Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner,
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, Respondents.
R E S O L U T I O N
BRION, J.:
This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by respondent The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set aside our Decision of November 7, 2008. In the assailed decision, we found that an employer-employee relationship existed between Manulife and petitioner Gregorio Tongko and ordered Manulife to pay Tongko backwages and separation pay for illegal dismissal.
The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase began on July 1, 1977, under a Career Agent’s Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed or interpreted as creating an employer-employee relationship between the Company and the Agent.
x x x x
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due to or become due to the Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted by the Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company as evidenced by an Official Receipt issued by the Company directly to the policyholder.
x x x x
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver, extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall be construed for any previous failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to maintain a standard of knowledge and competency in the sale of Manulife’s products, satisfactory to Manulife and sufficient to meet the volume of the new business, required by his Production Club membership.3
The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s Sales Agency Organization. In 1990, he became a Branch Manager. Six years later (or in 1996), Tongko became a Regional Sales Manager.4
Tongko’s gross earnings consisted of commissions, persistency income, and management overrides. Since the beginning, Tongko consistently declared himself self-employed in his income tax returns. Thus, under oath, he declared his gross business income and deducted his business expenses to arrive at his taxable business income. Manulife withheld the corresponding 10% tax on Tongko’s earnings.5
In 2001, Manulife instituted manpower development programs at the regional sales management level. Respondent Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that were brought up during the October 18, 2001 Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been very clear – to increase the number of agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined the organization. Since then, however, substantial changes have taken place in the organization, as these have been influenced by developments both from within and without the company.
x x x x
The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers’ meeting earlier last month when Kevin O’Connor, SVP-Agency, took to the floor to determine from our senior agency leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had presented information where evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from your end which were perceived to be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in your management team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers meeting held at the 7/F Conference room last 18 October.
x x x x
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the table before the rest of your Region’s Sales Managers to verify its validity. As you must have noted, no Sales Manager came forward on their own to confirm your statement and it took you to name Malou Samson as a source of the same, an allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all along, that these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
x x x x
All the above notwithstanding, we had your own records checked and we found that you made a lot more money in the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you probably will make more money in the Year 2001 compared to Year 2000. Obviously, your above statement about making "less money" did not refer to you but the way you argued this point had us almost believing that you were spouting the gospel of truth when you were not. x x x
x x x x
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency growth.
x x x x
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you feel "may not be your cup of tea."
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The above could solve this problem.
x x x x
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining groups.
x x x x
The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you. But you have to understand that meeting corporate objectives by everyone is primary and will not be compromised. We are meeting tough challenges next year, and I would want everybody on board. Any resistance or holding back by anyone will be dealt with accordingly.6
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko’s services:
It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between yourself and SVP Kevin O’Connor, some of them with me, as well as group meetings with your Sales Managers, all these efforts have failed in helping you align your directions with Management’s avowed agency growth policy.
x x x x
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter.7
Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC) Arbitration Branch. He essentially alleged – despite the clear terms of the letter terminating his Agency Agreement – that he was Manulife’s employee before he was illegally dismissed.8
Thus, the threshold issue is the existence of an employment relationship. A finding that none exists renders the question of illegal dismissal moot; a finding that an employment relationship exists, on the other hand, necessarily leads to the need to determine the validity of the termination of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding ₱50,000.00, regardless of production levels attained and exclusive of commissions and bonuses. He also claimed that as Regional Sales Manager, he was given a travel and entertainment allowance of ₱36,000.00 per year in addition to his overriding commissions; he was tasked with numerous administrative functions and supervisory authority over Manulife’s employees, aside from merely selling policies and recruiting agents for Manulife; and he recommended and recruited insurance agents subject to vetting and approval by Manulife. He further alleges that he was assigned a definite place in the Manulife offices when he was not in the field – at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati City – for which he never paid any rental. Manulife provided the office equipment he used, including tables, chairs, computers and printers (and even office stationery), and paid for the electricity, water and telephone bills. As Regional Sales Manager, Tongko additionally asserts that he was required to follow at least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid commissions of varying amounts, computed based on the premium paid in full and actually received by Manulife on policies obtained through an agent. As sales manager, Tongko was paid overriding sales commission derived from sales made by agents under his unit/structure/branch/region. Manulife also points out that it deducted and withheld a 10% tax from all commissions Tongko received; Tongko even declared himself to be self-employed and consistently paid taxes as such—i.e., he availed of tax deductions such as ordinary and necessary trade, business and professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s claim as he was not its employee as characterized in the four-fold test and our ruling in Carungcong v. National Labor Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the NLRC reversed the labor arbiter’s decision on appeal; it found the existence of an employer-employee relationship and concluded that Tongko had been illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the appellate court found that the NLRC gravely abused its discretion in its ruling and reverted to the labor arbiter’s decision that no employer-employee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment relationship existed between Tongko and Manulife. We concluded that Tongko is Manulife’s employee for the following reasons:
1. Our ruling in the first Insular11 case did not foreclose the possibility of an insurance agent becoming an employee of an insurance company; if evidence exists showing that the company promulgated rules or regulations that effectively controlled or restricted an insurance agent’s choice of methods or the methods themselves in selling insurance, an employer-employee relationship would be present. The determination of the existence of an employer-employee relationship is thus on a case-to-case basis depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown by the following indicators:
2.1 Tongko undertook to comply with Manulife’s rules, regulations and other requirements, i.e., the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife’s insurance agents and managers, who occupied similar positions as Tongko, showed that they performed administrative duties that established employment with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios’ letter harped on the direction Manulife intended to take, viz., greater agency recruitment as the primary means to sell more policies; Tongko’s alleged failure to follow this directive led to the termination of his employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife’s right to due process by: (a) confining the review only to the issue of "control" and utterly disregarding all the other issues that had been joined in this case; (b) mischaracterizing the divergence of conclusions between the CA and the NLRC decisions as confined only to that on "control"; (c) grossly failing to consider the findings and conclusions of the CA on the majority of the material evidence, especially [Tongko’s] declaration in his income tax returns that he was a "business person" or "self-employed"; and (d) allowing [Tongko] to repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not only the legal relationships of agencies to sell but also distributorship and franchising, and ignores the constitutional and policy context of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold test other than the "control" test, reverses well-settled doctrines of law on employer-employee relationships, and grossly misapplies the "control test," by selecting, without basis, a few items of evidence to the exclusion of more material evidence to support its conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and 9 of the Civil Code, beyond the powers granted to this Court under Article VIII, Section 1 of the Constitution and contravenes through judicial legislation, the constitutional prohibition against impairment of contracts under Article III, Section 10 of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors, which should be corrected, in concluding that Respondent Manulife and Petitioner had an employer-employee relationship, that Respondent Manulife illegally dismissed Petitioner, and for consequently ordering Respondent Manulife to pay Petitioner backwages, separation pay, nominal damages and attorney’s fees.13
THE COURT’S RULING
A. The Insurance and the Civil Codes;
the Parties’ Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious that the factual antecedents were set in the insurance industry so that the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted to "Insurance Agents and Brokers" and specifically defines the agents and brokers relationship with the insurance company and how they are governed by the Code and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil law matter governed by the Civil Code. Thus, at the very least, three sets of laws – namely, the Insurance Code, the Labor Code and the Civil Code – have to be considered in looking at the present case. Not to be forgotten, too, is the Agreement (partly reproduced on page 2 of this Dissent and which no one disputes) that the parties adopted to govern their relationship for purposes of selling the insurance the company offers. To forget these other laws is to take a myopic view of the present case and to add to the uncertainties that now exist in considering the legal relationship between the insurance company and its "agents."
The main issue of whether an agency or an employment relationship exists depends on the incidents of the relationship. The Labor Code concept of "control" has to be compared and distinguished with the "control" that must necessarily exist in a principal-agent relationship. The principal cannot but also have his or her say in directing the course of the principal-agent relationship, especially in cases where the company-representative relationship in the insurance industry is an agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the country, in terms particularly of who can be in the insurance business, who can act for and in behalf of an insurer, and how these parties shall conduct themselves in the insurance business. Section 186 of the Insurance Code provides that "No person, partnership, or association of persons shall transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers, among other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or other compensation to any person for services in obtaining insurance, unless such person shall have first procured from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner x x x The Commissioner shall satisfy himself as to the competence and trustworthiness of the applicant and shall have the right to refuse to issue or renew and to suspend or revoke any such license in his discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is subject.
The application for an insurance agent’s license requires a written examination, and the applicant must be of good moral character and must not have been convicted of a crime involving moral turpitude.14 The insurance agent who collects premiums from an insured person for remittance to the insurance company does so in a fiduciary capacity, and an insurance company which delivers an insurance policy or contract to an authorized agent is deemed to have authorized the agent to receive payment on the company’s behalf.15 Section 361 further prohibits the offer, negotiation, or collection of any amount other than that specified in the policy and this covers any rebate from the premium or any special favor or advantage in the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also act within the parameters of the authority granted under the license and under the contract with the principal. Other than the need for a license, the agent is limited in the way he offers and negotiates for the sale of the company’s insurance products, in his collection activities, and in the delivery of the insurance contract or policy. Rules regarding the desired results (e.g., the required volume to continue to qualify as a company agent, rules to check on the parameters on the authority given to the agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements of control specific to an insurance agency and should not and cannot be read as elements of control that attend an employment relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter."16 While this is a very broad definition that on its face may even encompass an employment relationship, the distinctions between agency and employment are sufficiently established by law and jurisprudence.
Generally, the determinative element is the control exercised over the one rendering service. The employer controls the employee both in the results and in the means and manner of achieving this result. The principal in an agency relationship, on the other hand, also has the prerogative to exercise control over the agent in undertaking the assigned task based on the parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be express in light of the need for a license and for the designation by the insurance company. In the present case, the Agreement fully serves as grant of authority to Tongko as Manulife’s insurance agent.17 This agreement is supplemented by the company’s agency practices and usages, duly accepted by the agent in carrying out the agency.18 By authority of the Insurance Code, an insurance agency is for compensation,19 a matter the Civil Code Rules on Agency presumes in the absence of proof to the contrary.20 Other than the compensation, the principal is bound to advance to, or to reimburse, the agent the agreed sums necessary for the execution of the agency.21 By implication at least under Article 1994 of the Civil Code, the principal can appoint two or more agents to carry out the same assigned tasks,22 based necessarily on the specific instructions and directives given to them.
With particular relevance to the present case is the provision that "In the execution of the agency, the agent shall act in accordance with the instructions of the principal."23 This provision is pertinent for purposes of the necessary control that the principal exercises over the agent in undertaking the assigned task, and is an area where the instructions can intrude into the labor law concept of control so that minute consideration of the facts is necessary. A related article is Article 1891 of the Civil Code which binds the agent to render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the company rules and regulations that an agent has to comply with are indicative of an employer-employee relationship.24 The Dissenting Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life Assurance Co. v. National Labor Relations Commission (second Insular case)25 to support the view that Tongko is Manulife’s employee. On the other hand, Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission (AFPMBAI case)26 to support its allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited cases because none of them is on all fours with the present case; the uniqueness of the factual situation of the present case prevents it from being directly and readily cast in the mold of the cited cases. These cited cases are themselves different from one another; this difference underscores the need to read and quote them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the second Insular Life cases. A critical difference, however, exists as these cited cases dealt with the proper legal characterization of a subsequent management contract that superseded the original agency contract between the insurance company and its agent. Carungcong dealt with a subsequent Agreement making Carungcong a New Business Manager that clearly superseded the Agreement designating Carungcong as an agent empowered to solicit applications for insurance. The Grepalife case, on the other hand, dealt with the proper legal characterization of the appointment of the Ruiz brothers to positions higher than their original position as insurance agents. Thus, after analyzing the duties and functions of the Ruiz brothers, as these were enumerated in their contracts, we concluded that the company practically dictated the manner by which the Ruiz brothers were to carry out their jobs. Finally, the second Insular Life case dealt with the implications of de los Reyes’ appointment as acting unit manager which, like the subsequent contracts in the Carungcong and the Grepalife cases, was clearly defined under a subsequent contract. In all these cited cases, a determination of the presence of the Labor Code element of control was made on the basis of the stipulations of the subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract or document extant and submitted as evidence in the present case is the Agreement – a pure agency agreement in the Civil Code context similar to the original contract in the first Insular Life case and the contract in the AFPMBAI case. And while Tongko was later on designated unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding these undertakings appears in the records of the case. Any such contract or agreement, had there been any, could have at the very least provided the bases for properly ascertaining the juridical relationship established between the parties.
These critical differences, particularly between the present case and the Grepalife and the second Insular Life cases, should therefore immediately drive us to be more prudent and cautious in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the parties’ relations until the Agreement’s termination in 2001. This Agreement stood for more than two decades and, based on the records of the case, was never modified or novated. It assumes primacy because it directly dealt with the nature of the parties’ relationship up to the very end; moreover, both parties never disputed its authenticity or the accuracy of its terms.
By the Agreement’s express terms, Tongko served as an "insurance agent" for Manulife, not as an employee. To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; as the dissent clearly stated, the characterization of the juridical relationship the Agreement embodied is a matter of law that is for the courts to determine. At the same time, though, the characterization the parties gave to their relationship in the Agreement cannot simply be brushed aside because it embodies their intent at the time they entered the Agreement, and they were governed by this understanding throughout their relationship. At the very least, the provision on the absence of employer-employee relationship between the parties can be an aid in considering the Agreement and its implementation, and in appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not conclusive, is critical in this case because this intent is not illegal or outside the contemplation of law, particularly of the Insurance and the Civil Codes. From this perspective, the provisions of the Insurance Code cannot be disregarded as this Code (as heretofore already noted) expressly envisions a principal-agent relationship between the insurance company and the insurance agent in the sale of insurance to the public.1awph!1 For this reason, we can take judicial notice that as a matter of Insurance Code-based business practice, an agency relationship prevails in the insurance industry for the purpose of selling insurance. The Agreement, by its express terms, is in accordance with the Insurance Code model when it provided for a principal-agent relationship, and thus cannot lightly be set aside nor simply be considered as an agreement that does not reflect the parties’ true intent. This intent, incidentally, is reinforced by the system of compensation the Agreement provides, which likewise is in accordance with the production-based sales commissions the Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance agent never changed during his relationship with Manulife. If changes occurred at all, the changes did not appear to be in the nature of their core relationship. Tongko essentially remained an agent, but moved up in this role through Manulife’s recognition that he could use other agents approved by Manulife, but operating under his guidance and in whose commissions he had a share. For want of a better term, Tongko perhaps could be labeled as a "lead agent" who guided under his wing other Manulife agents similarly tasked with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their own agency agreements. Thus, if Tongko’s compensation scheme changed at all during his relationship with Manulife, the change was solely for purposes of crediting him with his share in the commissions the agents under his wing generated. As an agent who was recruiting and guiding other insurance agents, Tongko likewise moved up in terms of the reimbursement of expenses he incurred in the course of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received greater reimbursements for his expenses and was even allowed to use Manulife facilities in his interactions with the agents, all of whom were, in the strict sense, Manulife agents approved and certified as such by Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable conclusion that results from the reading of the Agreement (the only agreement on record in this case) and his continuing role thereunder as sales agent, from the perspective of the Insurance and the Civil Codes and in light of what Tongko himself attested to as his role as Regional Sales Manager. To be sure, this interpretation could have been contradicted if other agreements had been submitted as evidence of the relationship between Manulife and Tongko on the latter’s expanded undertakings. In the absence of any such evidence, however, this reading – based on the available evidence and the applicable insurance and civil law provisions – must stand, subject only to objective and evidentiary Labor Code tests on the existence of an employer-employee relationship.
In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the parties’ relationship should be noted. From 1977 until the termination of the Agreement, Tongko’s occupation was to sell Manulife’s insurance policies and products. Both parties acquiesced with the terms and conditions of the Agreement. Tongko, for his part, accepted all the benefits flowing from the Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling Manulife insurance products since he invariably declared himself a business or self-employed person in his income tax returns. This consistency with, and action made pursuant to the Agreement were pieces of evidence that were never mentioned nor considered in our Decision of November 7, 2008. Had they been considered, they could, at the very least, serve as Tongko’s admissions against his interest. Strictly speaking, Tongko’s tax returns cannot but be legally significant because he certified under oath the amount he earned as gross business income, claimed business deductions, leading to his net taxable income. This should be evidence of the first order that cannot be brushed aside by a mere denial. Even on a layman’s view that is devoid of legal considerations, the extent of his annual income alone renders his claimed employment status doubtful.27
Hand in hand with the concept of admission against interest in considering the tax returns, the concept of estoppel – a legal and equitable concept28 – necessarily must come into play. Tongko’s previous admissions in several years of tax returns as an independent agent, as against his belated claim that he was all along an employee, are too diametrically opposed to be simply dismissed or ignored. Interestingly, Justice Velasco’s dissenting opinion states that Tongko was forced to declare himself a business or self-employed person by Manulife’s persistent refusal to recognize him as its employee.29 Regrettably, the dissent has shown no basis for this conclusion, an understandable omission since no evidence in fact exists on this point in the records of the case. In fact, what the evidence shows is Tongko’s full conformity with, and action as, an independent agent until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its conclusion that the Agreement negated any employment relationship between Tongko and Manulife so that the commissions he earned as a sales agent should not be considered in the determination of the backwages and separation pay that should be given to him. This part of the dissent is correct although it went on to twist this conclusion by asserting that Tongko had dual roles in his relationship with Manulife; he was an agent, not an employee, in so far as he sold insurance for Manulife, but was an employee in his capacity as a manager. Thus, the dissent concluded that Tongko’s backwages should only be with respect to his role as Manulife’s manager.
The conclusion with respect to Tongko’s employment as a manager is, of course, unacceptable for the legal, factual and practical reasons discussed in this Resolution. In brief, the factual reason is grounded on the lack of evidentiary support of the conclusion that Manulife exercised control over Tongko in the sense understood in the Labor Code. The legal reason, partly based on the lack of factual basis, is the erroneous legal conclusion that Manulife controlled Tongko and was thus its employee. The practical reason, on the other hand, is the havoc that the dissent’s unwarranted conclusion would cause the insurance industry that, by the law’s own design, operated along the lines of principal-agent relationship in the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife ever exercised means-and-manner control, even to a limited extent, over Tongko during his ascent in Manulife’s sales ladder. In 1983, Tongko was appointed unit manager. Inexplicably, Tongko never bothered to present any evidence at all on what this designation meant. This also holds true for Tongko’s appointment as branch manager in 1990, and as Regional Sales Manager in 1996. The best evidence of control – the agreement or directive relating to Tongko’s duties and responsibilities – was never introduced as part of the records of the case. The reality is, prior to de Dios’ letter, Manulife had practically left Tongko alone not only in doing the business of selling insurance, but also in guiding the agents under his wing. As discussed below, the alleged directives covered by de Dios’ letter, heretofore quoted in full, were policy directions and targeted results that the company wanted Tongko and the other sales groups to realign with in their own selling activities. This is the reality that the parties’ presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes on its agents in the sale of insurance. The mere presentation of codes or of rules and regulations, however, is not per se indicative of labor law control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the insurance company and its agents in the performance of their respective obligations under the Code, particularly on licenses and their renewals, on the representations to be made to potential customers, the collection of premiums, on the delivery of insurance policies, on the matter of compensation, and on measures to ensure ethical business practice in the industry.
The general law on agency, on the other hand, expressly allows the principal an element of control over the agent in a manner consistent with an agency relationship. In this sense, these control measures cannot be read as indicative of labor law control. Foremost among these are the directives that the principal may impose on the agent to achieve the assigned tasks, to the extent that they do not involve the means and manner of undertaking these tasks. The law likewise obligates the agent to render an account; in this sense, the principal may impose on the agent specific instructions on how an account shall be made, particularly on the matter of expenses and reimbursements. To these extents, control can be imposed through rules and regulations without intruding into the labor law concept of control for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by the rules and regulations of an insurance company does not ipso facto make the insurance agent an employee. Neither do guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term is defined in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely relate to the mutually desirable result intended by the contractual relationship; they must have the nature of dictating the means or methods to be employed in attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of these means. In fact, results-wise, the principal can impose production quotas and can determine how many agents, with specific territories, ought to be employed to achieve the company’s objectives. These are management policy decisions that the labor law element of control cannot reach. Our ruling in these respects in the first Insular Life case was practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulife’s codes of conduct,30 all of which do not intrude into the insurance agents’ means and manner of conducting their sales and only control them as to the desired results and Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control existed between Manulife and Tongko.
The dissent considers the imposition of administrative and managerial functions on Tongko as indicative of labor law control; thus, Tongko as manager, but not as insurance agent, became Manulife’s employee. It drew this conclusion from what the other Manulife managers disclosed in their affidavits (i.e., their enumerated administrative and managerial functions) and after comparing these statements with the managers in Grepalife. The dissent compared the control exercised by Manulife over its managers in the present case with the control the managers in the Grepalife case exercised over their employees by presenting the following matrix:31
| Duties of Manulife’s Manager |
Duties of Grepalife’s Managers/Supervisors |
- to render or recommend prospective agents to be licensed, trained and contracted to sell Manulife products and who will be part of my Unit |
- train understudies for the position of district manager |
|
- to coordinate activities of the agents under [the managers’] Unit in [the agents’] daily, weekly and monthly selling activities, making sure that their respective sales targets are met;
- to conduct periodic training sessions for [the] agents to further enhance their sales skill; and
- to assist [the] agents with their sales activities by way of joint fieldwork, consultations and one-on-one evaluation and analysis of particular accounts |
- properly account, record and document the company’s funds, spot-check and audit the work of the zone supervisors, x x x follow up the submission of weekly remittance reports of the debit agents and zone supervisors
- direct and supervise the sales activities of the debit agents under him, x x x undertake and discharge the functions of absentee debit agents, spot-check the record of debit agents, and insure proper documentation of sales and collections of debit agents. |
Aside from these affidavits however, no other evidence exists regarding the effects of Tongko’s additional roles in Manulife’s sales operations on the contractual relationship between them.
To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of other sales agents constituted a substantive alteration of Manulife’s authority over Tongko and the performance of his end of the relationship with Manulife. We could not deny though that Tongko remained, first and foremost, an insurance agent, and that his additional role as Branch Manager did not lessen his main and dominant role as insurance agent; this role continued to dominate the relations between Tongko and Manulife even after Tongko assumed his leadership role among agents. This conclusion cannot be denied because it proceeds from the undisputed fact that Tongko and Manulife never altered their July 1, 1977 Agreement, a distinction the present case has with the contractual changes made in the second Insular Life case. Tongko’s results-based commissions, too, attest to the primacy he gave to his role as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate the great qualitative difference that exists between:
the Manulife managers’ role is to coordinate activities of the agents under the managers’ Unit in the agents’ daily, weekly, and monthly selling activities, making sure that their respective sales targets are met.
the District Manager’s duty in Grepalife is to properly account, record, and document the company's funds, spot-check and audit the work of the zone supervisors, conserve the company's business in the district through "reinstatements," follow up the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of district managers, and maintain his quota of sales (the failure of which is a ground for termination).
the Zone Supervisor’s (also in Grepalife) has the duty to direct and supervise the sales activities of the debit agents under him, conserve company property through "reinstatements," undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the debit agents.
These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job are specified and pre-determined; in the present case, the operative words are the "sales target," the methodology being left undefined except to the extent of being "coordinative." To be sure, a "coordinative" standard for a manager cannot be indicative of control; the standard only essentially describes what a Branch Manager is – the person in the lead who orchestrates activities within the group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter of control by Manulife; it is simply a statement of a branch manager’s role in relation with his agents from the point of view of Manulife whose business Tongko’s sales group carries.
A disturbing note, with respect to the presented affidavits and Tongko’s alleged administrative functions, is the selective citation of the portions supportive of an employment relationship and the consequent omission of portions leading to the contrary conclusion. For example, the following portions of the affidavit of Regional Sales Manager John Chua, with counterparts in the other affidavits, were not brought out in the Decision of November 7, 2008, while the other portions suggesting labor law control were highlighted. Specifically, the following portions of the affidavits were not brought out:32
1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on the computed premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method in soliticing insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily work load;
1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;
x x x x
6. I have my own staff that handles the day to day operations of my office;
7. My staff are my own employees and received salaries from me;
x x x x
9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-employed individual or professional with a ten (10) percent creditable withholding tax. I also remit monthly for professionals.
These statements, read with the above comparative analysis of the Manulife and the Grepalife cases, would have readily yielded the conclusion that no employer-employee relationship existed between Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates the least amount of intrusion into Tongko’s exercise of his role as manager in guiding the sales agents. Strictly viewed, de Dios’ directives are merely operational guidelines on how Tongko could align his operations with Manulife’s re-directed goal of being a "big league player." The method is to expand coverage through the use of more agents. This requirement for the recruitment of more agents is not a means-and-method control as it relates, more than anything else, and is directly relevant, to Manulife’s objective of expanded business operations through the use of a bigger sales force whose members are all on a principal-agent relationship. An important point to note here is that Tongko was not supervising regular full-time employees of Manulife engaged in the running of the insurance business; Tongko was effectively guiding his corps of sales agents, who are bound to Manulife through the same Agreement that he had with Manulife, all the while sharing in these agents’ commissions through his overrides. This is the lead agent concept mentioned above for want of a more appropriate term, since the title of Branch Manager used by the parties is really a misnomer given that what is involved is not a specific regular branch of the company but a corps of non-employed agents, defined in terms of covered territory, through which the company sells insurance. Still another point to consider is that Tongko was not even setting policies in the way a regular company manager does; company aims and objectives were simply relayed to him with suggestions on how these objectives can be reached through the expansion of a non-employee sales force.
Interestingly, a large part of de Dios’ letter focused on income, which Manulife demonstrated, in Tongko’s case, to be unaffected by the new goal and direction the company had set. Income in insurance agency, of course, is dependent on results, not on the means and manner of selling – a matter for Tongko and his agents to determine and an area into which Manulife had not waded. Undeniably, de Dios’ letter contained a directive to secure a competent assistant at Tongko’s own expense. While couched in terms of a directive, it cannot strictly be understood as an intrusion into Tongko’s method of operating and supervising the group of agents within his delineated territory. More than anything else, the "directive" was a signal to Tongko that his results were unsatisfactory, and was a suggestion on how Tongko’s perceived weakness in delivering results could be remedied. It was a solution, with an eye on results, for a consistently underperforming group; its obvious intent was to save Tongko from the result that he then failed to grasp – that he could lose even his own status as an agent, as he in fact eventually did.
The present case must be distinguished from the second Insular Life case that showed the hallmarks of an employer-employee relationship in the management system established. These were: exclusivity of service, control of assignments and removal of agents under the private respondent’s unit, and furnishing of company facilities and materials as well as capital described as Unit Development Fund. All these are obviously absent in the present case. If there is a commonality in these cases, it is in the collection of premiums which is a basic authority that can be delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongko’s case was the grant of an expanded sales agency role that recognized him as leader amongst agents in an area that Manulife defined. Whether this consequently resulted in the establishment of an employment relationship can be answered by concrete evidence that corresponds to the following questions:
as lead agent, what were Tongko’s specific functions and the terms of his additional engagement;
was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions he received from the insurance sales he generated;
what can be Manulife’s basis to terminate his status as lead agent;
can Manulife terminate his role as lead agent separately from his agency contract; and
to what extent does Manulife control the means and methods of Tongko’s role as lead agent?
The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly discussed above. But strictly speaking, the questions cannot definitively and concretely be answered through the evidence on record. The concrete evidence required to settle these questions is simply not there, since only the Agreement and the anecdotal affidavits have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of the factors determinative of the existence of employer-employee relationship, the Court cannot conclusively find that the relationship exists in the present case, even if such relationship only refers to Tongko’s additional functions. While a rough deduction can be made, the answer will not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that the absence of evidence showing Manulife’s control over Tongko’s contractual duties points to the absence of any employer-employee relationship between Tongko and Manulife. In the context of the established evidence, Tongko remained an agent all along; although his subsequent duties made him a lead agent with leadership role, he was nevertheless only an agent whose basic contract yields no evidence of means-and-manner control.
This conclusion renders unnecessary any further discussion of the question of whether an agent may simultaneously assume conflicting dual personalities. But to set the record straight, the concept of a single person having the dual role of agent and employee while doing the same task is a novel one in our jurisprudence, which must be viewed with caution especially when it is devoid of any jurisprudential support or precedent. The quoted portions in Justice Carpio-Morales’ dissent,33 borrowed from both the Grepalife and the second Insular Life cases, to support the duality approach of the Decision of November 7, 2008, are regrettably far removed from their context – i.e., the cases’ factual situations, the issues they decided and the totality of the rulings in these cases – and cannot yield the conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ appointment as zone supervisor and district manager made them employees of Grepalife. Indeed, because of the presence of the element of control in their contract of engagements, they were considered Grepalife’s employees. This did not mean, however, that they were simultaneously considered agents as well as employees of Grepalife; the Court’s ruling never implied that this situation existed insofar as the Ruiz brothers were concerned. The Court’s statement – the Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations – simply means that when an insurance company has exercised control over its agents so as to make them their employees, the relationship between the parties, which was otherwise one for agency governed by the Civil Code and the Insurance Code, will now be governed by the Labor Code. The reason for this is simple – the contract of agency has been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have jurisdiction over an illegal termination dispute involving parties who had two contracts – first, an original contract (agency contract), which was undoubtedly one for agency, and another subsequent contract that in turn designated the agent acting unit manager (a management contract). Both the Insular Life and the labor arbiter were one in the position that both were agency contracts. The Court disagreed with this conclusion and held that insofar as the management contract is concerned, the labor arbiter has jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings. We never said in this case though that the insurance agent had effectively assumed dual personalities for the simple reason that the agency contract has been effectively superseded by the management contract. The management contract provided that if the appointment was terminated for any reason other than for cause, the acting unit manager would be reverted to agent status and assigned to any unit.
The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in the existence of an employer-employee relationship should be resolved in favor of the existence of the relationship.34 This observation, apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies only when a doubt exists in the "implementation and application" of the Labor Code and its implementing rules; it does not apply where no doubt exists as in a situation where the claimant clearly failed to substantiate his claim of employment relationship by the quantum of evidence the Labor Code requires.
On the dissent’s last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice it to state that, as discussed above, the Decision was not supported by the evidence adduced and was not in accordance with controlling jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the manner the dissent suggests as the dissenting opinions are as factually and as legally erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7, 2008, GRANT Manulife’s motion for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO
Associate Justice |
CONCHITA CARPIO MORALES
Associate Justice |
PRESBITERO J. VELASCO, JR.
Associate Justice |
ANTONIO EDUARDO B. NACHURA
Associate Justice |
TERESITA J. LEONARDO-DE CASTRO
Associate Justice |
DIOSDADO M. PERALTA
Associate Justice |
LUCAS P. BERSAMIN
Associate Justice |
MARIANO C. DEL CASTILLO
Associate Justice |
ROBERTO A. ABAD
Associate Justice |
MARTIN S. VILLARAMA, JR.
Associate Justice |
JOSE PORTUGAL PEREZ
Associate Justice |
JOSE CATRAL MENDOZA
Associate Justice |
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Court.
RENATO C. CORONA
Chief Justice
Footnotes
1 Rollo, pp. 772-819.
2 Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., G.R. No. 167622, November 7, 2008, 570 SCRA 503, 506-507.
3 Rollo, p. 52.
4 Id. at 53.
5 Ibid.
6 Supra note 2, at 508-510.
7 Id. at 511.
8 Rollo, pp. 57-58.
9 Tongko’s Petition for Review, id. at 3-46; and Summary of Tongko’s Position in the September 27, 2004 decision of the NLRC (id. at 349-351) and the CA decision (id. at 57-58).
10 347 Phil. 587 (1997); see Summary of Manulife’s Position in the September 27, 2004 decision of the NLRC (rollo, pp. 351-353) and the CA decision (rollo, pp. 58-59).
11 Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989, 179 SCRA 459.
12 In an Affidavit dated April 28, 2003, John D. Chua, a Regional Sales Manager of Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager ("RSM") for Metro South Region pursuant to an Agency Contract. As such RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my region.
While Amanda Toledo, a Branch Manager of Manulife, stated in her Affidavit, dated April 29, 2003, that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate activities of other commission agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit, dated April 28, 2003, that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch, Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife products and who will be part of my Unit.
b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling activities, making sure that their respective sales targets are met.
c. To conduct periodic training sessions for my agents to further enhance their sales skills.
d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on-one evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales activities and encouraging them to be involved in company and industry activities.
f. To provide opportunities for professional growth to my agents by encouraging them to be a member of the LUCAP (Life Underwriters Association of the Philippines).
13 Rollo, pp. 776-777.
14 Sections 303 and 304, Insurance Code.
15 Section 306, Insurance Code.
16 Article 1868, Civil Code.
17 Article 1869, Civil Code.
18 Article 1870, Civil Code.
19 Section 299, Insurance Code.
20 Article 1875, Civil Code.
21 Articles 1886 and 1918, Civil Code.
22 Article 1894, Civil Code.
23 Article 1887, Civil Code.
24 Supra note 2, at 519-520.
25 G.R. No. 119930, March 12, 1998, 287 SCRA 476.
26 G.R. No. 102199, January 28, 1997, 267 SCRA 47.
27 In 1997, his income was ₱2,822.620.00; in 1998 – ₱4,805,166.34; in 1999, ₱6,797,814.05; in 2001, ₱6,214,737.11; and in 2002, ₱8,003,180.38.
28 Articles 1431 to 1439 of the Civil Code.
29 Justice Velasco’s Dissenting Opinion, p. 10. Justice Velasco maintains that Tongko’s declaration in his tax returns that he was self-employed was forced upon him by Manulife, which refused and still refuses to consider him as its employee, and withheld 10% of Tongko’s income as an agent for taxes. Tongko therefore had no choice but to use the withholding tax certificates issued to Manulife in connection with the taxes it paid on his income as an agent and he could not have been faulted for declaring himself as self-employed.
30 These include the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Manulife Code of Conduct Agreement.
31 Justice Velasco’s Dissenting Opinion, pp. 3-4.
32 Motion for Reconsideration dated December 3, 2008; quoting the Affidavit of John Chua (Regional Sales Manager) dated April 28, 2003, Affidavit of Amanda Tolentino (Branch Manager) dated April 29, 2003, and Affidavit of Lourdes Samson (Unit Manager) dated April 28, 2003. Rollo, p. 803.
33Separate Dissenting Opinion of Justice Conchita Carpio Morales, pp. 1-2. Justice Carpio Morales asserts that an agent may, at the same time, be an employee of a life insurance company and quotes the Grepalife case:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of the functions performed by private respondents were those of insurance agents. Nevertheless, it does not follow that they are not employees of Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations.
She additionally posits that the hybrid model is not novel—the second Insular Life case purportedly held that Pantaleon delos Reyes, acting unit manager, was an employee of Insular Life only insofar as the management contract is concerned, quoting in support of this assertion the following discussion in the second Insular Life case:
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into between petitioner and De los Reyes as contracts of agency. We, however, hold otherwise. Unquestionably there exist major distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far removed from the concept of agency in that provided therein are conditionalities that indicate an employer-employee relationship. The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but this holds true only insofar as the management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the case.
34 Justice Presbitero Velasco, Jr.’s Dissenting Opinion, p. 12.
The Lawphil Project - Arellano Law Foundation
SEPARATE DISSENTING OPINION
CARPIO MORALES, J.:
Writing for the Court, Justice Arturo Brion grants the Motion for Reconsideration (Motion) filed by respondent Manufacturer’s Life Insurance Co. (Phils.). The ponente, who concurred in the Court’s November 7, 2008 Decision,1 this time reverses the finding of employer-employee relationship. The ponencia states that petitioner cannot simultaneously assume the dual or hybrid role of employee and agent.
I dissent.
I submit this Separate Dissenting Opinion, after taking a closer look at the juxtaposition of five pertinent labor cases bearing on the insurance industry, three of which ruled in favor of the existence of an employer-employee relationship.
An agent may, at the same time, be an
employee of a life insurance company
In Great Pacific Life Assurance Corp. v. NLRC2 (second Grepalife case), the Court found that an employer-employee relationship existed between Grepalife and the Ruiz brothers in their capacities as zone supervisor and district manager. On the relevant point, it elucidated:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of the functions performed by private respondents were those of insurance agents. Nevertheless, it does not follow that they are not employees of Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations.3 (Citations omitted; emphasis and underscoring supplied)
This type of hybrid role is not novel. In Insular Life Assurance Co., Ltd. v. NLRC (4th Division)4 (second Insular Life case), the Court ruled that the therein respondent Pantaleon de los Reyes, acting unit manager, was an employee of Insular Life only insofar as the management contract is concerned.
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into between petitioner and De los Reyes as contracts of agency. We[,] however[,] hold otherwise. Unquestionably there exist major distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far removed from the concept of agency in that provided therein are conditionalities that indicate an employer-employee relationship. The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but this holds true only insofar as the management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the case.5 (Emphasis and underscoring supplied)
In the present case, the employer-employee relationship is extant from petitioner’s management functions as Unit Manager in 1983, later as Branch Manager in 1990, and finally as Regional Sales Manager in 1996, notwithstanding the absence of written management contracts. Even assuming that management contracts were executed, the law is deemed written into them and its application cannot be disavowed by the parties.
Admittedly, petitioner was allowed to continue selling as an agent simultaneously with his management functions. Insofar as the termination of his agency agreement6 is concerned, the trial court has jurisdiction over such controversy.
The ponencia finds it "conflicting" for petitioner to assume the dual roles of agent and employer. It agrees, however, that petitioner’s "additional role as Branch Manager did not lessen his main and dominant role as insurance agent," without explaining how to weigh the dominance of one function over another.
In the present Motion, there is no reiteration of the invocation of Insurance Commission (IC) Memorandum Circular 3-93 (June 28, 1993) which provides that "[n]o official or employee of an insurance brokerage or an adjustment company and no individual adjuster, shall be licensed to act as an insurance agent or general agent" and that "[n]o employee with the rank of manager and above of an insurance company shall be licensed to act as its insurance agent or general agent."7
There is no conflict between the 1993 IC Circular and the Court’s 1998 Decision in the second Insular Life case. That the regulation says that things should run in a certain manner does not mean that any determination of facts should not be contrary to that manner. "He should not" is different from "he did not." Respondent may assert that the parties herein could not have violated the Circular, but it does not bar the Court to determine otherwise when facts glaringly point to the existence of an employer-employee relationship.
Whatever infraction or tolerance committed or exhibited by the parties in defiance of the Circular or any other regulation or Code, it is for the IC or the appropriate body to determine. The same holds true with the corollary tax implications which respondent invites the Court to explore. Reconcilability of tax returns has never been decisive of the issue of employer-employee relationship. It never became the business of this Court to thresh out for the parties the tax consequences arising from every labor dispute where an alleged "independent contractor" was declared by the Court to be an employee. Suffice it to state that a party would have to face the consequences, if any, of his or her actions before the proper forum.
On one hand, respondent proffers petitioner’s income tax returns and documents8 as an admission that it did not employ petitioner, to which petitioner replies that the withholding and remittance of taxes were done by respondent as payor and withholding agent, as indicated in the Certificates of Creditable Income Tax Withheld at Source.
On the other, petitioner relies as respondent’s implied admission that he is an employee respondent’s having offered him a Stock Option that could only be exercised by "active employees" and would be terminated upon "termination of employment,"9 respondent’s disclaimer to this exceptional grant solely decided by its Head Office in Canada notwithstanding.
As the conflicting claims effectively cancel each other, a review of the other array of evidence is in order.
Control over the means and methods
in the attainment of the result
It bears noting that the NLRC Decision of September 27, 2004 judiciously explained why the resolution of the employment status of petitioner hinges on the "control test" after discussing the three other components of the four-fold test.10
Delving into jurisprudence, no employer-employee relationship was found in Insular Life Assurance Co., Ltd. v. NLRC11 (first Insular Life case) because the Court, applying the control test, found that Insular Life neither controlled nor restricted the choice of methods – or the methods themselves – of selling insurance by agency manager Melecio Basiao, leaving him free to exercise his own judgment as to the time, place and means of soliciting insurance.
In declaring the type of "control" that is necessary for one to be deemed an employee, the Court explained in the first Insular Life case, viz:
x x x It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company.12 (Emphasis and underscoring supplied)
I thus concur with the conclusion that the imposition of the codes of conduct is not indicative of control on the part of an insurance company.
In Great Pacific Life Assurance Corporation v. Judico13 (first Grepalife case), however, the therein respondent Honorato Judico was found to be an employee because
x x x the element of control by the petitioner on Judico was very much present. The record shows that petitioner Judico received a definite minimum amount per week as his wage known as "sales reserve" wherein the failure to maintain the same would bring him back to a beginner's employment with a fixed weekly wage of P200.00 for thirteen weeks regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to his canvassing work he was burdened with the job of collection. In both cases he was required to make regular report to the company regarding these duties, and for which an anemic performance would mean a dismissal. Conversely[,] faithful and productive service earned him a promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular P200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece of work nor for a definite period.14 (Underscoring supplied)
The question on the presence of "control over the means and methods" must always be taken in relation to the attainment of the result or goal. The proper query is thus not whether respondent exercised means-and-method control but whether such control was directed in attaining which result.
Although the bottomline of any commercial enterprise has always been sales, the identification of the specific "result or goal" in a particular case can only be gathered from the nature of one’s functions. It is thus imperative to identify the functions appurtenant to the goal before administering the control test.
In the first Insular Life case, it was clear that selling or soliciting insurance was the goal, the attainment of which Insular Life did not exercise control over the methodology of the agency manager. Insular Life set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station. He could seek and work on his prospects anywhere and at anytime he chooses.
In the first Grepalife case, however, although the debit agent’s goal of selling was basically identical, Grepalife retained control over the means in achieving sales. Grepalife assigned him a definite place in the office to work on when he is not in the field, gave him collection and canvassing jobs, required him to make regular report regarding these duties, and, in fact, exercised the power of dismissal for his dismal performance.
There is no element of control with respect to petitioner’s function of selling insurance as an agent. His managerial function, however, takes another form.
In the second Insular Life and Grepalife cases, the goal expected from the managers was different from the first set of cases. The "result or goal" (in how to accomplish it the company was found to have exercised control) were specifically aligned to the coordination and supervision of the whole marketing effort or strategy.
In the second Insular Life case, the acting unit manager was assigned the task of supervising and coordinating the sales efforts of the underwriters who were to be recruited and trained within his designated territory.
In the second Grepalife case, the zone supervisor and the district manager were entrusted with supervisory, sales and administrative functions to guard Grepalife's business interests, to bring in more clients to the company, and to ensure that all collections and reports are faithfully brought to the company.
In both cases, the manner by which those goals were carried out was dictated by their respective employers. Similarly, in the present case, the nature of petitioner’s job as such called for the exercise of supervisory and administrative functions, including recruitment and training of agents, which, when examined in the light of the two cases, were discharged within the close range of control wielded by respondent. Tersely stated, petitioner’s duty of supervision was under the "control" of respondent.
A comparison of functions with that obtaining in the second Grepalife case illustrates an intimate similarity:
Furthermore, it cannot be gainsaid that Grepalife had control over private respondents' performance as well as the result of their efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates the manner by which their jobs are to be carried out. For instance, the District Manager must properly account, record and document the company's funds spot-check and audit the work of the zone supervisors, conserve the company's business in the district through 'reinstatements', follow up the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of district manager, and maintain his quota of sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must direct and supervise the sales activities of the debit agents under him, conserve company property through "reinstatements", undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the debit agents.15 (Underscoring supplied)
In contradistinction with Carungcong v. NLRC,16 which also involves an insurance manager, the Court found the therein petitioner Susan Carungcong, a new business manager of Sun Life Assurance Company, to be an independent contractor. In the absence of restrictive or interfering company regulations that effectively and actually controlled her choice of methods in performing her management duties, the Court gave weight to the contractual disavowals in the management contracts and her admission that she alone judges the element of time and place and means in the performance of duties. She patently admitted that she performed "monitoring, training, recruitment and sales, at her own time and convenience, at however she deemed convenient, and with whomever she chose."17
More significantly, in the succeeding Insular Life case, the Court found the following indicators material in finding the presence of control in cases involving insurance managers:
Exclusivity of service, control of assignments and removal of agents under private respondent's unit, collection of premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner.18 (Underscoring supplied)
The ponencia concludes that "[a]ll these are obviously absent" in petitioner’s case. The facts show otherwise, however. On top of the exclusive service rendered to respondent, which AFP Mutual Benefit Association, Inc. v. NLRC19 instructs to be not controlling, other factors were present. Petitioner established no agency of his own as the Metro North Region to which he was assigned remained intact even after his ties with respondent were severed.20 Respondent provided and furnished company facilities, equipments and materials for petitioner at respondent’s Makati office.21 Respondent’s control of assignments was evident from its act of removing the North Star Branch from petitioner’s scope of the Metro North Region, on which a "memo to spell this matter out in greater detail" was advised to be issued shortly thereafter.22 Respondent reserved to impose other improvements in the region after manifesting its intention to closely follow the region.23 Respondent’s managers, like petitioner, could only refer and recommend to respondent prospective agents who would be part of their respective units.24 In other words, respondent had the last say on the composition and structure of the sales unit or region of petitioner. Respondent, in fact, even devised the deployment of an Agency Development Officer in the region to "contribute towards the manpower development work x x x as part of our agency growth campaign."
Such an arrangement leads to no other conclusion than that respondent exercised the type of control of an employer, thereby wiping away the perception that petitioner was only a "lead agent" as viewed by the ponencia. Even respondent sees otherwise when it rebuked petitioner that "[y]ou (petitioner) may have excelled in the past as an agent but, to this date, you still carry the mindset of a senior agent."25 Insofar as his management functions were concerned, petitioner was no longer considered a senior agent.
I vote to DENY respondent’s Motion but MODIFY the dispositive portion of the Court’s November 7, 2008 Decision to (a) clarify that petitioner, Gregorio Tongko, became respondent’s employee not when he started as an agent in 1977 but when he was appointed as unit manager in 1983, thus moving the reckoning of the computation of separation pay; and (b) remand the case to the NLRC for the purpose of computing petitioner’s proper backwages as manager.
CONCHITA CARPIO MORALES
Associate Justice
Footnotes
1 570 SCRA 503, decided by the Court’s Second Division, per Velasco, J.
2 G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694, decided by the Court’s Third Division, per Cortes, J.
3 Id. at 699.
4 G.R. No. 119930, March 12, 1998, 287 SCRA 476, decided by the Court’s First Division, per Bellosillo, J.
5 Id. at 483.
6 Rollo, pp. 451-453.
7 Vide Manulife’s Comment, rollo, p. 418.
8 Rollo, pp. 456-462.
9 Id. at 291-294.
10 Vide rollo, pp. 358-360.
11 G.R. No. 84484, November 15, 1989, 179 SCRA 459, decided by the Court’s First Division, per Narvasa, J.
12 Id. at 464-465.
13 G.R. No. 73887, December 21, 1989, 180 SCRA 445, decided by the Court’s Second Division, per Paras, J.
14 Id. at 450.
15 Supra at 698-699.
16 G.R. No. 118086, December 15, 1997, 283 SCRA 308, decided by the Court’s Third Division, per Narvasa, C.J.
17 Id. at 322.
18 Supra at 489.
19 G.R. No. 102199, January 28, 1997, 267 SCRA 47.
20 Rollo, pp. 364-365.
21 Id. at 9, 727; vide rollo, pp. 241-242.
22 Id. at 299.
23 Ibid.
24 Id. at 592-595.
25 Rollo, p. 298.
The Lawphil Project - Arellano Law Foundation
DISSENTING OPINION
VELASCO, JR., J.:
By Decision dated November 7, 2008, the Court, on the finding that petitioner Gregorio V. Tongko was illegally dismissed as employee of respondent Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife), awarded him full backwages and separation benefits, in lieu of reinstatement.
Manulife, via this Motion for Reconsideration, urges the Court to reconsider and set aside its aforementioned Decision by declaring, in effect, that Tongko had never been its employee.1 As Manulife avers, the subject Decision effectively "converted agency contracts of life insurance agents to contracts of regular employment."2 It thus warns that the ruling, if not reconsidered, would apply to all 41,853 life insurance agents spread across the country, thrusting in the process the insurance industry in the Philippines into a crisis.3
The majority seems to agree with the grim possibilities thus painted by Manulife.
As was before the National Labor Relations Commission (NLRC), then the Court of Appeals and as it is before the Court, the critical issue in the present case is the same: whether or not Tongko––during all the time he was directly or indirectly connected with the company, first as an agent, pursuant to a Career Agent’s Agreement (Agreement), and then as unit, branch and eventually regional sales manager of Manulife’s Sales Agency Organization––was an employee of Manulife. In resolving the issue of whether an employer-employee tie obtains, attention was focused, as jurisprudential trend dictates, on the four-fold test on employment developed and invariably invoked by labor officials and this Court as a guiding, if not governing norm, to determine, based on the facts and circumstances involved in a given situation, whether such relationship exists. These four elements are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the control test.4 And as stressed in the Decision subject of this recourse, of the four, the control test––meaning whether or not the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also the means and methods employed in reaching that end––constitutes the most important index of the existence of an employer-employee relationship. And as also there emphasized, the security of tenure of a regular employee flowing from employment cannot be defeated by any contract, for the law defines the employment status of a person.5 Article 280 of the Labor Code provides that "[t]he provisions of written agreement to the contrary notwithstanding and regardless of oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer."
From the evidence on record, it appears that Manulife had control over the work of Tongko after his appointment as manager of the company’s insurance sales force, indubitably implying the existence of an employer-employee relationship between them.
It cannot be over-emphasized enough that in Great Pacific Life Assurance Corporation v. NLRC, Ernesto Ruiz and Rodrigo Ruiz6 (Grepalife), the Court considered respondents Ruizes, then district managers, as employees of Grepalife, taking into account their duties and undertakings. Some excerpts from Grepalife:
x x x A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates the manner by which their jobs are to be carried out. For instance, the District Manager must properly account, record and document the company’s funds, spot-check and audit the work of the zone supervisors, conserve the company’s business in the district through ‘reinstatements’, follow up the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of district manager, and maintain his quota of sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must direct and supervise the sales activities of the debit agents under him, conserve company property through "reinstatements", undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the debit agents.7 (Emphasis supplied.)
A comparative look at the duties of the Ruizes, as set forth in the decision in Grepalife, and those of Tongko, as may be deduced from affidavits8 of insurance managers of Manulife, would reveal a striking similarity in their respective duties as would adequately support a similar finding on the question of whether the petitioner, like the Ruizes, is an employee of Manulife just as the Ruizes were Grepalife’s. Consider:
| Duties of Manulife’s Managers |
Duties of Grepalife’s Managers/Supervisors |
- to render or recommend prospective agents to be licensed, trained and contracted to sell Manulife products, and who will be part of the managers’ Unit |
- train understudies for the position of district manager |
- to coordinate activities of the agents under [the managers’] Unit in [the agents’] daily, weekly and monthly selling activities, making sure that their respective sales targets are met;
- to conduct periodic training sessions for [the] agents to further enhance their sales skills; and
- to assist [the] agents with their sales activities by way of joint fieldwork, consultations and one-on-one evaluation and analysis of particular accounts |
- properly account, record and document the company’s funds, spot-check and audit the work of the zone supervisors, x x x follow up the submission of weekly remittance reports of the debit agents and zone supervisors
- direct and supervise the sales activities of the debit agents under him, x x x undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the debit agents. |
The ponencia would altogether deny Tongko––either while serving as insurance agent or underwriter pursuant to the Agreement, or as appointed manager––the status of Manulife’s employee. It added the observation that the factual antecedents in this case were set in the insurance industry and, hence, the Insurance Code and the industry practices instead of the Labor Code shall primary govern in determining the element of control and necessarily whether an employer-employee existed between Tongko and Manulife. The ponencia also went on to state that the Agreement, which provided that "the Agent is an independent contractor x x x and nothing herein shall be construed as creating an employer-employee relationship between the Company and Agent," embodies the intent of Manulife and Tongko at the time they executed the Agreement and they were governed by this understanding throughout their relationship.
I beg to disagree.
First, the suggestion in the ponencia that the characterization the parties gave their relationship cannot simply be brushed aside runs counter against established jurisprudence. As it were, the question of the existence of an employer-employee relationship is a matter of public concern, never left, if ever, for the parties to peremptorily determine. To borrow from Insular Life Assurance Co., Ltd. v. NLRC (4th Division)9 (Insular Life II), neither can such existence be negated by expressly repudiating it in the management contract and providing therein, as here, that the employee is an independent contractor. For, as earlier indicated, the law defines and prescribes the employment status of a person, not what the clashing parties chose to call it or say it should be.10 We said as much in Servidad v. National Labor Relations Commission:11
The private agreement of the parties cannot prevail over Article 1700 of the Civil Code, which provides:
Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to special laws on labor unions, collective bargaining, strikes and lockouts, closed shops, wages, working conditions, hours of labor and similar subjects.
Similarly telling is the case of Pakistan Airlines Corporation vs. Pole, et al. There, it was said:
xxx provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into the contract. Put a little differently, the governing principle is that the parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. . .
Of the same tenor is the Court’s fairly recent holding in Paguio v. National Labor Relations Commission:12
Respondent company cannot seek refuge under the terms of the agreement it has entered into with petitioner. The law, in defining their contractual relationship, does so, not necessarily or exclusively upon the terms of their written or oral contract, but also on the basis of the nature of the work petitioner has been called upon to perform. The law affords protection to an employee, and it will not countenance any attempt to subvert its spirit and intent. A stipulation in an agreement can be ignored as and when it is utilized to deprive the employee of his security of tenure. The sheer inequality that characterizes employer-employee relations, where the scales generally tip against the employee, often scarcely provides him real and better options. (Emphasis supplied.)
Second, and in relation to the first reason, the fact that the Agreement was subsisting even after Tongko’s appointment as manager does not militate against a conclusion that Tongko was Manulife’s employee, at least during his stint as such manager. To be sure, an insurance agent may at the same time be an employee of an insurance company. Or to put it a bit differently, an employee-manager may be given the privilege of soliciting insurance, as agent, and earn in the process commission for every contract concluded as a result of such solicitation. The reality of two personalities–– one as employee and the other as non-employee of an insurance company, coinciding in one person––was acknowledged in Insular Life II, in which the Court wrote:
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into between [Insular Life] and [respondent] De Los Reyes as contracts of agency. We however hold otherwise. Unquestionably there exist major distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far removed from the concept of agency in that provided therein are conditionalities that indicate an employer-employee relationship. The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but this holds true only insofar the management contract is concerned.13 x x x
Grepalife may also be cited where we declared:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of the functions performed by private respondent were those of insurance agents. Nevertheless, it does not follow that they are not employees of Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations.14
The ponencia points out that Grepalife and Insular Life II factually differ with the instant case in that: "these cited cases dealt with the proper legal characterization of a subsequent management contract that superseded the original agency contract between the insurance company and its agent." In other words, the majority opinion distinguishes the instant case from Grepalife and Insular Life II in the lack of a written management contract between Tongko and Manulife.
The cited difference does not, for that reason alone, pose a plausible bar to the application of Grepalife and Insular Life II to the instant case. In fact, the absence of a written agreement to memorialize the naming and assumption of Tongko as unit and later branch manager is irrelevant to the issue of the presence of an employer-employee relationship. A management contract, for purposes of determining the relationship between the worker and the employer, is simply an evidence to support a conclusion either way. Such document, or the absence thereof, would not influence the conclusion on the issue of employment. The presence of a management contract would merely simplify the issue as to the duties and responsibilities of the employee concerned as they would then be defined more clearly.
Manulife’s decision not to execute a management contract with Tongko was well within its discretion. However, the fact of Manulife and Tongko not having inked a management contract, if this were the case, did not reduce the petitioner to a mere "lead agent," as the ponencia would have it. While there was perhaps no written management contract whence Tongko’s rights, duties and functions as unit/branch manager may easily be fleshed out as a prelude to determining if an employer-employee relationship with Manulife did exist, other evidence was adduced to show such duties and responsibilities. For one, in his letter15 of November 6, 2001, respondent de Dios distinctly referred to Tongko as sales manager. For another, it is well nigh inconceivable that Manulife issued no promotional appointments to petitioner as unit manager, branch manager and eventually regional sales manager. Basic and sound management practice simply requires an appointment for any upward personnel movement, particularly when additional duties and compensation are involved. Then, too, the aforementioned affidavits of the managers of Manulife as to the duties and responsibilities of a unit manager, such as Tongko, point to the conclusion that these managers were employees of Manulife, applying the four-fold test.
To my mind, Grepalife and Insular Life II bear obvious parallelism to the instant case vis-à-vis the facts against which they are cast. Too, the parties are similarly situated in point of positions occupied, the agreed exclusivity of service and functional profiles to warrant the application of the stare decisis doctrine. The Latin maxim stare decisis et non quieta movere, translates "stand by the thing and do not disturb the calm." It requires that high courts must follow, as a matter of sound policy, its own precedents, or respect settled jurisprudence absent compelling reason to do otherwise.16 Put a bit differently, the doctrine holds that when a court has laid down a principle of law as applicable to a certain set of facts, it will abide with that principle in future cases in which the facts are substantially the same.17 In the view I take of this case, there is absolutely nothing in Grepalife and Insular Life II which may be viewed as plainly unreasonable as to justify withholding from them the stare decisis effect.
And lest it be overlooked, both Grepalife and Insular Life II appreciated and applied the element of control––the most crucial and determinative indicator of an employer-employee relationship––as a labor law concept. The Labor Code and other labor relations laws, some of which have been incorporated in the Civil Code, regulate the relationship between labor and capital or between worker and employer in the private sector. The Insurance Code, on the other hand, governs the licensing requirements and other particular duties of insurance agents;18 it also regulates not only the relationship between the insurer and the insured but also the internal affairs of the insurance company.19 These are the particular areas of operation of the aforementioned laws. To argue then that the Insurance Code and insurance industry practice shall determine the existence of an employer-employee relationship in the case at bench is, it is submitted, simplistic if not downright erroneous. Both law and jurisprudence do not support the contention on the primacy of the Insurance Code and insurance usages in determining said relationship. As a matter of fact, the Court, in a string of cases involving corporations engaged in non-insurance activities as well as those into the insurance business, notably in Grepalife, Insular Life I20 and II, Great Pacific Life Assurance Corporation v. Judico,21 and AFP Mutual Benefit Association v. NLRC,22 held that the determination of the existence of an employer-employee relationship lies in the four-fold test. An examination of these cases yields no indication that a separate law, other than the Labor Code and labor law concepts, was ever considered by the Court in determining the existence of an employer-employee relationship.
There can be no quibbling that Tongko, as unit, branch and regional sales manager, was without a fixed salary, but earned his income strictly on commission basis. However, how and when he was paid his compensation is, without more, not an argument against a finding that he was an employee of Manulife. For, the phrase "wage paid," as a component of employment and as an element of the four-fold test, is defined under Art. 97(f) of the Labor Code as "the 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 services rendered or to be rendered."23 Lazaro v. Social Security Commission24 is emphatic on this point:
Lazaro’s arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by way of commission does not preclude the establishment of an employer-employee relationship. In Grepalife v. Judico, the Court upheld the existence of an employer-employee relationship between the insurance company and its agents, despite the fact that the compensation that the agents on commission received was not paid by the company but by the investor or the person insured. The relevant factor remains, as stated earlier, whether the "employer" controls or has reserved the right to control the "employee" not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished. (Emphasis supplied.)
Much has been made in the ponencia, following Manulife’s line, of Tongko’s income tax returns (ITRs), in which he described himself to be "self-employed." It must be stressed in this regard, however, that he had no other choice but to do so, for the following reasons: (1) Manulife had refused to consider him as its employee; and (2) Manulife withheld 10% of his income as an agent as taxes. Tongko had no other viable alternative but to make use of the withholding tax certificates issued by Manulife in paying his taxes. Thus, petitioner could not have really been faulted for including in his ITRs an entry declaring himself as self-employed. While perhaps not on all fours here, because its issue revolved around estoppel instead of declaration against interest made in an ITR, Philippine National Construction Corporation v. NLRC25 is nonetheless most instructive:
Time honored is the precept that quitclaims are ineffective in barring recovery for the full measure of the worker's rights and that acceptance of benefits therefrom does not amount to estoppel. In Lopez Sugar Corporation vs. Federation of Free Workers, the Court explained:
Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of the job, he has to face harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent their claim. They pressed it. They are deemed not to have waived any of their rights. x x x
It may be noted at this juncture that Manulife has changed its stance on the issue of illegal dismissal. In its Position Paper with Motion to Dismiss filed before the Labor Arbiter, in its Motion for Reconsideration (Re: Decision dated 27 September 2004) dated October 11, 2004 filed before the NLRC, and in its Comment dated August 5, 2006 filed before the Court, Manulife had consistently assumed the posture that the dismissal of petitioner was a proper exercise of termination proviso under the Agreement.26 In this motion, however, Manulife, in a virtual acknowledgment of Tongko being its employee, contends that he was "dismissed for a just and lawful cause – for gross and habitual neglect of duties, inefficiency and willful disobedience of the lawful orders."27 Manulife adds that:
Respondents presented an abundance of evidence demonstrating how termination happened only after failure to meet company goals, after all remedial efforts to correct the inefficiency of Petitioner failed and after Petitioner, as found by the CA, created dissension in Respondent Manulife when he refused to accept the need for improvement in his area and continued to spread the bile of discontent and rebellion that he had generated among the other agents.28
If Manulife claimed at every possible turn that Tongko was never an employee of the insurance company, why take a formal action of dismissal with a statement of the grounds therefor?
No less than the Constitution itself guarantees protection to labor:
ARTICLE XIII
LABOR
Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.
x x x x
The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns to investments, and to expansion and growth.
Complementing the foregoing guarantee provisions is Article 1702 of the Civil Code mandating that, in case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. Along side with the Civil Code command is Art. 4 of the Labor Code providing:
ART. 4. Construction in favor of labor.––All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.
The fairly recent Dealco Farms, Inc. v. National Labor Relations Commission (5th Division)29 is reflective of the statutory bias in favor of the working class and the need to give labor the benefit of the doubt, thus:
Having failed to substantiate its allegation on the relationship between the parties, we stick to the settled rule in controversies between a laborer and his master that doubts reasonably arising from the evidence should be resolved in the former’s favor. (Emphasis supplied.)
In the instant case, doubts as to the true relationship between Tongko and Manulife should be resolved in favor of the former and for employment.
Lest it be misunderstood, this dissent proposes only to affirm the underlying Decision of the Court dated November 7, 2008, but only insofar as it considered Tongko Manulife’s employee following his hiring as manager, first as unit manager, then branch manager and ultimately as regional sales manager. For, it was only after such engagement that Manulife exercised effective control not only over the results of his works, but also over the means and methods by which it is to be accomplished; it was then that Tongko was tasked to perform administrative duties. As to Tongko’s stint as insurance agent, an employer-employee relationship cannot be posited in light of the paucity of evidence to support the proposition.
In view of the foregoing, I vote to partially grant the motion for reconsideration but only in the sense that petitioner Tongko shall only be considered as employee of respondent Manulife only after his engagement as manager of the company. Accordingly, his entitlement to backwages and separation benefits shall be reckoned from that point in time and the amount shall correspond to his commission earned as such manager only, subject to the usual accounting requirements.
PRESBITERO J. VELASCO, JR.
Associate Justice
Footnotes
1 Rollo, pp. 2092-2114.
2 Id. at 773.
3 Id. at 772.
4 G.R. No. 166920, February 19, 2007, 516 SCRA 209.
5 Industrial Timber Corp. v. NLRC, G.R. No. 83616, January 20, 1989, 169 SCRA 341.
6 G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694.
7 Id. at 698-699.
8 Rollo, pp. 590-594.
9 G.R. No. 119930, March 12, 1998, 287 SCRA 476, 489.
10 Industrial Timber Corp. v. NLRC, supra note 5.
11 G.R. No. 128682, March 18, 1999, 305 SCRA 49, 57-58.
12 G.R. No. 147816, May 9, 2003, 403 SCRA 190, 198.
13 Supra note 9, at 483.
14 Supra note 6, at 699.
15 Rollo, p. 53.
16 Republic v. Nillas, G.R. No. 159595, January 23, 2007, 512 SCRA 286, 297.
17 Uy v. Villanueva, G.R. No. 157851, June 29, 2007, 526 SCRA 73, 90.
18 Grepalife, supra note 6.
19 Insular Life Insurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989, 179 SCRA 459, 465; citing 43 Am. Jur. 2d. pp. 73-91.
20 Insular Life Insurance Co., Ltd. v. NLRC, supra note 19.
21 G.R. No. 73887, December 21, 1989, 180 SCRA 445.
22 G.R. No. 102199, January 28, 1997, 267 SCRA 47.
23 Iran v. NLRC (Fourth Division), G.R. No. 121927, April 22, 1998, 289 SCRA 433.
24 G.R. No. 138254, July 30, 2004, 435 SCRA 472, 476.
25 G.R. No. 100353, October 22, 1999, 317 SCRA 186, 193.
26 Rollo, pp. 451-453.
27 Id. at 813.
28 Id.
29 G.R. No. 153192, January 30, 2009, 577 SCRA 280, 295.
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