of the

 
 

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Labor Code or any other labor laws but the provisions on human
relations under the New Civil Code. Evidently, the determination
of the respective rights of the parties herein, and the
ascertainment whether there were abuses of such rights, do not
call for the application of the labor laws but of the New Civil
Code. Apropos thereto, the resolution of the issues raised in the
instant complaint does not require the expertise acquired by labor
officials. It is the courts of general jurisdiction, which is the RTC
in this case, which has the authority to hear and decide Civil Case
No. 7304.
Not every dispute between an employer and employee involves
matters that only labor arbiters and the NLRC can resolve in the
exercise of their adjudicatory or quasi-judicial powers. Where the
claim to the principal relief sought is to be resolved not by
reference to the Labor Code or other labor relations statute or a
collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of

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justice and not to the Labor Arbiter and the NLRC. In such
situations, [resolution] of the dispute requires expertise, not in
labor management relations nor in wage structures and other
terms and conditions of employment, but rather in the application
of the general civil law. Clearly, such claims fall outside the area
of competence or expertise ordinarily ascribed to Labor Arbiters
and the NLRC and the rationale for granting jurisdiction over
such claims to these agencies disappears.
It is the character of the principal relief sought that appears
essential in this connection. Where such principal relief is to be
granted under labor legislation or a collective bargaining
agreement, the case should fall within the jurisdiction of the
Labor Arbiter and the NLRC, even though a claim for damages
might be asserted as an incident to such claim.
The pivotal question is whether the Labor Code has any
relevance to the principal relief sought in the complaint. As
pointed out earlier, Ubaña did not seek refuge from the Labor
Code in asking for the award of damages. It was the transgression
of Article[s] 19 and 20 of the

 
 
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New Civil Code that she was insisting in wagering this case. The
primary relief sought herein is for moral and exemplary damages
for the abuse of rights. The claims for actual damages for
unrealized income are the natural consequence for abuse of such
rights.
While it is true that labor arbiters and the NLRC have
jurisdiction to award not only reliefs provided by labor laws, but
also damages governed by the Civil Code, these reliefs must still
be based on an action that has a reasonable causal connection
with the Labor Code, other labor statutes, or collective bargaining
agreements. Claims for damages under paragraph 4 of Article 217
must have a reasonable causal connection with any of the claims
provided for in the article in order to be cognizable by the labor
arbiter. Only if there is such a connection with the other claims
can the claim for damages be considered as arising from
employer-employee relations. In the present case, Ubaña’s claim
for damages is not related to any other claim under Article 217,
other labor statutes, or collective bargaining agreements.
All told, it is ineluctable that it is the regular courts that has
[sic] jurisdiction to hear and decide Civil Case No. 7304. In Tolosa

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v. NLRC,18 the Supreme Court held that, “[i]t is not the NLRC but
the regular courts that have jurisdiction over action for damages,
in which the employer-employee relations is merely incidental,
and in which the cause of action proceeds from a different source
of obligation such as tort. Since petitioner’s claim for damages is
predicated on a quasi-delict or tort that has no reasonable causal
connection with any of the claims provided for in Article 217,
other labor statutes or collective bargaining agreements,
jurisdiction over the action lies with the regular courts — not with
the NLRC or the labor arbiters.” The same rule applies in this
case.
WHEREFORE, premises considered, the instant petition is
DENIED and the Order dated March 6, 2007 of the Regional Trial
Court, Branch 39 of Daet, Camarines Norte in Civil Case No.
7304 is hereby AFFIRMED.

_______________

18  449 Phil. 271; 401 SCRA 291 (2003).

 
 
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Social Security System vs. Ubaña

SO ORDERED.19

 
Petitioner filed a Motion for Reconsideration,20 but the
CA denied the same in its January 10, 2012 Resolution.21
Hence, the present Petition.
 
Issue
 
Petitioner simply submits that the assailed CA
dispositions are contrary to law and jurisprudence.
 
Petitioner’s Arguments
 
Praying that the assailed CA dispositions be set aside
and that the RTC’s October 1, 2003 Order dismissing Civil
Case No. 7304 be reinstated, petitioner essentially
maintains in its Petition and Reply22 that respondent’s
claims arose from and are in fact centered on her previous
employment. It maintains that there is a direct causal

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connection between respondent’s claims and her

employment, which brings the subject matter within the
jurisdiction of the NLRC. Petitioner contends that
respondent’s other claims are intimately intertwined with
her claim of actual damages which are cognizable by the
NLRC. Moreover, petitioner alleges that its existing
manpower services agreements with DBP Service
Corporation and SSS Retirees Association are legitimate;
and that some of respondent’s claims may not be
entertained since these pertain to benefits enjoyed by
government employees, not by employees contracted via
legitimate manpower service providers. Finally, petitioner
avers that the nature and character of the reliefs prayed
for by the respondent are directly within the jurisdiction
not of the courts, but of the labor tribunals.

_______________

19  CA Rollo, pp. 92-95.

20  Id., at pp. 106-112.
21  Id., at p. 118.
22  Rollo, pp. 54-61.

 
 
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Respondent’s Arguments
 
In her Comment,23 respondent maintains that her case
is predicated not on labor laws but on Articles 19 and 20 of
the Civil Code for petitioner’s act of exploiting her and
enriching itself at her expense by not paying her the correct
salary commensurate to the position she held within SSS.
Also, since there is no employer-employee relationship
between her and petitioner, as the latter itself admits, then
her case is not cognizable by the Civil Service Commission
(CSC) either; that since the NLRC and the CSC have no
jurisdiction over her case, then it is only the regular courts
which can have jurisdiction over her claims. She argues
that the CA is correct in ruling that her case is rooted in
the principle of abuse of rights under the Civil Code; and
that the Petition did not properly raise issues of law.
 
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Our Ruling
 
The Court denies the Petition.
In Home Development Mutual Fund v. Commission on
Audit,24 it was held that while they performed the work of
regular government employees, DBP Service Corporation
personnel are not government personnel, but employees of
DBP Service Corporation acting as an independent
contractor. Applying the foregoing pronouncement to the
present case, it can be said that during respondent’s stint
with petitioner, she never became an SSS employee, as she
remained an employee of DBP Service Corporation and
SSS Retirees Association — the two being independent
contractors with legitimate service contracts with SSS.
Indeed, “[i]n legitimate job contracting, no employer-em-
ployee relation exists between the principal and the job
con-

_______________

23  Id., at pp. 31-43.

24  483 Phil. 666; 440 SCRA 643 (2004).
 

 
 
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Social Security System vs. Ubaña

tractor’s employees. The principal is responsible to the job

contractor’s employees only for the proper payment of
wages.”25
In her Complaint, respondent acknowledges that she is
not petitioner’s employee, but that precisely she was
promised that she would be absorbed into the SSS plantilla
after all her years of service with SSS; and that as SSS
Processor, she was paid only P229.00 daily or P5,038.00
monthly, while a regular SSS Processor receives a monthly
salary of P18,622.00, or P846.45 daily wage. In its
pleadings, petitioner denied the existence of an employer-
employee relationship between it and respondent; in fact, it
insists on the validity of its service agreements with DBP
Service Corporation and SSS Retirees Association —
meaning that the latter, and not SSS, are respondent’s true
employers. Since both parties admit that there is no
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employment relation between them, then there is no

dispute cognizable by the NLRC. Thus, respondent’s case is
premised on the claim that in paying her only P229.00
daily — or P5,038.00 monthly — as against a monthly
salary of P18,622.00, or P846.45 daily wage, paid to a
regular SSS Processor at the time, petitioner exploited her,
treated her unfairly, and unjustly enriched itself at her
expense.
For Article 217 of the Labor Code to apply, and in order
for the Labor Arbiter to acquire jurisdiction over a dispute,
there must be an employer-employee relation between the
parties thereto.

x x x It is well-settled in law and jurisprudence that where

no employer-employee relationship exists between the
parties and no issue is involved which may be resolved by
reference to the Labor Code, other labor statutes or any
collective bargaining agreement, it is the Regional Trial
Court that has jurisdiction. x  x  x The action is within the
realm of civil law hence jurisdiction over the case belongs to
the regular courts. While the resolution of

_______________

25   Philippine Airlines, Inc. v. National Labor Relations Commission,

358 Phil. 919, 939; 298 SCRA 430, 447 (1998).

 
 
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Social Security System vs. Ubaña

the issue involves the application of labor laws, reference to

the labor code was only for the determination of the solidary
liability of the petitioner to the respondent where no
employer-employee relation exists. Article 217 of the Labor
Code as amended vests upon the labor arbiters exclusive
original jurisdiction only over the following:
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of
employment;

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4. Claims for actual, moral, exemplary and other forms

of damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this
Code, including questions involving legality of strikes and
lockouts; and
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.
In all these cases, an employer-employee relationship is
an indispensable jurisdictional requisite x x x.26

Since there is no employer-employee relationship

between the parties herein, then there is no labor dispute
cognizable by the Labor Arbiters or the NLRC.
There being no employer-employee relation or any other
definite or direct contract between respondent and
petitioner, the latter being responsible to the former only
for the proper payment of wages, respondent is thus
justified in filing a case

_______________

26   Lapanday Agricultural Development Corporation v. Court of

Appeals, 381 Phil. 41, 48-49; 324 SCRA 39, 45-46 (2000).

 
 
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Social Security System vs. Ubaña

against petitioner, based on Articles 19 and 20 of the Civil

Code, to recover the proper salary due her as SSS
Processor. At first glance, it is indeed unfair and unjust
that as Processor who has worked with petitioner for six
long years, she was paid only P5,038.00 monthly, or
P229.00 daily, while a regular SSS employee with the same
designation and who performs identical functions is paid a
monthly salary of P18,622.00, or P846.45 daily wage.
Petitioner may not hide under its service contracts to
deprive respondent of what is justly due her. As a vital
government entity charged with ensuring social security, it

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should lead in setting the example by treating everyone

with justice and fairness. If it cannot guarantee the
security of those who work for it, it is doubtful that it can
even discharge its directive to promote the social security of
its members in line with the fundamental mandate to
promote social justice and to insure the well-being and
economic security of the Filipino people.
In this jurisdiction, the “long honored legal truism of
‘equal pay for equal work’” has been “impregnably
institutionalized”; “[p]ersons who work with substantially
equal qualifications, skill, effort and responsibility, under
similar conditions, should be paid similar salaries.”27 “That
public policy abhors inequality and discrimination is
beyond contention. Our Constitution and laws reflect the
policy against these evils. The Constitution in the Article
on Social Justice and Human Rights exhorts Congress to
‘give highest priority to the enactment of measures that
protect and enhance the right of all people to human
dignity, reduce social, economic, and political inequalities.’
The very broad Article 19 of the Civil Code requires every
person, ‘in the exercise of his rights and in the performance
of his duties, [to] act with justice, give everyone his due,
and observe honesty and good faith.’”28

_______________

27  International School Alliance of Educators v. Quisumbing, 388 Phil.

661, 675; 333 SCRA 13, 22-23 (2000).
28  Id., at p. 672; pp. 19-20.

 
 

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Social Security System vs. Ubaña

WHEREFORE, the Petition is DENIED. The assailed

July 29, 2011 Decision and January 10, 2012 Resolution of
the Court of Appeals in C.A.-G.R. S.P. No. 110006 are
AFFIRMED. The case is ordered remanded with dispatch
to the Regional Trial Court of Daet, Camarines Norte,
Branch 39, for continuation of proceedings.
SO ORDERED.

Carpio (Chairperson), Mendoza and Leonen, JJ.,

concur.

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Jardeleza,** J., See Dissenting Opinion.

 
DISSENTING OPINION
 
JARDELEZA, J.:
 
The majority has voted to deny the petition on the
ground that, there being no employer-employee
relationship between the parties, there is no labor dispute
cognizable by the Labor Arbiters or the National Labor
Relations Commission (NLRC). There being no labor
dispute, the trial court correctly assumed jurisdiction over
respondent’s suit for damages against the Social Security
System (SSS), based on Articles 19 and 20 of the Civil
Code.
With all due respect, I dissent from the majority
decision.
It is my view that respondent’s suit against the SSS
involves a labor dispute properly cognizable by the Civil
Service Commission (CSC).
Both parties agree that there is no employer-employee
relation between them, respondent being an employee of
independent service contractors1 hired by the SSS. This
fact alone,

_______________

**  Designated acting member per Special Order No. 2147 dated
August 24, 2015.
1  Respondent was employed with the Development Bank of the
Philippines Service Corporation (recognized by this Court as an in-

 
 
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Social Security System vs. Ubaña

however, does not preclude the controversy between them

from being a labor dispute.2 Article 212(1) of the Labor
Code defines a labor dispute to include “any controversy or
matter concerning terms or conditions of employment or
the association or representation of persons in negotiating,
fixing, maintaining, changing or arranging the terms and
conditions of employment regardless of whether or not

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the disputants stand in the proximate relations of

employer and employee.”3
Furthermore, respondent’s claims relate to the terms
and conditions of her working relationship vis-à-vis the
SSS. While captioned as a suit for damages under Articles
19 and 20 of the Civil Code, respondent’s action is really
one to recover from the SSS amounts she would have
received had she been employed in petitioner’s roster of
regular employees. This is a dispute no different from
“regularization cases” usually filed by contractual
employees seeking to be absorbed as regular employees of a
company.
The SSS is a government-controlled corporation created
by Republic Act (RA) No. 1161.4 Pursuant to Section 2(1),
Article IX of the Constitution,5 a labor dispute involving
the SSS is cognizable by the CSC. Thus:

_______________

dependent contractor in Home Development Mutual Fund v. COA, G.R.

No. 157001, October 19, 2004, 440 SCRA 643) from May 1996 to December
14, 2001. She was thereafter employed with the SSS Retirees Service
Corporation from December 15, 2001 until her resignation on August 26,
2002. Rollo, p. 67.
2  San Miguel Corp. Employees Union-PTGWO v. Bersamira, G.R. No.
87700, June 13, 1990, 186 SCRA 496, 503.
3  Emphasis and underscoring supplied.
4  As amended by RA No. 8282, otherwise known as the ‘Social Security
Act of 1997.’
5  “The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, including government-
owned or -controlled corporations with original charters.”

 
 
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Social Security System vs. Ubaña

… that the action below is for damages under Articles 19, 20 and
21 of the Civil Code would not suffice to keep the case within the
jurisdictional boundaries of regular Courts. That claim for
damages is interwoven with a labor dispute existing
between the parties and would have to be ventilated
before the administrative machinery established for the
expeditious settlement of those disputes. To allow the action

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filed below to prosper would bring about “split jurisdiction” which

is obnoxious to the orderly administration of justice.6
(Emphasis supplied)

I note with serious concern the statement of the

majority that respondent is “justified” in filing the case
based on Articles 19 and 20 of the Civil Code “to recover
the proper salary” and that the SSS “may not hide under
its service contracts to deprive respondent of what is justly
due her.”7
The only issue for resolution in this case concerns the
matter of jurisdiction. While clearly obiter, the foregoing
statement gives the impression that the merits of
respondent’s claim have already been proved and settled.
This, on the contrary, is an issue still to be resolved on
remand.
The foregoing statement would have serious
repercussions on a significant question of law, that is,
whether or not a principal can legally be held liable for
damages by a person contracted through an independent
contractor under a valid and legitimate service contract.
This Court has recognized that an employer has “the
proprietary right … to exercise an inherent management
prerogative and its best business judgment to determine
whether it should contract out the performance of some of
its work to independent contractors.”8 This right, in my
view, flows from

_______________

6  Supra note 2 at pp. 504-505.

7  Ponencia, pp. 50-51.
8  Supra note 2.

 
 
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Social Security System vs. Ubaña

the constitutional liberty of an employer to determine

whether to perform its work itself or through independent
contractors that meet the requirements of the law.
Accordingly, I vote to GRANT the petition filed by the
SSS and order the dismissal, without prejudice, of

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respondent’s Complaint for Damages filed before the trial

court.

Petition denied, judgment and resolution affirmed.

Notes.—An independent contractor must have either

substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others. The
law does not require both substantial capital and
investment in the form of tools, equipment, machineries,
etc. It is enough that it has substantial capital. In the case
of HI, it has proven both. (Sasan, Sr. vs. National Labor
Relations Commission 4th Division, 569 SCRA 670 [2008])
In permissible job contracting, the principal agrees to
put out or farm out with a contractor or subcontractor the
performance or completion of a specific job, work or service
within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or
completed within or outside the premises of the principal.
(Spic N’ Span Services Corporation vs. Paje, 629 SCRA 261
[2010])
 
 
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