Supreme Court rules that Section 9-B of Republic Act No. 11199 (Social Security System Act of 2018) on the solidary liability of manning agencies for SSS contributions is constitutional [Joint Ship Manning Group, Inc. v. Social Security System, G.R. No. 247471 (07 July 2020)]
The Supreme Court recently held that Section 9-B of Republic Act No. 11199 or the Social Security System Act of 2018 (“R.A. No. 11199”) on the treatment of manning agencies as employers and their solidary liability with respect to Social Security System (“SSS”) contributions of sea-based Overseas Filipino Workers (“OFWs”) is constitutional and does not violate substantive due process and equal protection of rights.
In Joint Ship Manning Group, Inc. v. Social Security System, G.R. No. 247471 (07 July 2020), the petitioners assailed the constitutionality of Section 9-B of R.A. No. 11199, alleging that it violated the equal protection clause as it unreasonably discriminates against manning agencies of sea-based OFWs by treating them as employers and making them jointly and severally liable with principal employers as to the SSS coverage of the OFWs, while treating land-based OFWs as self-employed members of the SSS, while recruitment agencies are not jointly and severally liable.
The Supreme Court ruled that the said provision did not violate equal protection as there is substantial distinction between sea-based and land-based OFWs. This substantial distinction is that all seafarers have one standard contract, the POEA-SEC, which provides for the rights and obligations of the foreign ship owner, the seafarer and the manning agencies. On the contrary, land-based OFWs do not have a singular or uniform employment contract because of the variety of work they perform. Hence, these two classifications of OFWs may be treated differently.
Further, the joint and several liability of manning agencies with the principal foreign ship owners simply reiterates similar provisions in existing laws and regulations, such as R.A. No. 8042 or the Migrant Workers and Overseas Filipinos Act and the 2016 POEA Rules. The law also applied the joint and solidary liability of manning agencies to attain the statutory purpose of the mandatory coverage of seafarers under the SSS, which satisfies the second requisite of valid classifications—that is, the classification is germane to the purpose of the law.
The Supreme Court further explained that as to the third requisite that the classification must not be limited to existing conditions only, this was satisfied as seafarers are completely covered by the SSS, and all the manning agencies, without any prior conditions, shall have a solidary liability with the principal foreign ship owners for the SSS contributions. Lastly, mandatory coverage of SSS applies to all kinds of seafarers, regardless of position or designation on their respective vessels, thus satisfying the fourth requisite that the classification must apply equally to all members of the same class.
Petitioners likewise argued that Section 9-B of R.A. No. 11199 violates the right of a manning agency’s managers, officers, owners, or directors to substantive due process as it imposes criminal liability on them for the crimes that the principal foreign employer might commit against OFWs. The Supreme Court disagreed and pointed out that the officers shall only incur criminal liability under the law once their organization first commits a criminal act.
With regard to the issue of whether the imposition of the new rates under R.A. No. 11199 violates petitioners’ rights against infringement of their existing contracts with sea-based OFWs, the Supreme Court held in the negative, reasoning that the State reasonably exercised its police power in increasing the SSS contributions since the constitutional right to inviolability of contracts is not absolute and the subject contracts are labor contracts, which are impressed with public interest.