FONTANO, MARIE FAYE B.

Labor Standards

Insular Life Assurance Co., LTD., v. National Labor Relations Commission and Melecio
Basiao

FACTS:
On July 2, 1968, Insular Life and Basiao entered into a contract. The contract’s provisions,
among others, include the relations of the parties, the duties of the Agent (Basiao), the acts
prohibited to him, and the modes of the termination of the agreement.

In April 1972, the parties entered into another contract, which is the Agency Manager’s
Contract. In May 1979, the contract was terminated. Basiao sought for reconsideration and
filed a civil action, and claimed that his first contract was terminated and the payment of his
commissions was stopped.

A complaint was filed with the Ministry of Labor by Basiao seeking to recover the
commissions unpaid to him plus attorney’s fees. Respondent disputed Basiao’s claim
asserting that he was not an employee of the Company, but an independent contractor and
that the Company had no obligation to him for unpaid commissions under the terms and
conditions of his contract.

When the case was assigned at the Labor Arbiter, it found for Basiao. It ruled that the
agreement had established an employer-employee relationship between Basiao and
petitioner.

On appeal by the Company, the National Labor Relations Commission affirmed the decision
of the Labor Arbiter.

Hence, this petition.

ISSUE:
WON Basiao became the company’s employee by virtue of the contract invoked by him

HELD:
The Supreme Court held in the negative. Based on the power of control, an element to
determine the existence of employer-employee relationship, 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. Rules that merely
serve as guidelines should be distinguished to those that control 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. 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. Also, No
showing has been made that any such rules or regulations were in fact promulgated, much
less that any rules existed or were issued which effectively controlled or restricted his
choice of methods — or the methods themselves — of selling insurance.
FONTANO, MARIE FAYE B.
Labor Standards

Gregorio V. Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc. and Renato
A. Vergel De Dios

Facts:
A contractual relationship between Tongko and Manulife had two basic phases. The first
phase began on July 1, 1977, under a Career Agent’s Agreement which provided that
Tongko is an independent contractor. 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. In 1996, Tongko became a Regional Sales Manager. Tongko’s gross earnings
consisted of commissions, persistency income, and management overrides. Tongko
consistently declared himself self-employed in his income tax returns. Respondent de Dios
wrote Tongko expressing dissatisfaction of Tongko’s performance in their agent recruiting
business. On December 18, 2001, Tongko received a letter which served as notice of
termination of his Agency Agreement with the company.

Tongko filed an illegal dismissal complaint with the National Labor Relations Commission
(NLRC), alleging that despite the clear terms of the letter terminating his Agency
Agreement, that he was Manulife’s employee before he was illegally dismissed.

The Labor Arbiter decreed that no employer-employee relationship existed between the
parties.

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.

The Court of Appeals reverted to the labor arbiter’s decision that no employer-employee
relationship existed between Tongko and Manulife.

ISSUE:
Is there an employer-employee relationship between Tongko and Manulife?

HELD:
The Supreme Court held in the negative. The court applied the four-fold test to determine
the relationship that exists between Tongko and Manulife. In the case at bar, 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. Claimant clearly failed to
substantiate his claim of employment relationship by the quantum of evidence the Labor
Code requires.

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.