G.R. No.

167622
GREGORIO V. TONGKO, Petitioner, vs. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and
RENATO A. VERGEL DE DIOS, Respondents.

DISSENTINGOPINION

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 Tongkoduring all the time he was directly or
indirectly connected with the company, first as an agent, pursuant to a Career Agents Agreement (Agreement), and then as
unit, branch and eventually regional sales manager of Manulifes Sales Agency Organizationwas 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 testmeaning 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 endconstitutes 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 companys insurance sales force, indubitably implying the existence of an employer-employee
relationship between them.
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 It cannot be over-emphasized enough that in Great Pacific Life Assurance Corporation v. NLRC, Ernesto Ruiz
and Rodrigo Ruiz[6] (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 companys funds, spot-check
and audit the work of the zone supervisors, conserve the companys 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 affidavits[8] 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 Grepalifes. Consider:

Duties of Manulifes Managers Duties of Grepalifes 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
- 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
- train understudies for the position of district
manager
- properly account, record and document the
companys 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 Tongkoeither while serving as insurance agent or underwriter pursuant to
the Agreement, or as appointed managerthe status of Manulifes 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.

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 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 Courts 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 Tongkos
appointment as manager does not militate against a conclusion that Tongko was Manulifes 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 personwas 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

3
 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.

Manulifes 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 Tongkos 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 letter[15] 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--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,
4
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 controlthe
most crucial and determinative indicator of an employer-employee relationshipas 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
I[20]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 Commission[24] is emphatic on this point:

Lazaros 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 Manulifes line, of Tongkos 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

5
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. NLRC[25]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.

xxxx

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.

6
 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 (5 th 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 formers 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 Manulifes 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 Tongkos 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