An employer that has paid the monetary award in an illegal dismissal case and secured a satisfaction of judgment may consider the dispute closed. But does that also settle the employee’s Social Security System (SSS) contributions for the period covered by the backwages award?
In Lopez Sugar Corp. v. Perrin (G.R. No. 260447, 2026), the Supreme Court held that it does not. Payment of backwages does not extinguish an employer’s separate obligation to remit SSS contributions corresponding to the backwages period.
The case involved four employees whose dismissal was declared illegal. The Supreme Court ordered the company to reinstate them with backwages.
After receiving their backwages, the employees sought remittance of their SSS contributions for the period covered by the backwages award, from October 1995 to November 2005. They wanted the contributions considered for their retirement benefits. The company refused, prompting proceedings before the Social Security Commission (SSC).
SSS CONTRIBUTIONS DURING THE BACKWAGES PERIOD
The company argued that its obligation to remit contributions ended when the employees were separated from employment. It relied on Section 11 of the Social Security Act of 1997, which provides that the employer’s contribution obligation ceases at the end of the month of separation. According to the company, the provision did not require the separation to be legal for the employer’s obligation to remit SSS contributions to cease.
The Supreme Court disagreed. Under Article 294 of the Labor Code, illegally dismissed employees are entitled to reinstatement without loss of seniority rights and other privileges, and full backwages inclusive of allowances and other benefits or their monetary equivalent.
Citing Escario v. NLRC (G.R. No. 160302, 2010) and Dumapis v. Lepanto Consolidated Mining Co. (G.R. No. 204060, 2020), the Supreme Court explained that illegally dismissed employees are deemed not to have left their employment and are entitled to the salaries and benefits they would have received. Consequently, the company’s contribution obligation continued for the period covered by the backwages award.
A SEPARATE CLAIM BEFORE THE SSC
The company also questioned the SSC’s jurisdiction and argued that the dispute concerned the computation of backwages, which belonged before the Labor Arbiter.
The Supreme Court ruled that the employees were seeking enforcement of the statutory obligation to remit contributions, rather than a determination of what their backwages should include. The SSC had jurisdiction over that contribution dispute.
Neither did the earlier illegal dismissal judgment bar the subsequent contribution claim. Although the parties were the same, the subject matters and causes of action differed. One concerned illegal dismissal while the other concerned the refusal to remit contributions.
EFFECT OF THE SATISFACTION OF JUDGMENT
The company further invoked the employees’ Satisfaction of Judgment, which included a broad release of employment-related claims. The Supreme Court, however, ruled that the employees could reasonably expect the company to comply with its contribution obligations; they did not intend to waive the remittance of their SSS contributions.
The Supreme Court also sustained liability of the company under the Social Security Act of 1997 and applied the monthly penalty. Section 22(a) of Republic Act No. 11199 now provides a 2% monthly penalty.
Lopez Sugar underscores that payment of a labor award does not discharge the employer’s separate obligation to remit SSS contributions. As the case illustrates, employees may still pursue a distinct contribution claim before the SSC even after receiving their labor award and executing a satisfaction of judgment.
For employers, the ruling highlights that liability arising from illegal dismissal may extend beyond the labor award, as unremitted SSS contributions and penalties may remain due even after the judgment has been satisfied.
(This article is for informational and educational purposes only. It is not offered and does not constitute legal advice or legal opinion.)
David Jonrey Z. Pepito is an associate of the Cebu Branch of Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
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