Republic of the Philippines

Supreme Court
Manila

EN BANC

GREGORIO V. TONGKO,
Petitioner,

versus -

THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS,
Respondents.
G.R. No. 167622

Present:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,

ABAD,
VILLARAMA, JR.,
PEREZ, and
MENDOZA, JJ.
Promulgated:

June 29, 2010

x-----------------------------------------------------------------------------------------x

RESOLUTION

BRION, J.:

This resolves the Motion for Reconsideration[1] 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 Agents 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.

xxxx

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.

xxxx

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 Manulifes 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 Manulifes Sales Agency
Organization. In 1990, he became a Branch Manager. Six years later (or in 1996), Tongko became a
Regional Sales Manager.[4]

Tongkos 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 Tongkos 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.

xxxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior
Managers meeting earlier last month when Kevin OConnor, 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 Regions Sales
Managers meeting held at the 7/F Conference room last 18 October.

xxxx

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 Regions 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.

xxxx

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

xxxx

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., Manulifes 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.

xxxx

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.

xxxx

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.
xxxx

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 Tongkos
services:

It would appear, however, that despite the series of meetings and communications, both one-on-one
meetings between yourself and SVP Kevin OConnor, 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
Managements avowed agency growth policy.

xxxx

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 useffective 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 Manulifes 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. Tongkos Case for Employment Relationship

Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding P50,000.00,
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 P36,000.00 per year in
addition to his overriding commissions; he was tasked with numerous administrative functions and
supervisory authority over Manulifes 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. Manulifes 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 suchi.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 Tongkos 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 arbiters 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 arbiters 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 Manulifes employee
for the following reasons:

1. Our ruling in the first Insular[11] 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 agents 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 Manulifes 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 Manulifes 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; Tongkos 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 Manulifes 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 [Tongkos] 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--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 employeremployee relationship, that Respondent Manulife illegally dismissed Petitioner, and for consequently
ordering Respondent Manulife to pay Petitioner backwages, separation pay, nominal damages and
attorneys fees.[13]

THE COURTS 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
thePhilippines. 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 xThe 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.

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 agents 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
companys 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 companys 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 Manulifes insurance agent.[17] This agreement is
supplemented by the companys 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 Manulifes employee. On the other hand, Manulife cites
theCarungcong 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 asthese 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 Agreements 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 Agreements express terms, Tongko served as an insurance agent for Manulife, not as an
employee. To be sure, the Agreements 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. 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 Tongkos 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
Manulifes 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 Tongkos 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 latters 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, Tongkos
occupation was to sell Manulifes 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 Tongkos admissions against his interest.Strictly
speaking, Tongkos 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 laymans 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 concept[28] necessarily must come into play. Tongkos 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 Velascos dissenting opinion states that Tongko was forced to declare himself a
business or self-employed person by Manulifes 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
Tongkos 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 Tongkos backwages should only
be with respect to his role as Manulifes manager.

The conclusion with respect to Tongkos 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 dissents unwarranted conclusion would cause the
insurance industry that, by the laws 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

Manulifes 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 Tongkos
appointment as branch manager in 1990, and as Regional Sales Manager in 1996. The best evidence of
control the agreement or directive relating to Tongkos 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 agents 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
companys 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, Manulifes 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 Manulifes 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 Manulifes Manager

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 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 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 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 Tongkos
additional roles in Manulifes sales operations on the contractual relationship between them.

To the dissent, Tongkos administrative functions as recruiter, trainer, or supervisor of other sales agents
constituted a substantive alteration of Manulifes 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. Tongkos 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 Managers 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 Supervisors (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 managers role in relation with his agents from the point of view of Manulife
whose business Tongkos sales group carries.

A disturbing note, with respect to the presented affidavits and Tongkos 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;

xxxx

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;

xxxx

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
Tongkos 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 Manulifes 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 Manulifes 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 Tongkos
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 Tongkos own expense. While couched in terms
of a directive, it cannot strictly be understood as an intrusion into Tongkos 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 Tongkos
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 respondents 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 Tongkos 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 Tongkos 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 Manulifes 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 Tongkos 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 Tongkos
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
Manulifes control over Tongkos 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
theGrepalife 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 Grepalifes employees.
This did not mean, however, that they were simultaneously considered agents as well as employees of
Grepalife; the Courts ruling never implied that this situation existed insofar as the Ruiz brothers were
concerned. The Courts 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 dissents 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 Tongkos failure to comply with the guidelines of de Dios
letter, as a ground for termination of Tongkos 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 Manulifes motion for reconsideration and, accordingly, DISMISS Tongkos petition. No costs.
SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
LUCAS P. BERSAMIN
Associate Justice
ROBERTO A. ABAD
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice

CONCHITA CARPIO MORALES

Associate Justice
ANTONIO EDUARDO B. NACHURA
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
MARIANO C. DEL CASTILLO
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice
JOSE CATRAL MENDOZA
Associate Justice
CERTIFICATION
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
_____________________________________________________________________________________

Republic of the Philippines

Supreme Court
Manila

EN BANC

GREGORIO V. TONGKO,
Petitioner,

- versus -

THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS,
Respondents.
G.R. No. 167622

Present:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.
Promulgated:

January 25, 2011

x-----------------------------------------------------------------------------------------x

RESOLUTION

BRION, J.:

We resolve petitioner Gregorio V. Tongkos bid, through his Motion for Reconsideration,[1] to set aside
our June 29, 2010 Resolution that reversed our Decision of November 7, 2008.[2] With the reversal, the
assailed June 29, 2010 Resolution effectively affirmed the Court of Appeals ruling[3] in CA-G.R. SP No.
88253 that the petitioner was an insurance agent, not the employee, of the respondent The
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife).

In his Motion for Reconsideration, petitioner reiterates the arguments he had belabored in his petition
and various other submissions. He argues that for 19 years, he performed administrative functions and
exercised supervisory authority over employees and agents of Manulife, in addition to his insurance
agent functions.[4] In these 19 years, he was designated as a Unit Manager, a Branch Manager and a
Regional Sales Manager, and now posits that he was not only an insurance agent for Manulife but was
its employee as well.

We find no basis or any error to merit the reconsideration of our June 29, 2010 Resolution.

A.

Labor Law Control = Employment Relationship

Control over the performance of the task of one providing service both with respect to the means and
manner, and the results of the service is the primary element in determining whether an employment
relationship exists. We resolve the petitioners Motion against his favor since he failed to show that the
control Manulife exercised over him was the control required to exist in an employer-employee
relationship; Manulifes control fell short of this norm and carried only the characteristic of the
relationship between an insurance company and its agents, as defined by the Insurance Code and by the
law of agency under the Civil Code.

The petitioner asserts in his Motion that Manulifes labor law control over him was demonstrated (1)
when it set the objectives and sales targets regarding production, recruitment and training programs;

and (2) when it prescribed the Code of Conduct for Agents and the Manulife Financial Code of Conduct
to govern his activities.[5] We find no merit in these contentions.

In our June 29, 2010 Resolution, we noted that there are built-in elements of control specific to an
insurance agency, which do not amount to the elements of control that characterize an employment
relationship governed by the Labor Code. The Insurance Code provides definite parameters in the way
an agent negotiates for the sale of the companys insurance products, his collection activities and his
delivery of the insurance contract or policy.[6] In addition, the Civil Code defines an agent as a person
who binds himself to do something in behalf of another, with the consent or authority of the latter.[7]
Article 1887 of the Civil Code also provides that in the execution of the agency, the agent shall act in
accordance with the instructions of the principal.

All these, read without any clear understanding of fine legal distinctions, appear to speak of control by
the insurance company over its agents. They are, however, controls aimed only at specific results in
undertaking an insurance agency, and are, in fact, parameters set by law in defining an insurance agency
and the attendant duties and responsibilities an insurance agent must observe and undertake. They do
not reach the level of control into the means and manner of doing an assigned task that invariably
characterizes an employment relationship as defined by labor law. From this perspective, the petitioners
contentions cannot prevail.

To reiterate, guidelines indicative of labor law control do not merely relate to the mutually desirable
result intended by the contractual relationship; they must have the nature of dictating the means and
methods to be employed in attaining the result.[8] Tested by this norm, Manulifes instructions regarding
the objectives and sales targets, in connection with the training and engagement of other agents, are
among the directives that the principal may impose on the agent to achieve the assigned tasks. They are
targeted results that Manulife wishes to attain through its agents. Manulifes codes of conduct, likewise,
do not necessarily intrude into the insurance agents means and manner of conducting their sales. Codes
of conduct are norms or standards of behavior rather than employer directives into how specific tasks
are to be done. These codes, as well as insurance industry rules and regulations, are not per se indicative
of labor law control under our jurisprudence.[9]

The duties[10] that the petitioner enumerated in his Motion are not supported by evidence and,
therefore, deserve scant consideration. Even assuming their existence, however, they mostly pertain to
the duties of an insurance agent such as remitting insurance fees to Manulife, delivering policies to the
insured, and after-sale services. For agents leading other agents, these include the task of overseeing
other insurance agents, the recruitment of other insurance agents engaged by Manulife as principal, and
ensuring that these other agents comply with the paperwork necessary in selling insurance. That
Manulife exercises the power to assign and remove agents under the petitioners supervision is in
keeping with its role as a principal in an agency relationship; they are Manulife agents in the same
manner that the petitioner had all along been a Manulife agent.

The petitioner also questions Manulifes act of investing him with different titles and positions in the
course of their relationship, given the respondents position that he simply functioned as an insurance
agent.[11] He also considers it an unjust and inequitable situation that he would be unrewarded for the
years he spent as a unit manager, a branch manager, and a regional sales manager.[12]

Based on the evidence on record, the petitioners occupation was to sell Manulifes insurance policies and
products from 1977 until the termination of the Career Agents Agreement (Agreement). The evidence
also shows that through the years, Manulife permitted him to exercise guiding authority over other
agents who operate under their own agency agreements with Manulife and whose commissions he
shared.[13] Under this scheme an arrangement that pervades the insurance industry petitioner in effect
became a lead agent and his own commissions increased as they included his share in the commissions
of the other agents;[14] he also received greater reimbursements for expenses and was allowed to use
Manulifes facilities. His designation also changed from unit manager to branch manager and then to
regional sales manager, to reflect the increase in the number of agents he recruited and guided, as well
as the increase in the area where these agents operated.

As our assailed Resolution concluded and as we now similarly conclude, these arrangements, and the
titles and positions the petitioner was invested with, did not change his status from the insurance agent
that he had always been (as evidenced by the Agreement that governed his relationship with Manulife
from the start to its disagreeable end).The petitioner simply progressed from his individual agency to
being a lead agent who could use other agents in selling insurance and share in the earnings of these
other agents.

In sum, we find absolutely no evidence of labor law control, as extensively discussed in our Resolution of
June 29, 2010, granting Manulifes motion for reconsideration.The Dissent, unfortunately, misses this
point.

B.

No Resulting Inequity

We also do not agree that our assailed Resolution has the effect of fostering an inequitable or unjust
situation. The records show that the petitioner was very amply paid for his services as an insurance
agent, who also shared in the commissions of the other agents under his guidance. In 1997, his income
was P2,822,620; in 1998, P4,805,166.34; in 1999, P6,797,814.05; in 2001, P6,214,737.11; and in 2002,
P8,003,180.38. All these he earned as an insurance agent, as he failed to ever prove that he earned
these sums as an employee. In technical terms, he could not have earned all these as an employee
because he failed to provide the substantial evidence required in administrative cases to support the
finding that he was a Manulife employee. No inequity results under this legal situation; what would be

unjust is an award of backwages and separation pay amounts that are not due him because he was
never an employee.

The Dissents discussion on this aspect of the case begins with the wide disparity in the status of the
parties that Manulife is a big Canadian insurance company while Tongko is but a single agent of
Manulife. The Dissent then went on to say that [i]f is but just, it is but right, that the Court interprets the
relationship between Tongko and Manulife as one of employment under labor laws and to uphold his
constitutionally protected right, as an employee, to security of tenure and entitlement to monetary
award should such right be infringed.[15] We cannot simply invoke the magical formula by creating an
employment relationship even when there is none because of the unavoidable and inherently weak
position of an individual over a giant corporation.

The Dissent likewise alluded to an ambiguity in the true relationship of the parties after Tongkos
successive appointments. We already pointed out that the legal significance of these appointments had
not been sufficiently explained and that it did not help that Tongko never bothered to present evidence
on this point. The Dissent recognized this but tried to excuse Tongko from this failure in the subsequent
discussion, as follows:

[o]ther evidence was adduced to show such duties and responsibilities. For one, in his letter of
November 6, 2001, respondent De Dios addressed petitioner as sales manager. And as I wrote in my
Dissent to the June 29, 2010 Resolution, it is difficult to imagine that Manulife did not issue promotional
appointments to petitioner as unit manager, branch manager, and, eventually, regional sales manager.
Sound management practice simply requires an appointment for any upward personnel movement,
particularly when additional functions and the corresponding increase in compensation are involved.
Then, too, the adverted affidavits of the managers of Manulife as to the duties and responsibilities of a
unit manager, such as petitioner, point to the conclusion that these managers were employees of
Manulife, applying the four-fold test.[16]

This Court (and all adjudicators for that matter) cannot and should not fill in the evidentiary gaps in a
partys case that the party failed to support; we cannot and should not take the cudgels for any party.
Tongko failed to support his cause and we should simply view him and his case as they are; our duty is to
sit as a judge in the case that he and the respondent presented.

To support its arguments on equity, the Dissent uses the Constitution and the Civil Code, using
provisions and principles that are all motherhood statements. The mandate of the Court, of course, is to
decide cases based on the facts and the law, and not to base its conclusions on fundamental precepts
that are far removed from the particular case presented before it. When there is no room for their

application, of capacity of principles, reliance on the application of these fundamental principles is

misplaced.

C. Earnings were Commissions

That his earnings were agents commissions arising from his work as an insurance agent is a matter that
the petitioner cannot deny, as these are the declarations and representations he stated in his income
tax returns through the years. It would be doubly unjust, particularly to the government, if he would be
allowed at this late point to turn around and successfully claim that he was merely an employee after he
declared himself, through the years, as an independent self-employed insurance agent with the privilege
of deducting business expenses. This aspect of the case alone considered together with the probative
value of income tax declarations and returns filed prior to the present controversy should be enough to
clinch the present case against the petitioners favor.

D. The Dissents Solution:

Unwieldy and Legally Infirm

The Dissent proposes that Tongko should be considered as part employee (as manager) and part
insurance agent; hence, the original decision should be modified to pertain only to the termination of
his employment as a manager and not as an insurance agent. Accordingly, the backwages component of
the original award to him should not include the insurance sales commissions. This solution, according
to the line taken by the Dissent then, was justified on the view that this was made on a case-to-case
basis.

Decisions of the Supreme Court, as the Civil Code provides, form part of the law of the land. When the
Court states that the determination of the existence of an employment relationship should be on a caseto-case basis, this does not mean that there will be as many laws on the issue as there are cases. In the
context of this case, the four-fold test is the established standard for determining employer-employee
relationship and the existence of these elements, most notably control, is the basis upon which a
conclusion on the absence of employment relationship was anchored. This simply means that a
conclusion on whether employment relationship exists in a particular case largely depends on the facts
and, in no small measure, on the parties evidence vis--vis the clearly defined jurisprudential standards.
Given that the parties control what and how the facts will be established in a particular case and/or how
a particular suit is to be litigated, deciding the issues on a case-to-case basis becomes an imperative.

Another legal reality, a more important one, is that the duty of a court is to say what the law is.[17] This
is the same duty of the Supreme Court that underlies the stare decisis principle. This is how the public,

in general and the insurance industry in particular, views the role of this Court and courts in general in
deciding cases. The lower courts and the bar, most specially, look up to the rulings of this Court for
guidance. Unless extremely unavoidable, the Court must, as a matter of sound judicial policy, resist the
temptation of branding its ruling pro hac vice.

The compromise solution of declaring Tongko both an employee and an agent is legally unrealistic,
unwieldy and is, in fact, legally infirm, as it goes against the above basic principles of judicial operation.
Likewise, it does not and cannot realistically solve the problem/issue in this case; it actually leaves more
questions than answers.

As already pointed out, there is no legal basis (be it statutory or jurisprudential) for the partemployee/part-insurance agent status under an essentially principal-agent contractual relation which
the Dissent proposes to accord to Tongko. If the Dissent intends to establish one, this is highly
objectionable for this would amount to judicial legislation. A legal relationship, be it one of employment
or one based on a contract other than employment, exists as a matter of law pursuant to the facts,
incidents and legal consequences of the relationship; it cannot exist devoid of these legally defined
underlying facts and legal consequences unless the law itself creates the relationship an act that is
beyond the authority of this Court to do.

Additionally, the Dissents conclusion completely ignores an unavoidable legal reality that the parties are
bound by a contract of agency that clearly subsists notwithstanding the successive designation of
Tongko as a unit manager, a branch manager and a regional sales manager. (As already explained in our
Resolution granting Manulifes motion for reconsideration, no evidence on record exists to provide the
Court with clues as to the precise impact of all these designations on the contractual agency
relationship.) The Dissent, it must be pointed out, concludes that Tongkos employment as manager was
illegally terminated; thus, he should be accordingly afforded relief therefor. But, can Tongko be given
the remedies incidental to his dismissal as manager separately from his status as an insurance agent? In
other words, since the respondents terminated all relationships with Tongko through the termination
letter, can we simply rule that his role as a manager was illegally terminated without touching on the
consequences of this ruling on his status as an insurance agent? Expressed in these terms, the
inseparability of his contract as agent with any other relationship that springs therefrom can thus be
seen as an insurmountable legal obstacle.

The Dissents compromise approach would also sanction split jurisdiction. The labor tribunals shall have
jurisdiction over Tongkos employment as manager while another entity shall decide the issues/cases
arising from the agency relationship. If the managerial employment is anchored on the agency, how will
the labor tribunals decide an issue that is inextricably linked with a relationship that is outside the loop
of their jurisdiction? As already mentioned in the Resolution granting Manulifes reconsideration,
theDOMINANT relationship in this case is agency and no other.

E. The Dissents Cited Cases

The Dissent cites the cases of Great Pacific Life Assurance Corporation v. National Labor Relations
Commission[18] and Insular Life Assurance Co., Ltd. v. National Labor Relations Commission[19] to
support the allegation that Manulife exercised control over the petitioner as an employer.

In considering these rulings, a reality that cannot but be recognized is that cases turn and are decided on
the basis of their own unique facts; the ruling in one case cannot simply be bodily lifted and applied to
another, particularly when notable differences exist between the cited cases and the case under
consideration; their respective facts must be strictly examined to ensure that the ruling in one applies to
another. This is particularly true in a comparison of the cited cases with the present case. Specifically,
care should be taken in reading the cited cases and applying their rulings to the present case as the cited
cases all dealt with the proper legal characterization of subsequent management contracts that
superseded the original agency contract between the insurance company and the agent.

In Great Pacific Life, the Ruiz brothers were appointed to positions different from their original positions
as insurance agents, whose duties were clearly defined in a subsequent contract. Similarly, in Insular, de
los Reyes, a former insurance agent, was appointed as acting unit manager based on a subsequent
contract. In both cases, the Court anchored its findings of labor control on the stipulations of these
subsequent contracts.

In contrast, the present case is remarkable for the absence of evidence of any change in the nature of
the petitioners employment with Manulife. As previously stated above and in our assailed Resolution,
the petitioner had always been governed by the Agreement from the start until the end of his
relationship with Manulife. His agency status never changed except to the extent of being a lead agent.
Thus, the cited cases where changes in company-agent relationship expressly changed and where the
subsequent contracts were the ones passed upon by the Court cannot be totally relied upon as
authoritative.

We cannot give credit as well to the petitioners claim of employment based on the affidavits executed
by other Manulife agents describing their duties, because these same affidavits only affirm their status
as independent agents, not as employees. To quote these various claims:[20]

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 soliciting 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;

xxxx

6. I have my own staff that handles day to day operations of my office;

7. My staff are my own employees and received salaries from me;

xxxx

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.

The petitioner cannot also rely on the letter written by respondent Renato Vergel de Dios to prove that
Manulife exercised control over him. As we already explained in the assailed Resolution:

Even de Dios letter is not determinative of control as it indicates the least amount of intrusion into
Tongkos 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 Manulifes 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 Manulifes 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.[21]

Lastly, in assailing the Agreement between him and Manulife, the petitioner cites Paguio v. National
Labor Relations Commission[22] on the claim that the agreement that the parties signed did not
conclusively indicate the legal relationship between them.

The evidentiary situation in the present case, however, shows that despite the petitioners insistence
that the Agreement was no longer binding between him and Manulife, no evidence was ever adduced to
show that their relationship changed so that Manulife at some point controlled the means and method
of the petitioners work. In fact, his evidence only further supports the conclusion that he remained an
independent insurance agent a status he admits, subject only to the qualification that he is at the same
time an employee. Thus, we can only conclude that the Agreement governed his relations with
Manulife.

Additionally, it is not lost on us that Paguio is a ruling based on a different factual setting; it involves a
publishing firm and an account executive, whose repeated engagement was considered as an indication
of employment. Our ruling in the present case is specific to the insurance industry, where the law
permits an insurance company to exercise control over its agents within the limits prescribed by law,
and to engage independent agents for several transactions and within an unlimited period of time
without the relationship amounting to employment. In light of these realities, the petitioners arguments
on his last argument must also fail.

The dissent also erroneously cites eight other cases Social Security System v. Court of Appeals,[23]
Cosmopolitan Funeral Homes, Inc. v. Maalat,[24] Algon Engineering Construction Corporation v.
National Labor Relations Commission,[25] Equitable Banking Corporation v. National Labor Relations
Commission,[26] Lazaro v. Social Security Commission,[27] Dealco Farms, Inc. v. National Labor Relations
Commission,[28] South Davao Development Company, Inc. v. Gamo,[29] and Abante, Jr. v. Lamadrid
Bearing & Parts Corporation.[30] The dissent cited these cases to support its allegation that labor laws
and jurisprudence should be applied in cases, to the exclusion of other laws such as the Civil Code or the
Insurance Code, even when the latter are also applicable.

In Social Security System, Cosmopolitan Funeral Homes, Dealco Farms, and South Davao Development,
the issue that repeats itself is whether complainants were employees or independent contractors; the
legal relationships involved are both labor law concepts and make no reference to the Civil Code (or
even the Insurance Code). The provisions cited in the Dissent Articles 1458-1637 of the Civil Code[31]
and Articles 1713-1720 of the Civil Code [32] do not even appear in the decisions cited.

In Algon, the issue was whether the lease contract should dictate the legal relationship between the
parties, when there was proof of an employer-employee relationship. In the cited case, the lease
provisions on termination were thus considered irrelevant because of a substantial evidence of an
employment relationship. The cited case lacks the complexity of the present case; Civil Code provisions

on lease do not prescribe that lessees exercise control over their lessors in the way that the Insurance
Code and the Civil provide that insurance companies and principals exercised control over their agents.

The issue in Equitable, on the other hand, is whether a lawyer-client relationship or an employment
relationship governs the legal relation between parties. Again, this case is inapplicable as it does not
illustrate the predominance of labor laws and jurisprudence over other laws, in general, and the
Insurance Code and Civil Code, in particular. It merely weighed the evidence in favor of an employment
relationship over that of a lawyer-client relationship. Similarly in Lazaro, the Court found ample proof of
control determinative of an employer-employee relationship. Both cases are not applicable to the
present case, which is attended by totally different factual considerations as the petitioner had not
offered any evidence of the companys control in the means and manner of the performance of his work.

On the other hand, we find it strange that the dissent cites Abante as a precedent, since the Court, in
this case, held that an employee-employer relationship is notably absent in this case as the complainant
was a sales agent. This case better supports the majoritys position that a sales agent, who fails to show
control in the concept of labor law, cannot be considered an employee, even if the company exercised
control in the concept of a sales agent.[33]

It bears stressing that our ruling in this case is not about which law has primacy over the other, but that
we should be able to reconcile these laws. We are merely saying that where the law makes it mandatory
for a company to exercise control over its agents, the complainant in an illegal dismissal case cannot rely
on these legally prescribed control devices as indicators of an employer-employee relationship. As
shown in our discussion, our consideration of the Insurance Code and Civil Code provisions does not
negate the application of labor laws and jurisprudence; ultimately, we dismissed the petition because of
its failure to comply with the control test.

WHEREFORE, premises considered, we hereby DENY the Motion for Reconsideration WITH FINALITY for
lack of merit. No further pleadings shall be entertained. Let entry of judgment proceed in due course.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR

RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO
Associate Justice
I dissent.
(Please see dissenting opinion)
PRESBITERO J. VELASCO, JR.
Associate Justice
I join the dissent of Justice Velasco
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

I join the dissent of Justice Velasco

LUCAS P. BERSAMIN
Associate Justice

EN BANC

G.R. No. 167622 (Gregorio V. Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc. and Renato A.
Vergel de Dios)

Promulgated:
January 25, 2011
x-----------------------------------------------------------------------------------------x

DISSENTINGOPINION

VELASCO, JR., J.:

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have
existed if Labor had not first existed. Labor is superior to capital, and deserves much the higher
consideration.
Abraham Lincoln

Prefatory Statement

At the outset, it has to be made clear that the instant petition applies solely to petitioner Tongko with
respect to his relationship with Manulife as the latters Regional Manager of Metro North Region and not
to ordinary underwriters of different insurance companies claiming to be totaling 45,000 in the
Philippines. In view of the facts and circumstances peculiar only to Tongkos case, the disposition in the
instant petition is pro hac vice in line with the previous rulings of this Court that the determination of an
employer-employee relationship shall be on a case-to-case basis.[1]

There is, therefore, no reason to conclude that the November 7, 2008 Decision of this Court was meant
to indiscriminately classify all insurance agents as employees of their respective insurance companies.
Nowhere in the Decision was such a conclusion made or espoused. To reiterate, it was specifically stated
in the Decision that Tongko, given his administrative duties as a manager of Manulife, and not any other
insurance agent in the Philippines, was an employee. As in every case involving the determination of
whether or not an employer-employee relationship obtains, it must be established in each case that the
alleged employer exercises control over the means and methods employed by the worker in achieving a
set objective. Only then can such relationship be said to exist.

In a Letter dated December 16, 2008, the Joint Foreign Chambers of the Philippines implored this Court
to reverse its November 7, 2008 Decision on the stated ground that it is a case of judicial legislation that
impairs the obligations of commercial contracts and interferes with established business models and
practices. The Chambers conclusion, sad to state, was based on the erroneous premise that the Decision

was a blanket declaration that all agents or underwriters are considered employees of the insurance
company.

The Philippine Life Insurance Association, Inc., through its then President Gregorio D. Mercado, also
wrote a letter dated January 12, 2009 reiterating the concerns of the Joint Foreign Chambers of the
Philippines. In the letter, Mercado states:

Thus, with the recent Decision of the Honorable Supreme Court, generalizing the code of conduct as an
indication of control over the means and method of an employee, PLIA is alarmed that the floodgates
would open to unscrupulous claimants and leave PLIAs member companies vulnerable to a multitude of
law suits from agents who shall insist on benefits that only employees enjoy. Such a scenario would
certainly cripple PLIAs member insurance companies, as their time and resources would be devoted to
fending off unscrupulous claims instead of focusing on improving themselves to serve the interests of
the public.

Mercado goes on to imply that the finality of the November 7, 2008 Decision would spell the end of the
insurance industry.

The grim scenario depicted in Mercados letter and the unmistakable veiled threats implied therein are
uncalled for.

The November 7, 2008 Decision, to reiterate, applies only to Tongko in light of the circumstances
attendant in his case. Certainly, his situation is unique from most other agents considering that he was
promoted initially to Unit Manager, then to Branch Manager and, eventually, Regional Manager. By this
fact alone, the Decision cannot be applicable to all other agents in the Philippines. Furthermore, the
Decision was reached considering the totality of all relevant matters underpinning and/or governing the
professional relationship of Tongko and Manulife, not only the Code of Conduct, or certain duties only.
All the factors mentioned in the Decision contributed to the conclusion that at the time that Tongko was
dismissed, he was an employee of Manulife. And it will only be in the far off possibility that a completely
identical case is presented that the findings therein would apply.

Additionally, in line with the Courts ruling in the November 7, 2008 Decision that Tongko became an
employee after his designation as a manager of Manulife, any backwages for illegal dismissal should only
correspond to his income, bonuses and other benefits that were appurtenant to his designation as a
manager. Under Tongkos Career Agents Agreement, he was entitled to commissions, production bonus

and persistency income. Thus, the basis for backwages would only be his management overrides and
other bonuses relative to his position as manager.

The Case

For the consideration of the Court is the Motion for Reconsideration dated July 28, 2010, filed by
petitioner Gregorio V. Tongko. Tongko seeks the reversal of our June 29, 2010 Resolution which
dismissed the instant petition finding that Tongko was not an employee of Manufacturers Life Insurance
Co. (Phils.), Inc. (Manulife). The Resolution reversed the Courts November 17, 2008 Decision.

The Facts

For clarity, the facts of the case are hereby reiterated:

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life
insurance business. Renato A. Vergel De Dios (De Dios) was, during the period material, its President and
Chief Executive Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1,
1977 by virtue of a Career Agents Agreement[2] (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

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.

xxxx

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 or to 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.

xxxx

14. TERMINATION

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. This Agreement shall similarly terminate forthwith
upon the death of the Agent.

In cases of termination, including the Agents death, the Agent and/or his estate, executors or
administrators, heirs, assignees or successors-in-interest, as the case may be, shall remain liable to the
Company for all the Agents obligations and indebtedness due the Company arising from law or this
Agreement.

In 1983, Tongko was named as a Unit Manager in Manulifes Sales Agency Organization. In 1990, he
became a Branch Manager. He was thereafter promoted to Regional Manager. As the Court of Appeals
(CA) found, Tongkos gross earnings from his work at Manulife as a Regional Manager, consisting of
commissions, persistency income, and management overrides, may be summarized as follows:

January to December 10, 2002 - P 865,096.07

2001 - 6,214,737.11
2000 - 8,003,180.38
1999 - 6,797,814.05
1998 - 4,805,166.34
1997 - 2,822,620.00[3]

The problem started sometime in 2001, when Manulife instituted manpower development programs in
the regional sales management level. Relative thereto, De Dios addressed a letter dated November 6,

2001[4] to Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter,
De Dios stated:

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.

xxxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior
Managers meeting earlier last month when Kevin OConnor, 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 Regions Sales
Managers meeting held at the 7/F Conference room last 18 October.

xxxx

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., Manulifes 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.

xxxx

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.

xxxx

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.

xxxx

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.

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,[5] terminating Tongkos
services, thus:

It would appear, however, that despite the series of meetings and communications, both one-on-one
meetings between yourself and SVP Kevin OConnor, 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
Managements avowed agency growth policy.

xxxx

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.

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the National Labor Relations
Commission (NLRC) against Manulife for illegal dismissal. The case, docketed as NLRC NCR Case No. 1110330-02, was raffled to Labor Arbiter Marita V. Padolina.

In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios
gave him specific directives on how to manage his area of responsibility in the latters letter dated
November 6, 2001. He further claimed that Manulife exercised control over him as follows:

Such control was certainly exercised by respondents over the herein complainant. It was Manulife who
hired, promoted and gave various assignments to him. It was the company who set objectives as regards
productions, recruitment, training programs and all activities pertaining to its business. Manulife
prescribed a Code of Conduct which would govern in minute detail all aspects of the work to be
undertaken by employees, including the sales process, the underwriting process, signatures, handling of
money, policyholder service, confidentiality, legal and regulatory requirements and grounds for
termination of employment. The letter of Mr. De Dios dated 06 November 2001 left no doubt as to who
was in control. The subsequent termination letter dated 18 December 2001 again established in no
uncertain terms the authority of the herein respondents to control the employees of Manulife. Plainly,

the respondents wielded control not only as to the ends to be achieved but the ways and means of
attaining such ends.[6]

Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th Division)[7] and
Great Pacific Life Assurance Corporation v. NLRC,[8] which Tongko claimed to be similar to the instant
case.

Tongko further claimed that his dismissal was without basis and that he was not afforded due process.
He also cited the Manulife Code of Conduct by which his actions were controlled by the company.

Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,[9] in which it
alleged that Tongko is not its employee, and that it did not exercise control over him. Thus, Manulife
claimed that the NLRC has no jurisdiction over the case.

In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of
an employer-employee relationship. Padolina found that applying the four-fold test in determining the
existence of an employer-employee relationship, none was found in the instant case. The dispositive
portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for
lack of jurisdiction, there being no employer-employee relationship between the parties.

SO ORDERED.

Tongko appealed the arbiters Decision to the NLRC which reversed the same and rendered a Decision
dated September 27, 2004 finding Tongko to have been illegally dismissed.

The NLRCs First Division, while finding an employer-employee relationship between Manulife and
Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that
Manulife exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios
and wrote:

The above-mentioned letter shows the extent to which respondents controlled complainants manner
and means of doing his work and achieving the goals set by respondents. The letter shows how
respondents concerned themselves with the manner complainant managed the Metro North Region as
Regional Sales Manager, to the point that respondents even had a say on how complainant interacted

with other individuals in the Metro North Region. The letter is in fact replete with comments and
criticisms on how complainant carried out his functions as Regional Sales Manager.

More importantly, the letter contains an abundance of directives or orders that are intended to directly
affect complainants authority and manner of carrying out his functions as Regional Sales Manager.[10]

Additionally, the NLRC also ruled that:

Further evidence of [respondents] control over complainant can be found in the records of the case.
[These] are the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial
Code of Conduct, and the Manulife Financial Code of Conduct Agreement, which serve as the
foundations of the power of control wielded by respondents over complainant that is further
manifested in the different administrative and other tasks that he is required to perform. These codes of
conduct corroborate and reinforce the display of respondents power of control in their 06 November
2001 Letter to complainant.[11]

The fallo of the September 27, 2004 NLRC Decision reads:

WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside. We find
complainant to be a regular employee of respondent Manulife and that he was illegally dismissed from
employment by respondents.

In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as
above set forth. Respondent Manulife is further ordered to pay complainant backwages from the time
he was dismissed on 02 January 2002 up to the finality of this decision also as indicated above.

xxxx

All other claims are hereby dismissed for utter lack of merit.

From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First
Division in a Resolution dated December 16, 2004.[12]

Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued
the assailed Decision dated March 29, 2005, finding the absence of an employer-employee relationship

between the parties and deeming the NLRC with no jurisdiction over the case. The CA arrived at this
conclusion while again applying the four-fold test. The CA found that Manulife did not exercise control
over Tongko that would render the latter an employee of Manulife. The dispositive portion reads:

WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for
accordingly GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December
16, 2004 of the National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC
NCR CA No. 040220-04) are hereby ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of
Labor Arbiter Marita V. Padolina is hereby REINSTATED.

Hence, Tongko filed a petition with this Court raising the following issues: (1) whether Tongko was an
employee of Manulife; and (2) whether Tongko was illegally dismissed.

In the November 17, 2010 Decision, this Court ruled that Tongko was an employee of Manulife and was
illegally dismissed. Applying the four-fold test, the Court found sufficient indicia of employment to
conclude that Manulife and Tongko had an employer-employee relationship. Thus, the Court further
ruled that because there was no just or valid cause for the termination of Tongkos employment, he was
therefore illegally dismissed.

Manulife appealed such Decision to the Court en banc which reversed the same in a June 29, 2010
Resolution. In the Resolution, the Court used the intent of the parties as well as the established
insurance industry practices to conclude that the control required by the labor code to be present to
establish an employer-employee relationship between Manulife and Tongko was not present. It was
further ruled that there was no other concrete evidence to establish that Tongko was an employee of
Manulife.

Thereafter, Tongko filed the instant motion for reconsideration of the Resolution.

The motion for reconsideration must be granted.

Labor laws, not the Insurance Code

or the Corporation Code, shall prevail in the instant case

Manufacturers Life Insurance Co. (Phils.), Inc. is part of a Canada-based multinational financial company
claiming to be the largest life insurance company in North America having 3,000 employees and 25,000
agents.[13] On the other hand, Tongko is but a single Filipino agent/manager of Manulife. It is but just, it
is but right, that the Court, interpret the relationship between Tongko and Manulife as one of
employment under labor laws and to uphold his constitutionally protected rights as an employee, to
security of tenure and an entitlement to monetary award should such right is infringed. And this
constitutionally-guaranteed right cannot be diminished, let alone undermined, by a mere contract, or
however the parties choose to call their true working relationship.[14] Neither, to stress, may the
employer-employee relationship, if one exists, be subverted by the manner and form of remuneration
or earnings being paid or received,[15] i.e., fixed or on commission basis, or the method of calculating
the same.

The controversy in this case arose from the fact that, initially, Tongko executed a Career Agents
Agreement whereby he became an agent of Manulife. As such agent, Manulife did not control the
means and methods for accomplishing his assigned objective of canvassing life insurance applications. It
is, therefore submitted that when he was exclusively an agent of Manulife, he was not the latters
employee.

The evidence, however, will reveal that he was later on promoted to the positions of unit, branch and
regional manager. The evidence will also show that he, similar to his colleagues, was assigned other
duties and responsibilities aside from those enumerated under the Agreement.

And there lies the crux of the problem. There is now an ambiguity as to the true relationship between
Manulife and Tongko. Moreover, it is now unclear as to what law, labor laws, corporation code,
insurance code or civil code, should be applied to the two parties.

Jurisprudence teaches that, given the doubt as to the applicable law in the instant case, labor law shall
govern.

The Constitution acknowledges the reality that capital and labor often do not deal on equal grounds,
requiring the state to protect labor from abuse. To level the playing field, the framers of the Constitution
incorporated two (2) provisions therein to safeguard the employees right to security of tenure and
enhance protection to employees rights and welfare:

ARTICLE II
DECLARATION OF PRINCIPLES
AND STATE POLICIES PRINCIPLES

STATE POLICIES

Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of
workers and promote their welfare.

ARTICLE XIII
SOCIAL JUSTICE AND HUMAN RIGHTS

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.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate
in policy and decision-making processes affecting their rights and benefits as may be provided by law.
(Emphasis supplied.)

In the Civil Code, it is provided in Articles 1700 and 1702 thereof that:

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 the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and similar subjects.

Article 1702. 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. (Emphasis supplied.)

Verily, the mandate of this Court is to ensure that the provisions of the Constitution are carried out. The
Court has the responsibility to ensure that the rights of labor, as guaranteed by the Constitution, are
actually enjoyed by the workers. Thus, in several cases, the Court has repeatedly resolved doubts as to
the relationship between parties as that of employment, that which is most favorable to labor.

The Court, in a slew of cases, has consistently ruled that when there is doubt as to the law to be applied
in a case with an allegation of an employer-employee relationship, labor laws and jurisprudence shall
apply. Consider:

1. In Social Security System v. Court of Appeals,[16] the Court was faced with the conflicting claims of
the workers and the proprietor on the issue of whether an employer-employee relationship exists.
Romeo Carreon and Quality Tobacco Corporation (QTC) entered into an agreement whereby Carreon
would allegedly purchase and sell QTCs products. Carreon claims that he was an employee of QTC while
QTC claims that Carreon is an independent contractor. In the agreement, Carreon was referred to as a
vendee of QTCs products. Their relationship would therefore be covered by the Civil Code provisions on
sales.[17] However, in view of the complaint of Carreon praying for SSS benefits on the claim that he is
an employee of QTC, there arose the question as to which law should applythe Civil Code or the Labor
Code and jurisprudence. The Court applied the jurisprudence in labor cases and used the four-fold test
to determine the existence of an employer-employee relationship. The Court stated:

The issue raised by the petitioner before this Court is the very same issue resolved by the Court of
Appeals-that is, whether or not Romeo Carreon is an employee or an independent contractor under the
contract aforequoted. Corollary thereto the question as to whether or not the Mafinco case is applicable
to this case was raised by the parties.

The Court took cognizance of the fact that the question of whether or not an employer-employee
relationship exists in a certain situation continues to bedevil the courts. Some businessmen with the aid
of lawyers have tried to avoid the bringing about of an employer-employee relationship in some of their
enterprises because that juridical relation spawns obligations connected with workmens compensation,
social security, medicare, minimum wage, termination pay and unionism.

For this reason, in order to put the issue at rest, this Court has laid down in a formidable line of decisions
the elements to be generally considered in determining the existence of an employer-employee
relationship, as follows: a) selection and engagement of the employee; b) the payment of wages; c) the
power of dismissal; and d) the employers power to control the employee with respect to the means and
method by-which the work is to be accomplished. The last which is the so-called control test is the most
important element (Brotherhood Labor Unity Movement of the Phils. vs. Zamora, 147 SCRA 49 [1987];
Dy Ke Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco Trading
Corp. vs. Ople, 70 SCRA 141 [1976]; Social Security System vs. Court of Appeals, 37 SCRA 579 [1971]).

Applying the control test, that is, 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 method by
which the same is to be accomplished, the question of whether or not there is an employer-employee
relationship for purposes of the Social Security Act has been settled in this jurisdiction in the case of
Investment Planning Corp. vs. SSS, 21 SCRA 924 (1967). In other words, where the element of control is
absent; where a person who works for another does so more or less at his own pleasure and is not
subject to definite hours or conditions of work, and in turn is compensated according to the result of his
effort, the relationship of employer-employee does not exist. (SSS vs. Court of Appeals, 30 SCRA 210
[1969]). (Emphasis supplied.)

2. In Cosmopolitan Funeral Homes, Inc. v. Maalat,[18] Cosmopolitan Funeral Homes, Inc. engaged the
services of Noli Maalat as a supervisor to handle the solicitation of mortuary arrangements, sales and
collections. Maalat was dimissed after having committed violations of the companys policies. He filed a
complaint for illegal dismissal and nonpayment of commissions. Cosmopolitan argues that there is no
employer-employee relationship between it and Maalat, the latter being an independent contractor.
The Court ruled that:

In determining whether a person who performs work for another is the latter's employee or an
independent contractor, the prevailing test is the right of control test. Under this test, an employeremployee relationship exists where the person for whom the services are performed reserves the right
to control not only the end to be achieved, but also the manner and means to be used in reaching that
end.

The Court did not consider the provisions of the Civil Code on a Contract for a Piece of Work[19] in
determining the relationship between the parties. Instead, it used the labor law concept, the control
test, to determine such relationship.
3. The Court in Algon Engineering Construction Corporation v. National Labor Relations Commission[20]
did not consider the Civil Code provisions on lease when it ruled upon the existence of an employeremployee relationship. In that case, from March 1, 1983 to May 10, 1985, Algon was in the process of
completing the Lucena Talacogon Project in Del Monte, Talacogon, Agusan del Sur. Jose Espinosas house
is located near that project site. Thus, throughout that same period of time, Espinosa allowed petitioner
Algon to use his house and the grounds adjacent thereto as a parking and storage place for the latters
heavy equipment. However, Espinosa also claims in addition thereto that there existed an employment
contract between himself and petitioner Algon which, he insisted, hired him as a watchman to guard the
heavy equipment parked in other leased house spaces in Libtong, Talacogon, Agusan del Sur. The Court
ruled therein that:

No particular evidence is required to prove the existence of an employer-employee relationship. All that
is necessary is to show that the employer is capable of exercising control over the employee. In labor
disputes, it suffices that there be a casual connection between the claim asserted and the employeremployee relations.

The elements of an employer-employee relationship are: (1) selection and engagement of the
employee; (2) payment of wages; (3) power of dismissal; and (4) employers own power to control
employees conduct. Control of the employees conduct is commonly regarded as the most crucial and
determinative indicator of the presence or absence of an employer-employee relationship. In the case at
bar, there is no doubt that petitioner exercises control over Espinosas conduct, as shown by the fact
that, rather than address the loss of batteries as a breach of the purported contract of lease, the
memorandum instead emphasized the company rules and regulations and the fact that Espinosa was on
duty at the time of the said loss. Moreover, the petitioners act of transferring Espinosa to the day shift
clearly shows its treatment of Espinosa as an employee, and not as a landlord. Thus, an employeremployee relationship exists where the person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be used in reaching such an end.
(Emphasis supplied.)

4. Even when faced with the contention that the relationship between two parties was in the nature of a
lawyer-client relationship, the Court, in Equitable Banking Corporation v. National Labor Relations
Commission,[21] still employed the control test, a strictly labor law concept, to determine the existence
of an employer-employee relationship. There, Ricardo L. Sadac was engaged in 1981 as Equitables VicePresident for the legal department and as its General Counsel. In 1989, nine (9) lawyers of the legal
department issued a letter-petition to the chairperson of the board of the bank accusing private
respondent of abusive conduct, inefficiency, mismanagement, ineffectiveness and indecisiveness. Later,
the lawyers threatened to resign en masse if Sadac was not relieved as the head of the legal
department. After a formal investigation of the charges, Sadac was advised that he would be substituted
as the banks legal counsel. Sadac charged the bank with illegal dismissal. The bank in turn denied the
existence of an employer-employee relationship between it and Sadac. The Court stated in its Decision
that:

In determining the existence of an employer-employee relationship, the following elements are

considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal, and (4) the power to control the employee's conduct, with the control test generally
assuming primacy in the overall consideration. The power of control refers to the existence of the power
and not necessarily to the actual exercise thereof. It is not essential, in other words, for the employer to
actually supervise the performance of duties of the employee; it is enough that the former has the right
to wield the power. (Emphasis supplied.)

5. In Lazaro v. Social Security Commission,[22] Rosalina M. Laudato was a sales supervisor of Royal Star
Marketing, the proprietor of which was Angelito L. Lazaro. Laudato claimed that the company failed to
report her and remit her contributions as an employee, to the Social Security System (SSS). Denying that
Laudato was a sales supervisor of Royal Star Marketing, Lazaro claimed that the former was only a sales
agent earning on a commission basis. He added that Laudato did not maintain definite hours of work
and therefore could not be considered as an employee of Royal Star Marketing. The Court, in
determining the true relationship of the parties, did not apply the provisions of the Civil Code on agency.
Rather, the labor law concept of the control test was applied to determine the relationship of the
parties. The Court ruled therein that:

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.

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an
employee. In Cosmopolitan Funeral Homes, Inc. v. Maalat, the employer similarly denied the existence
of an employer-employee relationship, as the claimant according to it, was a supervisor on commission
basis who did not observe normal hours of work. This Court declared that there was an employeremployee relationship, noting that [the] supervisor, although compensated on commission basis, [is]
exempt from the observance of normal hours of work for his compensation is measured by the number
of sales he makes.

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato
was a sales supervisor and not a mere agent. As such, Laudato oversaw and supervised the sales agents
of the company, and thus was subject to the control of management as to how she implements its
policies and its end results. x x x (Emphasis supplied.)

6. While in Dealco Farms, Inc. v. National Labor Relations Commission (5th Division),[23] the Court
declared the workers as employees of Dealco farms and not independent contractors. There, Albert
Caban and Chiquito Bastida were hired by Dealco as escorts or comboys for the transit of live cattle from
General Santos City to Manila in 1993. Sometime 1999, Caban and Bastida were summarily replaced.
Thus, they filed a case for illegal dismissal. Dealco claimed that Caban and Bastida were in fact
independent contractors hired by the buyers of the cattle who arranged for the transport thereof to
Manila. The Court again did not take into consideration provisions of the Civil Code on Contracts for a

Piece of Work and instead used the four-fold test to determine the true nature of the parties
relationship. The Court ruled:
Regrettably, upon an evaluation of the merits of the petition, we do not find cause to disturb the
findings of the Labor Arbiter, affirmed by the NLRC, which are supported by substantial evidence.

The well-entrenched rule is that factual findings of administrative or quasi-judicial bodies, which are
deemed to have acquired expertise in matters within their respective jurisdictions, are generally
accorded not only respect but even finality, and bind the Court when supported by substantial evidence.
Section 5, Rule 133 defines substantial evidence as that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion.

Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in
labor cases. We may take cognizance of and resolve factual issues only when the findings of fact and
conclusions of law of the Labor Arbiter are inconsistent with those of the NLRC and the CA.

In the case at bench, both the Labor Arbiter and the NLRC were one in their conclusion that respondents
were not independent contractors, but employees of petitioner. In determining the existence of an
employer-employee relationship between the parties, both the Labor Arbiter and the NLRC examined
and weighed the circumstances against the four-fold test which has the following elements: (1) the
power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to control the
employees conduct, or the so-called control test. Of the four, the power of control is the most important
element. More importantly, the control test merely calls for the existence of the right to control, and
not necessarily the exercise thereof.

xxxx

We reject petitioners self-serving contention. 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. The
policy is reflected in no less than the Constitution, Labor Code and Civil Code. (Emphasis supplied.)

7. Similarly, in South Davao Development Company, Inc. v. Gamo,[24] the Court refused to apply the
provisions of the Civil Code on Contract for a Piece of Work to a copra maker contractor and instead
used the control test to determine the workers relationship with the company. South Davao
Development Company was the operator of a coconut and mango farm in San Isidro, Davao Oriental and
Inawayan/Baracatan, Davao del Sur. Sometime in August 1963, the company hired respondent Sergio L.
Gamo (Gamo) as a foreman. Sometime in 1987, Gamo was appointed as a copra maker contractor.

Ernesto Belleza, Carlos Rojas, Maximo Malinao were all employees in petitioners coconut farm, while
respondents Felix Terona, Virgilio Cosep, Maximo Tolda, and Nelson Bagaan were assigned to
petitioners mango farm. All of the abovenamed respondents (copra workers) were later transferred by
petitioner to Gamo as the latters copraceros. The Court ruled in that case that the workers must be
considered as employees of the company as the latter exercised control over the workers as evidenced
by its power to transfer the copra workers as its employees to that of Gamo:

In this case, it was in the exercise of its power of control when petitioner corporation transferred the
copra workers from their previous assignments to work as copraceros. It was also in the exercise of the
same power that petitioner corporation put Gamo in charge of the copra workers although under a
different payment scheme. Thus, it is clear that an employer-employee relationship has existed between
petitioner corporation and respondents since the beginning and such relationship did not cease despite
their reassignments and the change of payment scheme. (Emphasis supplied.)

8. While in Abante v. Lamadrid Bearing & Parts Corp.,[25] despite the allegation that the worker was a
commission salesman, the Court still used the four-fold test to determine the existence of an employeremployee relationship. The worker, Empermaco B. Abante, Jr., was employed by respondent company
Lamadrid Bearing and Parts Corporation sometime in June 1985 as a salesman earning a commission of
3% of the total paid-up sales covering the whole area of Mindanao. Sometime in 2001, Abante was
informed by his customers that Lamadrid had issued a letter informing them that Abante was no longer
their salesman. Thereafter, Abante filed a case against Lamadrid for illegal dismissal. Lamadrid, for its
part, argued that Abante was not its employee but rather a freelance salesman on commission basis.
The Court ruled therein:

We are called upon to resolve the issue of whether or not petitioner, as a commission salesman, is an
employee of respondent corporation. To ascertain the existence of an employer-employee relationship,
jurisprudence has invariably applied the four-fold test, namely: (1) the manner of selection and
engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4)
the presence or absence of the power of control. Of these four, the last one is the most important. The
so-called control test is commonly regarded as the most crucial and determinative indicator of the
presence or absence of an employer-employee relationship. Under the control test, an employeremployee relationship exists where the person for whom the services are performed reserves the right
to control not only the end achieved, but also the manner and means to be used in reaching that end.
(Emphasis supplied.)

Verily, based on the above-mentioned sample of numerous cases, the Court has invariably applied labor
laws and doctrines, particularly the four-fold and control test, over Civil Code provisions, to determine
the relationship of parties where an employer-employee relationship is alleged, without regard to the
industry or otherwise alleged relationship of the parties. The Court cannot now deviate from established

precedents. The four-fold test must be used to determine whether Tongko was an employee of Manulife
or not, and not the Insurance Code or Civil Code as claimed by Manulife.

Using the Four-Fold Test, Manulife exercised control over Tongko

As a matter of long and settled jurisprudence, the following are the elements, constituting the four-fold
test, usually considered in determining the existence of an employer-employee relationship: (a) the
selection of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power to
control the employees conduct, with the control test being the most crucial[26] or generally assuming
primacy in the overall consideration.[27]

In Meteoro v. Creative Creatures, Inc.,[28] the Court stated that in the determination of the existence of
an employer-employee relationship, any competent and relevant evidence may be considered, to wit:

To resolve the issue raised by respondent, that is, the existence of an employer-employee relationship,
there is need to examine evidentiary matters. The following elements constitute the reliable yardstick to
determine such relationship: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct.
There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant
evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security
registration, appointment letters or employment contracts, payrolls, organization charts, and personnel
lists, serve as evidence of employee status. These pieces of evidence are readily available, as they are in
the possession of either the employee or the employer; and they may easily be looked into by the labor
inspector (in the course of inspection) when confronted with the question of the existence or absence of
an employer-employee relationship.

Some businessmen, however, try to avoid an employer-employee relationship from arising in their
enterprises, because that juridical relation spawns obligations connected with workmens compensation,
social security, medicare, termination pay, and unionism. Thus, in addition to the above-mentioned
documents, other pieces of evidence are considered in ascertaining the true nature of the parties
relationship. This is especially true in determining the element of control. The most important index of
an employer-employee relationship is the so-called control test, that is, 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.)

The NLRC, taking stock of the affidavits of petitioners fellow insurance managers therein detailing their
duties, had concluded that petitioner was an employee of Manulife. Indeed, the duties, responsibilities
and undertakings of these insurance managers are strikingly similar to those of Ernesto and Rodrigo

Ruiz, as set forth in the Decision in Great Pacific Life Assurance Corporation v. NLRC.[29] There, the
Court decreed that the brothers Ruiz were employees of Grepalife. The reasons behind the declaration
need no belaboring. Suffice it to state that vis--vis the Ruizes in Grepalife, Manulife had control of the
means and methods employed by the petitioner in the performance of his work as a manager of
Manulife. Following the stare decisis rule, there seems to be no rhyme or reason to withhold from
herein petitioner the benefits accruing from an employer-employee relationship.

Thus, in the Courts November 7, 2008 Decision, finding that Tongko was Manulifes employee, it was
ruled that:

More importantly, Manulifes evidence establishes the fact that Tongko was tasked to perform
administrative duties that establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached
affidavits of its agents purportedly to support its claim that Tongko, as a Regional Sales Manager, did not
perform any administrative functions. An examination of these affidavits would, however, prove the
opposite.
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 Amada 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).
A comparison of the above functions and those contained in the Agreement with those cited in Great
Pacific Life Assurance Corporation reveals a striking similarity that would more than support a similar
finding as in that case. Thus, there was an employer-employee relationship between the parties.
(Emphasis supplied.)
In comparison, in Great Pacific Life Corporation v. NLRC (Grepalife),[30] the Court stated:

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 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. (Emphasis supplied.)

A close scrutiny of the duties and responsibilities of the Manulife managers with those of the Ruizes
would show a striking similarity that cannot be denied. More so, taking the aggregate of the evidence

presented in this case, a just and objective mind cannot but conclude that, as in Grepalife, the Manulife
managers are also employees of Manulife.

In Equitable Banking Corporation,[31] the Court ruled:

The NLRC, in the instant case, based its finding that there existed an employer-employee relationship
between petitioner bank and private respondent on these factual settings:

It was complainants understanding with respondent Morales that he would be appointed and assigned
to the Legal Department as vice President with the same salary, privileges and benefits granted by the
respondent bank to its ranking senior officers. He was not hired as lawyer on a retainership basis but as
an officer of the bank.

Thus, the complainant was given an appointment as Vice President, Legal Department, effective August
1, 1981, with a monthly salary of P8,000.00, monthly allowance of P4,500.00, and the usual two months
Christmas bonus based on basic salary likewise enjoyed by the other officers of the bank.

Then, as part of the ongoing organization of the Legal Department, the position of General Counsel of
the bank was created and extended to the complainant. In addition to his duties as Vice President of the
bank, the complainants duties and responsibilities were so defined as to prove that he was a bank
officer working under the supervision of the President and the Board of Directors of the respondent
bank.

In his more than eight years employment with the respondent bank, the complainant was given the
usual payslips to evidence his monthly gross compensation. The respondent bank, as employer,
withheld taxes due to the Bureau of Internal Revenue from the complainants salary as employee.
Moreover, the bank enrolled the complainant as its employee under the Social Security System and
Medicare programs. The complainant contributed to the bank Employees Provident Fund.

When the respondent bank changed its payroll accounting system in September 1988 by appointing SGV
& Co. to handle it and Far East Bank & Trust Company to pay the salaries and other benefits of Equitable
Banking Corporation officers, the complainant was included as one of corporate officers. Specifically,
that there were eleven Far East Bank and Trust Company credit memos starting October 13, 1988 up to
September 13, 1989 received by the complainant from FBTC crediting his salary and Christmas bonus to
his account with FBTC per instruction of the respondent bank.

In as much as the complainant and the lawyers in the Legal Department were receiving salaries and
other benefits as other bank officers and employees, the attorneys fees, documentary and notarial fees
earned in the exercise of their profession as in-house lawyers were not given to or even shared with
them, instead all were credited to the income of the bank. In 1987 and 1988, the complainant and his
subordinate lawyers were able to generate by way of attorneys fees, documentary and notarial fees a
total income of P973,028.00 for the bank(s) benefit. In turn, the respondent bank shouldered the
professional tax and Integrated Bar of the Philippines dues of the complainant and his subordinate
lawyers. Further proofs that there existed employer-employee relationship between the respondent
bank and the complainant are the following, to wit:

(1) Complainants monthly attendance, like those of other bank officers, was recorded by the Chief
Security Officer and reported to the Office of the President with copy of the report furnished to the bank
Personnel and HRD Department.

(2) Complainant was authorized by the President to sign for and in behalf of the bank contracts covering
legal services of lawyers to be retained by the respondent bank for its branches on periodical
retainership basis.

(3) Complainant participated as part of management in annual Management Planning Conferences

which started in 1986 on objective-setting and long-range planning in response to the requirement of
the rapidly changing environment.

(4) Respondent bank extended to complainant the benefit (of) a car plan like any other qualified senior
officer of the bank.

(5) Respondent bank since 1982 continuously reported and included the complainant as one of its senior
officers in its statements of financial condition holding the position of Vice President. These bank
statements have been distributed and circularized to the public, including bank clients and government
entities.

(6) Complainant, like other bank officers, prepared his biographical data for submission to the Central
Bank after his assumption of duties in 1981. Thereafter, and pursuant to the regulations of the Central
Bank, he has been required to update annually his biographical data."

It would virtually be foolhardy to so challenge the NLRC as having committed grave abuse of discretion
in coming up with its above findings. Just to the contrary, NLRC appears to have been rather exhaustive
in its examination of this particular question (existence or absence of an employer-employee
relationship between the parties). Substantial evidence, which is the quantum of evidence required to
establish a fact in cases before administrative and quasi-judicial bodies, connotes merely that amount of
relevant evidence which a reasonable mind might accept to be adequate in justifying a conclusion.
(Emphasis supplied.)

Here, by virtue of designating Tongko initially as a Unit Manager and later on as a Regional Manager,
Manulife must be deemed as having considered Tongko as an officer of the company. Furthermore,
Tongko has been involved in Manulifes manpower development programs. Thus, just as in Equitable
Banking Corporation, Tongko must be considered as an employee of Manulife.

While in Aboitiz Haulers, Inc. v. Damapatoi,[32] Dimapatoi and several other individuals worked as
checkers in Mega Warehouse, which Aboitiz Haulers, Inc. owned. Aboitiz claimed that the complaining
workers are not its employees, but rather, of Grigio Security Agency and General Services (Grigio), a
manpower agency that supplies security guards, checkers and stuffers. It allegedly entered into a
Written Contract of Service with Grigio in 1994. The workers services were terminated by Aboitiz on the
pretext that its contract with Grigio had already expired. In this case, the Court found that Aboitiz was
the employer of the workers exercising control over them:

Petitioners allegation that Grigio retained control over the respondents by providing supervisors to
monitor the performance of the respondents cannot be given much weight. Instead of exercising their
own discretion or referring the matter to the officers of Grigio, Grigios supervisors were obligated to
refer to petitioners supervisors any discrepancy in the performance of the respondents with their
specified duties. The Written Contract of Services provided that:

5.c. That the GRIGIO personnel, particularly the supervisors, shall perform the following:

The Supervisor for the warehouse operation shall monitor the performance and productivity of all the
checkers, jacklifters, stuffers/strippers, forklift operators, drivers, and helpers. He shall coordinate with
AHIs supervisors regarding the operations at the Warehouse to ensure safety at the place of work.

He shall see to it that the cargoes are not overlanded, shortlanded, delivered at a wrong destination, or
misdelivered to consignees port of destination. Any discrepancy shall be reported immediately to AHIs
Logistic Manager, Mr. Andy Valeroso.

The control exercised by petitioners supervisors over the performance of respondents was to such
extent that petitioners Warehouse Supervisor, Roger Borromeo, confidently gave an evaluation of the
performance of respondent Monaorai Dimapatoi, who likewise felt obliged to obtain such Certification
from Borromeo.

Petitioners control over the respondents is evident. And it is this 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, that constitutes the most important index of the existence of the employer-employee
relationship. (Emphasis supplied.)

With this case, it becomes apparent that supervision and monitoring is sufficient to establish control
that is evidence of an employer-employee relationship. Such control would, therefore, be even more
evident in the instant case considering that Tongko himself was tasked to supervise and monitor the
activities of Manulife agents. Moreover, it may be gleaned from the records of the case that Tongko
reported to Manulife with regard the performance of his agents. It was not, as if, Tongko was left alone
to supervise, and perhaps, discipline such agents. Tongko must be deemed as an employee of Manulife.

In fact, in Lazaro,[33] the Court ruled that a Sales Supervisor was considered an employee as she
oversaw and supervised the sales agents of the company:

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.

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an
employee. In Cosmopolitan Funeral Homes, Inc. v. Maalat, the employer similarly denied the existence
of an employer-employee relationship, as the claimant according to it, was a supervisor on commission
basis who did not observe normal hours of work. This Court declared that there was an employeremployee relationship, noting that [the] supervisor, although compensated on commission basis, [is]
exempt from the observance of normal hours of work for his compensation is measured by the number
of sales he makes.

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato
was a sales supervisor and not a mere agent. As such, Laudato oversaw and supervised the sales agents
of the company, and thus was subject to the control of management as to how she implements its
policies and its end results. x x x

The finding of the SSC that Laudato was an employee of Royal Star is supported by substantial evidence.
The SSC examined the cash vouchers issued by Royal Star to Laudato, calling cards of Royal Star
denominating Laudato as a Sales Supervisor of the company, and Certificates of Appreciation issued by
Royal Star to Laudato in recognition of her unselfish and loyal efforts in promoting the company. On the
other hand, Lazaro has failed to present any convincing contrary evidence, relying instead on his bare
assertions. The Court of Appeals correctly ruled that petitioner has not sufficiently shown that the SSCs
ruling was not supported by substantial evidence.

A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of Teresita
Lazaro, General Manager of Royal Star, directing that no commissions were to be given on all main office
sales from walk-in customers and enjoining salesmen and sales supervisors to observe this new policy.
The Memorandum evinces the fact that, contrary to Lazaros claim, Royal Star exercised control over its
sales supervisors or agents such as Laudato as to the means and methods through which these
personnel performed their work. (Emphasis supplied.)

Tongko was held out as an officer of Manulife by Manulife itself, being tagged as its Manager. He was
tasked to supervise the insurance agents of Manulife. Clearly, theLazaro case must apply to Tongko and
he must be considered an employee of Manulife.

Furthermore, the letter of De Dios itself also contained several indicia of control. To reiterate, it was
stated in the letter that:

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., Manulifes 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.

xxxx

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.

xxxx

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. (Emphasis supplied.)

The goal of Manulife was to become an agency-driven insurance company. If Tongko were indeed not an
employee of Manulife, the company would not set the means and methods to achieve such goal. As long
as Tongko was able to recruit the set number of agents, there would be no reason for Manulife to
terminate his services as an independent contractor. However, that is not the case here. It may be
gleaned from the letter that De Dios is directing Tongko to clamor more actively his peers and his agents
to recruit other agents. It was not sufficient that Tongko, by himself, recruit agents. This directive
certainly shows that Manulife sought to prescribe the means and methods to achieve its goal.

De Dios further ordered Tongko to hire at his expense an assistant on whom he can unload you of much
of the routine tasks which can be easily delegated. There is no other way to classify this order but as an
intrusion into the means and methods of achieving the companys goals.

In the letter, Tongko was also informed that his area of responsibility was going to be reduced. In
Megascope General Services v. National Labor Relations Commission,[34] between February 15, 1977
and January 1, 1989, petitioner contracted the services of several individuals as gardeners, helpers and
maintenance workers. These workers were deployed at the National Power Corporation in Bagac,
Bataan. Except for Gener J. del Rosario whose employment ended on April 30, 1989, the work of the
other workers ceased on January 31, 1991. Consequently, private respondents filed a complaint for

illegal dismissal, underpayment of salaries, nonpayment of five-day service incentive leave credits and
holiday pay against petitioner with the NLRC. The Court ruled therein that the company exercised
control over the workers that would establish an employer-employee relationship when it reassigned
the workers from one workplace to another:

Private respondents were selected and hired by petitioner which assigned them to the NPC housing
village in Bagac and in Km. 168, Morong, Bataan. They drew their salaries from petitioner which
eventually dismissed them. Petitioners control over private respondents was manifest in its power to
assign and pull them out of clients at its own discretion. Power of control refers merely to the existence
of the power and not to the actual exercise thereof. It is not essential for the employer to actually
supervise the performance of duties of the employee. It is enough that the former has the right to wield
the power.

In South Davao Development Company, Inc.,[35] the Court ruled that the workers must be considered as
employees of the company as the latter exercised control over the means and methods employed by
the workers to achieve their objective, as evidenced by its power to transfer the copra workers as its
employees to that of Gamo:

In this case, it was in the exercise of its power of control when petitioner corporation transferred the
copra workers from their previous assignments to work as copraceros. It was also in the exercise of the
same power that petitioner corporation put Gamo in charge of the copra workers although under a
different payment scheme. Thus, it is clear that an employer-employee relationship has existed between
petitioner corporation and respondents since the beginning and such relationship did not cease despite
their reassignments and the change of payment scheme.
Similarly, in the instant case, by limiting the area of responsibility of Tongko, this is akin to a transfer or
reassignment, an exercise of control by Manulife over Tongko that must necessarily determine the
existence of an employer-employee relationship.

On the same issue, Justice Carpio-Morales added in her Dissenting Opinion to the June 29, 2010
Resolution that:

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 respondents 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. x x x

The ponencia concludes that [a]ll these are obviously absent in petitioners case. The facts show
otherwise, however. On top of the exclusive service rendered to respondent, which AFP Mutual Benefit
Association, Inc. v. NLRC 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. Respondent provided and furnished company
facilities, equipments and materials for petitioner at respondents Makatioffice. Respondents control of
assignments was evident from its act of removing the North Star Branch from petitioners 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. Respondent reserved to impose other improvements in the region after manifesting
its intention to closely follow the region. Respondents managers, like petitioner, could only refer and
recommend to respondent prospective agents who would be part of their respective units. 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. Insofar as
his management functions were concerned, petitioner was no longer considered a senior agent.

Furthermore, while this Court has already ruled that Article 280 of the Labor Code may not be used to
prove the existence of an employer-employee relationship when the same is denied,[36] the fact that
the work of the alleged independent contractor is usually necessary or desirable in the usual business or
trade of the employer would establish a management structure that would mean that Tongko was
Manulifes employee.

Such element of control, however, was only present in the administrative duties imposed upon Tongko
when he was a manager of Manulife. The Agreement, as well as other the evidence presented, does not
show the control necessary to establish an employer-employee relationship while Tongko was just an
agent of Manulife. Hence, it is emphasized that it was only upon the imposition of such administrative
duties that Tongko was an employee of Manulife and only the consequent change in his remunerations
should be considered as his salary. This would consist of his persistency income and management
overrides only and not his commissions as an agent.

The majority would seem to suggest that the notion of control as understood in the Labor Code and as
applied in labor relations cases differs from the concept of control that governs the relationship
between an insurance company and its agents. In Grepalife and in the earlier Insular life Assurance Co.
Ltd. v. NLRC (4th Division) (Insular Life),[37] it was distinctly noted that the Court did not posit the
dichotomy presently parlayed by the majority. Consider the following excerpts from Insular Life:

Exclusivity of service, control of assignments and removal of agents under private respondents 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.

Similarly, Justice Carpio-Morales, in the same Dissenting Opinion, wrote:

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.

It bears pointing out that Tongko cannot be considered as an independent contractor of Manulife. There
is no evidence to establish such a scenario. In Television and Production Exponents, Inc. v. Servaa,[38]
the Court enumerates the requirements for a worker to be considered an independent contractor:

Aside from possessing substantial capital or investment, a legitimate job contractor or subcontractor
carries on a distinct and independent business and undertakes to perform the job, work or service on its
own account and under its own responsibility according to its own manner and method, and free from
the control and direction of the principal in all matters connected with the performance of the work
except as to the results thereof. TAPE failed to establish that respondent is an independent contractor.
As found by the Court of Appeals:

We find the annexes submitted by the private respondents insufficient to prove that herein petitioner is
indeed an independent contractor. None of the above conditions exist in the case at bar. Private
respondents failed to show that petitioner has substantial capital or investment to be qualified as an
independent contractor. They likewise failed to present a written contract which specifies the
performance of a specified piece of work, the nature and extent of the work and the term and duration
of the relationship between herein petitioner and private respondent TAPE.

Here, the records are bereft of any evidence to establish that Tongko had substantial capital or
investment to be qualified as an independent contractor.

Tongko being allowed the privilege to canvas

insurance applications is not contrary to his employment status

The majority described petitioner as a lead insurance agent, at best, the change in his designationfrom
unit manager to branch manager and then to regional sales managerbeing merely reflective of the
increase in the number of agents under his guidance as well as the increase in the area of operation.
Tongko, so the majority suggests, never rose to the level of Manulifes employee, as he did not even
present copies of his managerial appointment to prove the fact that his agency relationship changed in
the sense that Manulife controlled the means and methods of his work. The majority posits that even
though the other managers of Manulife admitted to having duties and responsibilities other than those
contained in a Career Agents Agreement, Tongko could not have been anything other than an agent.

With due respect, I beg to disagree with this posture.

It may be stated, as a general proposition, that an insurance agentwho usually sells insurance at his
convenience following his own selling methods and who, for the most part, is governed by a set of
rules[39] the company promulgates to guide its commission agents in selling its policies that they may
not run afoul of the lawis not an employee. But as explained for reasons stated in my Dissent to the June
29, 2010 Resolution, Manulife, upon the petitioners appointment as manager, exercised effective
control not only over the results of his work, but also over the means and methods by which it is to be
accomplished. For sure, petitioner, while acting as Manulifes unit or branch manager, was allowed to
sell insurance policies. And there is nothing absurd, let alone novel about an employee of an insurance
company being given the privilege to solicit insurance.

In two (2) cases, the Court has already ruled that an individual may be an employee of an insurance
agency while concurrently being allowed to sell insurance policies for the same company. In the Insular
Life case,[40] Insular Assurance Co., Ltd. (Insular) entered into an agency contract with Pantaleon de los
Reyes authorizing the latter to solicit within the Philippines applications for life insurance and annuities
for which he would be paid compensation in the form of commissions. Later, on March 1, 1993, the
same parties entered into another contract where de los Reyes was appointed as Acting Unit Manager.
The duties and responsibilities of de los Reyes included the recruitment, training, organization and
development within his designated territory of a sufficient number of qualified, competent and
trustworthy underwriters, and to supervise and coordinate the sales efforts of the underwriters in the
active solicitation of new business and in the furtherance of the agencys assigned goals. We also stated
that:

Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in the companys
conservation program, i.e., preservation and maintenance of existing insurance policies, and to accept
moneys duly receipted on agents receipts provided the same were turned over to the company. As long
as he was unit manager in an acting capacity, De los Reyes was prohibited from working for other life
insurance companies or with the government. He could not also accept a managerial or supervisory
position in any firm doing business in the Philippineswithout the written consent of petitioner.

Private respondent worked concurrently as agent and Acting Unit Manager until he was notified by
petitioner on 18 November 1993 that his services were terminated effective 18 December 1993. On 7
March 1994 he filed a complaint before the Labor Arbiter on the ground that he was illegally dismissed
and that he was not paid his salaries and separation pay. (Emphasis supplied.)

The fact that de los Reyes concurrently acted as an agent, selling insurance for Insular, and as an acting
Unit Manager, did not prevent the Court from ruling that de los Reyes was Insulars employee.

Similarly, in the Grepalife case,[41] the brothers Rodrigo and Ernesto Ruiz entered into agency
agreements with Great Pacific Life Assurance Corporation (Grepalife) for the former to sell the latters
insurance policies. They started out as trainee agents and later promoted to Zone Supervisor and District
Manager, respectively. Describing the brothers duties, the Court ruled:

x x x [T]heir work at the time of their dismissal as zone supervisor and district manager are necessary
and desirable to the usual business of the insurance company. They were entrusted with supervisory,
sales and other functions to guard Grepalifes business interests and to bring in more clients to the
company, and even with administrative functions to ensure that all collections, reports and data are
faithfully brought to the company.

Upon the foregoing factual setting, the Court ruled that the brothers Ruiz are employees of Grepalife,
the latter exercising control over the means and methods employed by them to reach their objective.

Clearly, the fact that an individual acts as an agent of an insurance company is irrelevant to the issue of
whether the individual is an employee of the company. The Court has already recognized the reality that
an employee of an insurance company may, at the same time, be an agent and allowed to act as such.

It may be, as asserted, that petitioner was unable to adduce in evidence copies of his management
contracts specifying his overall duties and responsibilities as manager. But then, a management

contract, for purposes of determining the relationship between the worker and the employer, is simply
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 clearly defined. Moreover, other evidence, like the letter of De Dios, may be considered to
support the contention that he was an employee of Manulife and prove his duties and responsibilities as
such.

It may not be remiss to point out that Tongko was dismissed from his employment with Manulife for his
failure to recruit sufficient numbers of agents. As was explained in the November 7, 2008 Decision:

The problem started sometime in 2001, when Manulife instituted manpower development programs in
the regional sales management level. Relative thereto, De Dios addressed a letter dated November 6,
2001 to Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter, De
Dios stated:
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.

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, terminating Tongkos
services, thus:
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
Managements avowed agency growth policy.
xxxx
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.

And yet, the recruitment of agents is not among the duties and responsibilities that were designated to
Tongko in the Agreement. And while there may not have been another contract to supersede the
Agreement that was presented as evidence, the facts of the case bear out that Tongko was assigned
various other duties and responsibilities that were not included therein.

Manulifes decision not to execute a management contract with petitioner was well within its
prerogative. However, the bare fact of Manulife and petitioner not having executed a management
contract, if this were the case, did not reduce the petitioner to a mere lead agent. While there was
perhaps no written management contract whence petitioners duties and undertaking as unit/branch
manager may easily be fleshed out prefatory 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[42] of November 6, 2001, respondent De Dios addressed petitioner as sales manager. And as I
wrote in my Dissent to the June 29, 2010 Resolution, it is difficult to imagine that Manulife did not issue
promotional appointments to petitioner as unit manager, branch manager, and eventually regional sales
manager. Sound management practice simply requires an appointment for any upward personnel
movement, particularly when additional functions and the corresponding increase in compensation are
involved. Then, too, the adverted affidavits of the managers of Manulife as to the duties and
responsibilities of a unit manager, such as petitioner, point to the conclusion that these managers were
employees of Manulife, applying the four-fold test.

Any lingering doubt that petitioner was, by virtue of the management appointment, under Manulifes
employ should be laid to rest by its virtual admission made in its Motion for Reconsideration dated
December 3, 2008 that petitioner was dismissed for a just and lawful cause: gross and habitual neglect
of duties, inefficiency and willful disobedience of the lawful orders of Manulife, to wit:

5.4. And yet, until the November 7 Decision, Respondents never thought for one moment that Petitioner
was Manulifes employee. All the agreements executed with him, his flexible hours, his unsupervised
choice of clients and method of selling the products, his ability to take leave anytime, his separate
business expenses, his own declarations in his tax return, Respondent Manulifes non-contribution of SSS
premiums for him, his non-existence in the company plantilla, Respondent Manulifes withholding from
him of creditable income tax, all consistently showed that Respondent Manulifes belief was singular in
the existence of independent contractorship.

x x x x.

5.7. And yet, respondent Manulife did indeed substantially comply with the requirements for lawful
dismissal of a regular employee, assuming arguendo that petitioner is one. He was dismissed for a just
and lawful cause for gross disobedience of the lawful orders of Respondent Manulife. 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.

Notably, in the termination letter of Manulife that was addressed to Tongko, no mention is made of any
valid cause for the termination of his services. No mention was made of any particular rule that Tongko
violated leading to his separation. Evidently, Tongkos termination of employment was without cause. In
an apparent about face, Manulife now claims that it had a valid cause for the termination of Tongkos
services.

While the Court allows the presentation of inconsistent defenses, Manulifes argumentation on this point
would destroy its position that Tongko is not its employee. Manulife is essentially pointing out the facts
that would show that it abided by the requirements of the Labor Code on the dismissal of an employee.
Article 282, paragraphs (a) and (b), of the Labor Code requires the presence of valid grounds for the
legal dismissal of an employee:

Article 282. Termination by employer. An employer may terminate an employment for any of the
following just causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

Stated differently, such requirements are only required of employers with regard to their employees.
Manulife had no reason to comply with this provision of law if it did not consider Tongko as an
employee. Therefore, the question is begged as to why Manulife deemed it necessary to comply with
such provision of law. There is an implied admission that Tongko was Manulifes employee.

The following excerpts appearing in my Dissent to the June 29, 2010 Resolution are self-explanatory:

At this juncture, the Court notes 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 Career
Agents Agreement. In this motion, however, Manulife, in a virtual acknowledgment of petitioner being
its employee, contends that the petitioner was dismissed for a just and lawful cause for gross and
habitual neglect of duties, inefficiency and willful disobedience of the lawful orders. 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.

In all, I submit that petitioners peculiar circumstances as unit manager, branch manager and ultimately
regional sales manager of Manulife, with the exclusivity feature of his engagement and his duties as
such manager, indicate, at the very least, a prima facie existence of an employer-employee relationship,
following the control test. And given the bias of the Constitution,[43] Labor Code[44] and Civil Code[45]
in favor of labor, any doubt as to the existence of such relationship occasioned by the lack of evidence
should be resolved in favor of petitioner and of employment. In this regard, I hark back anew to what
the Court emphatically said in Dealco Farms, Inc. v. National Labor Relations Commission:

Having failed to substantiate its allegations 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.[46]

As in Dealco Farms, the sympathies of the Court in this case should be easy and clear. The flip-flopping
of the lower tribunals and the change in the Courts own stand lucidly show the ambiguity and doubt in
the application of the labor laws to the instant case. As such, the Court is duty-bound to resolve such
doubts in favor of the employee, Tongko.

Tongko was illegally dismissed

Having established that Tongko was indeed an employee of Manulife when he was a manager thereof,
the next question is whether the dismissal was illegal.

This must be answered in the affirmative.

In the NLRC and the CA, Manulife alleged that Tongko was validly dismissed for gross and habitual
neglect of duties, inefficiency, as well as willful disobedience of the lawful orders of Manulife. Evidently,
such dismissal was due to Tongkos failure to recruit the required number of agents from his area of
responsibility.

To reiterate, two (2) of the alleged grounds for the dismissal of Tongko fall under Art. 282, paragraphs
(a) and (b) of the Labor Code:

Article 282. Termination by employer. An employer may terminate an employment for any of the
following just causes:
(b) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(c) Gross and habitual neglect by the employee of his duties;

On the other hand, inefficiency as a ground for termination of employment is equated with gross and
habitual neglect, as the Court explained in St. Lukes Medical Center, Incorporated v. Fadrigo:[47]

Gross inefficiency is closely related to gross neglect, for both involve specific acts of omission on the part
of the employee resulting in damage to the employer or to his business. As a just cause for an
employees dismissal, inefficiency or neglect of duty must not only be gross but also habitual. Thus, a
single or isolated act of negligence does not constitute a just cause for the dismissal of the employee.
(Emphasis supplied.)

In cases of termination of employment for just causes, the Court has repeatedly held that the burden
rests on the employer to justify such dismissal. Art. 277, paragraph (b) of the Labor Code states:

Article. 277. Miscellaneous provisions. x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause and without prejudice to the requirement of
notice under Article 283 of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the causes for termination and shall
afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated pursuant
to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall
be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing
a complaint with the regional branch of the National Labor Relations Commission. The burden of proving
that the termination was for a valid or authorized cause shall rest on the employer. The Secretary of the

Department of Labor and Employment may suspend the effects of the termination pending resolution of
the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor
and Employment before whom such dispute is pending that the termination may cause a serious labor
dispute or is in implementation of a mass lay-off. (Emphasis supplied.)

Thus, the Court has ruled in Caltex (Philippines), Inc. v. Agad[48] that:

In termination cases, the burden of proof rests on the employer to show that the dismissal is for just
cause. When there is no showing of a clear, valid, and legal cause for the termination of employment,
the law considers the matter a case of illegal dismissal and the burden is on the employer to prove that
the termination was for a valid or authorized cause.

The quantum of proof which the employer must discharge is substantial evidence. An employees
dismissal due to serious misconduct and loss of trust and confidence must be supported by substantial
evidence. Substantial evidence is that amount of relevant evidence as a reasonable mind might accept
as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine
otherwise.

While in Lima Land, Inc. v. Cuevas,[49] the Court ruled:

Well-settled is the rule that the essence of due process is simply an opportunity to be heard or, as
applied to administrative proceedings, an opportunity to explain ones side or an opportunity to seek a
reconsideration of the action or ruling complained of.

Moreover, in dismissing an employee, the employer has the burden of proving that the former worker
has been served two notices: (1) one to apprise him of the particular acts or omissions for which his
dismissal is sought, and (2) the other to inform him of his employers decision to dismiss him. The first
notice must state that dismissal is sought for the act or omission charged against the employee,
otherwise, the notice cannot be considered sufficient compliance with the rules.

The first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. Reasonable opportunity under the Omnibus Rules
means every kind of assistance that management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed as a period of at least five (5) calendar

days from receipt of the notice to give the employees an opportunity to study the accusation against
them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will
raise against the complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees. A general description of the charge will not
suffice. Lastly, the notice should specifically mention which company rules, if any, were violated and/or
which among the grounds under Article 282 is being charged against the employees.

Manulife has failed to overcome such burden. Willful disobedience, to justify termination from
employment, must comply with the following requirements, as enunciated in Areno v. SkyCable PCCBaguio,[50] to wit:

As a just cause for dismissal of an employee under Article 282 of the Labor Code, willful disobedience of
the employers lawful orders requires the concurrence of two elements: (1) the employees assailed
conduct must have been willful, i.e., characterized by a wrongful and perverse attitude; and (2) the
order violated must have been reasonable, lawful, made known to the employee, and must pertain to
the duties which he had been engaged to discharge.

Neglect of duty, to be a valid ground for termination of employment must also conform to the following
requirements, as stated in Benjamin v. Amellar Corporation:[51]

It bears stressing in dismissing an employee for gross and habitual neglect of duties, the negligence
should not merely be gross. It should also be habitual. There being nothing in the records to identify
what specific duties Anabel violated and whether the violations were gross and habitual, any discussion
herein is an exercise in futility.

Here, Manulife has failed to identify the rule and the standards by which Tongkos acts were considered
unsatisfactory. There were no set criteria for determining the sufficiency of Tongkos recruitment efforts.
Moreover, Tongkos acts were not proved to be willful or gross and habitual as defined by the abovecited jurisprudence. Absent proof establishing such factors, Manulife cannot be considered to have
discharged the burden required to prove that the just cause for termination of employment was indeed
present. In fact, at the time Tongkos services were terminated, his area was not the last in agent
recruitment. As such, Tongkos dismissal smacks of arbitrariness.

Informal communications violate the principle of sub judice

On a final note, the Court received and set for agenda four (4) letters in relation to the instant case: (1)
Letter of Tongko dated November 30, 2005;[52] (2) the aforementioned letter of the Joint Foreign
Chambers of the Philippines dated December 16, 2008;[53] (3) Letter of Gregorio Mercado, President of
the Philippine Life Insurance Association, Inc. dated January 12, 2009;[54] and (4) Letter of Tongko dated
March 25, 2009,[55] propounding their positions on the case. At that point in time, the case had not yet
become final and executory, hence, sub judice. In Romero v. Estrada,[56] the Court expounded on this
principle, to wit:

The sub judice rule restricts comments and disclosures pertaining to judicial proceedings to avoid
prejudging the issue, influencing the court, or obstructing the administration of justice. A violation of the
sub judice rule may render one liable for indirect contempt under Sec. 3(d), Rule 71 of the Rules of
Court. The rationale for the rule adverted to is set out in Nestle Philippines v. Sanchez:

[I]t is a traditional conviction of civilized society everywhere that courts and juries, in the decision of
issues of fact and law should be immune from every extraneous influence; that facts should be decided
upon evidence produced in court; and that the determination of such facts should be uninfluenced by
bias, prejudice or sympathies.

The principle of sub judice is a two-way street. Inasmuch as the parties and other interested individuals
should refrain from trying to influence the courts, the court itself should also be on guard against such
attempts. The Court should, therefore, be wary from accepting and putting on record, papers and
documents not officially filed with it. Such submissions have the appearance of influencing the Court
despite the latters determined objectivity and must be avoided. To illustrate, the November 7, 2008
Decision of this Court was decided in favor of Tongko with only one (1) dissent. However, in the July 29,
2010 Resolution, the original Decision was reversed in favor of Manulife by the Court en banc, with only
two (2) dissents. The above-mentioned letters were received by the Court after November 7, 2008 but
before July 29, 2010. While the letters themselves may not have actually swayed the members of the
Court, the appearance of impropriety should be avoided. To reiterate, when the parties submitted the
aforementioned letters, the case had not yet become final and executory, they had sufficient remedies
under the Rules of Court for redress. There was no reason for the parties to have submitted such letters
and for this Court to have taken cognizance thereof and to set the same for agenda.

To reiterate, the declaration that Tongko is an employee of Manulife, having performed administrative
functions as its manager, cannot be applied to insurance agents in general. Any finding of an employeremployee relationship shall always be on a case-to-case basis. The instant case is no exception. Any fear
that the grant of Tongkos motion for reconsideration shall render all insurance agents in the country as
employees of insurance companies is badly misplaced.

WHEREFORE, I vote to grant Tongkos Motion for Reconsideration dated July 28, 2010, to annul and set
aside the June 29, 2010, and to reinstate the November 7, 2008 Decision with modification on the
amount of backwages to which Tongko shall be entitled. As thus modified and subject to the
qualifications defined in the Dissenting Opinion to the June 29, 2010, petitioner should be awarded
backwages, to be computed as the monthly average of his management overrides, as well as other
bonuses and benefits, corresponding to the period he was serving Manulife as unit, branch and
eventually regional sales manager.

PRESBITERO J. VELASCO, JR.

Associate Justice

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

ATOK BIG WEDGE COMPANY, INC.,

Petitioner,

versus -

JESUS P. GISON,

Respondent.

G.R. No. 169510

Present:

CARPIO,* J.,
VELASCO, JR., J., Chairperson,
BRION,**
PERALTA, and
SERENO,*** JJ.
Promulgated:

August 8, 2011

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision[1] dated May 31,
2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution[2] dated August 23, 2005
denying petitioners motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer
basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and Acting

Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent assisted petitioner's
retained legal counsel with matters pertaining to the prosecution of cases against illegal surface
occupants within the area covered by the company's mineral claims. Respondent was likewise tasked to
perform liaison work with several government agencies, which he said was his expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when occasionally
requested by the management to discuss matters needing his expertise as a consultant. As payment for
his services, respondent received a retainer fee of P3,000.00 a month,[3] which was delivered to him
either at his residence or in a local restaurant. The parties executed a retainer agreement, but such
agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his
registration with the Social Security System (SSS), but petitioner did not accede to his request. He later
reiterated his request but it was ignored by respondent considering that he was only a
retainer/consultant. On February 4, 2003, respondent filed a Complaint[4] with the SSS against
petitioner for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a
Memorandum[5] advising respondent that within 30 days from receipt thereof, petitioner is terminating
his retainer contract with the company since his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint[6] for illegal dismissal, unfair labor practice,
underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay with the
National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB), Cordillera
Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was
docketed as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big
Wedge Co., Inc., or Atok for brevity, approached him and asked him if he can help the companys
problem involving the 700 million pesos crop damage claims of the residents living at the minesite of
Atok. He participated in a series of dialogues conducted with the residents. Mr. Torres offered to pay
him P3,000.00 per month plus representation expenses. It was also agreed upon by him and Torres that
his participation in resolving the problem was temporary and there will be no employer-employee

relationship between him and Atok. It was also agreed upon that his compensation, allowances and
other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants
barricaded the only passage to and from the minesite. In the early morning of February 1, 1992, a
dialogue was made by Atok and the crop damage claimants. Unfortunately, Atoks representatives,
including him, were virtually held hostage by the irate claimants who demanded on the spot payment of
their claims. He was able to convince the claimants to release the company representatives pending
referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the
barricade. While Atok was prosecuting its case with the claimants, another case erupted involving its
partner, Benguet Corporation. After Atok parted ways with Benguet Corporation, some properties
acquired by the partnership and some receivables by Benguet Corporation was the problem. He was
again entangled with documentation, conferences, meetings, planning, execution and clerical works.
After two years, the controversy was resolved and Atok received its share of the properties of the
partnership, which is about 5 million pesos worth of equipment and condonation of Atoks
accountabilities with Benguet Corporation in the amount of P900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok was
relieved of the burden of paying 700 million pesos. In between attending the problems of the crop
damage issue, he was also assigned to do liaison works with the SEC, Bureau of Mines, municipal
government of Itogon, Benguet, the Courts and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by Atok
to take charge of some liaison matters and public relations in Baguio andBenguet Province, and to
report regularly to Atoks office in Manila to attend meetings and so he had to stay in Manila at least one
week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is
already entitled to the benefits due an employee under the law, but management ignored his requests.
However, he continued to avail of his representation expenses and reimbursement of company-related
expenses. He also enjoyed the privilege of securing interest free salary loans payable in one year
through salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation officer
and legal assistant, and to assist in the ejection of illegal occupants in the mining claims of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to cause
his registration with the SSS. His request was again ignored and so he filed a complaint with the SSS.
After filing his complaint with the SSS, respondents terminated his services.[7]

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter
Rolando D. Gambito rendered a Decision[8] ruling in favor of the petitioner. Finding no employeremployee relationship between petitioner and respondent, the Labor Arbiter dismissed the complaint
for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution[9] affirming the decision of the Labor
Arbiter. Respondent filed a Motion for Reconsideration, but it was denied in the Resolution[10] dated
September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA
questioning the decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No. 87846.
In support of his petition, respondent raised the following issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the
Honorable Public Respondent affirming the same, are in harmony with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the
Complaint of Petitioner and whether or not the Honorable Public Respondent Committed a Grave Abuse
of Discretion when it affirmed the said Decision.[11]

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the
NLRC, the decretal portion of which reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations
Commission dismissing petitioner's complaint for illegal dismissal isANNULLED and SET ASIDE. Private
respondent Atok Big Wedge Company Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to
his former or equivalent position without loss of seniority rights and to pay him full backwages, inclusive
of allowances and other benefits or their monetary equivalent computed from the time these were

withheld from him up to the time of his actual and effective reinstatement. This case is ordered
REMANDED to the Labor Arbiter for the proper computation of backwages, allowances and other
benefits due to petitioner.Costs against private respondent Atok Big Wedge Company Incorporated.

SO ORDERED.[12]

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and
the NLRC may have overlooked Article 280 of the Labor Code,[13] or the provision which distinguishes
between two kinds of employees, i.e., regular and casual employees. Applying the provision to the
respondent's case, he is deemed a regular employee of the petitioner after the lapse of one year from
his employment. Considering also that respondent had been performing services for the petitioner for
eleven years, respondent is entitled to the rights and privileges of a regular employee.

The CA added that although there was an agreement between the parties that respondent's
employment would only be temporary, it clearly appears that petitioner disregarded the same by
repeatedly giving petitioner several tasks to perform. Moreover, although respondent may have waived
his right to attain a regular status of employment when he agreed to perform these tasks on a
temporary employment status, still, it was the law that recognized and considered him a regular
employee after his first year of rendering service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

I.
WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY
TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE
PETITION FOR CERTIORARI DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL
LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.

II.
WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY
TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT BASED ITS FINDING THAT
RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS
HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYEREMPLOYEE RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.

III.
WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY
TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT
RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW
AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED
RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE PROVIDED
TO THE COMPANY WAS SENSITIVE AND CONFIDENTIAL.[14]

Petitioner argues that since the petition filed by the respondent before the CA was a petition for
certiorari under Rule 65 of the Rules of Court, the CA should have limited the issue on whether or not
there was grave abuse of discretion on the part of the NLRC in rendering the resolution affirming the
decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether
there was an employer-employee relationship between the petitioner and the respondent. Petitioner
contends that where the existence of an employer-employee relationship is in dispute, Article 280 of the
Labor Code is inapplicable. The said article only set the distinction between a casual employee from a
regular employee for purposes of determining the rights of an employee to be entitled to certain
benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in
ruling in his favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of the
NLRC. It bears stressing that there is no appeal from the decision or resolution of the NLRC. As this Court
enunciated in the case of St. Martin Funeral Home v. NLRC,[15] the special civil action of certiorari under
Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper vehicle for judicial
review of decisions of the NLRC. The petition should be initially filed before the Court of Appeals in strict
observance of the doctrine on hierarchy of courts as the appropriate forum for the relief desired.[16]
This Court not being a trier of facts, the resolution of unclear or ambiguous factual findings should be

left to the CA as it is procedurally equipped for that purpose. From the decision of the Court of Appeals,
an ordinary appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be
resorted to by the parties. Hence, respondent's resort to the CA was appropriate under the
circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between
petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a

question of fact and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded not
only respect but even finality when supported by substantial evidence.[17] Being a question of fact, the
determination whether such a relationship exists between petitioner and respondent was well within
the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence, such
determination should have been accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered

to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee's conduct, or the so-called
"control test."[18] Of these four, the last one is the most important.[19] The so-called control test is
commonly regarded as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under the control test, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not only the end
achieved, but also the manner and means to be used in reaching that end.[20]

Applying the aforementioned test, an employer-employee relationship is apparently absent in the case
at bar. Among other things, respondent was not required to report everyday during regular office hours
of petitioner. Respondent's monthly retainer fees were paid to him either at his residence or a local
restaurant. More importantly, petitioner did not prescribe the manner in which respondent would
accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent was left
alone and given the freedom to accomplish the tasks using his own means and method. Respondent was
assigned tasks to perform, but petitioner did not control the manner and methods by which respondent
performed these tasks. Verily, the absence of the element of control on the part of the petitioner
engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly
admitted that petitioner hired him in a limited capacity only and that there will be no employeremployee relationship between them. As averred in respondent's Position Paper:[21]

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him
a pay in the amount of Php3,000.00 per month plus representation expenses. It was also agreed by Mr.
Torres and the complainant that his participation on this particular problem of Atok will be temporary
since the problem was then contemplated to be limited in nature, hence, there will be no employeremployee relationship between him and Atok. Complainant agreed on this arrangement. It was also
agreed that complainant's compensations, allowances, representation expenses and reimbursement of
company- related expenses will be processed and paid through disbursement vouchers;[22]

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the
petitioner and he agreed to perform tasks for the petitioner on a temporary employment status only.
However, respondent anchors his claim that he became a regular employee of the petitioner based on
his contention that the temporary aspect of his job and its limited nature could not have lasted for
eleven years unless some time during that period, he became a regular employee of the petitioner by
continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of
petitioner. The appellate court's premise that regular employees are those who perform activities which
are desirable and necessary for the business of the employer is not determinative in this case. In fact,
any agreement may provide that one party shall render services for and in behalf of another, no matter
how necessary for the latter's business, even without being hired as an employee.[23] Hence,
respondent's length of service and petitioner's repeated act of assigning respondent some tasks to be
performed did not result to respondent's entitlement to the rights and privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years,
he still cannot be considered as a regular employee of petitioner.Article 280 of the Labor Code, in which
the lower court used to buttress its findings that respondent became a regular employee of the
petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said provision is not the
yardstick for determining the existence of an employment relationship because it merely distinguishes
between two kinds of employees, i.e., regular employees and casual employees, for purposes of
determining the right of an employee to certain benefits, to join or form a union, or to security of
tenure; it does not apply where the existence of an employment relationship is in dispute.[24] It is,
therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in determining whether
an employer-employee relationship exists between respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the termination of
respondent's services by the petitioner after due notice did not constitute illegal dismissal warranting
his reinstatement and the payment of full backwages, allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the
Court of Appeals in CA-G.R. SP No. 87846, are REVERSEDand SET ASIDE. The Resolutions dated July 30,
2004 and September 30, 2004 of the National Labor Relations Commission are REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

PRESBITERO J. VELASCO, JR. ARTURO D. BRION

Associate Justice Associate Justice
Chairperson

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Third Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify
that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

BITOY JAVIER
(DANILO P. JAVIER),
Petitioner,

- versus -

FLY ACE CORPORATION/

FLORDELYN CASTILLO,
Respondents.

G.R. No. 192558

Present:

CARPIO,* J.,
PERALTA,** Acting Chairperson,
ABAD,
PEREZ,*** and
MENDOZA, JJ.

Promulgated:

February 15, 2012

x ----------------------------------------------------------------------------------------x

DECISION

MENDOZA, J.:

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision[1]
of the Court of Appeals (CA) and its June 7, 2010 Resolution,[2]in CA-G.R. SP No. 109975, which reversed
the May 28, 2009 Decision[3] of the National Labor Relations Commission (NLRC) in the case entitled
Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4] holding that petitioner Bitoy Javier (Javier) was illegally
dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to pay backwages and
separation pay in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor
standard benefits. He alleged that he was an employee of Fly Ace since September 2007, performing
various tasks at the respondents warehouse such as cleaning and arranging the canned items before
their delivery to certain locations, except in instances when he would be ordered to accompany the
companys delivery vehicles, as pahinante; that he reported for work from Monday to Saturday from
7:00 oclock in the morning to 5:00 oclock in the afternoon; that during his employment, he was not
issued an identification card and payslips by the company; that on May 6, 2008, he reported for work
but he was no longer allowed to enter the company premises by the security guard upon the instruction
of Ruben Ong (Mr. Ong), his superior;[5] that after several minutes of begging to the guard to allow him
to enter, he saw Ong whom he approached and asked why he was being barred from entering the
premises; that Ong replied by saying,Tanungin mo anak mo; [6] that he then went home and discussed

the matter with his family; that he discovered that Ong had been courting his daughter Annalyn after
the two met at a fiesta celebration in Malabon City; that Annalyn tried to talk to Ong and convince him
to spare her father from trouble but he refused to accede; that thereafter, Javier was terminated from
his employment without notice; and that he was neither given the opportunity to refute the cause/s of
his dismissal from work.

To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier
was a stevedore or pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was
subscribed before the Labor Arbiter (LA).[7]

For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries.
Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as extra helper on a
pakyaw basis at an agreed rate of 300.00 per trip, which was later increased to 325.00 in January
2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever the vehicle of its
contracted hauler, Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no longer
needed the services of Javier. Denying that he was their employee, Fly Ace insisted that there was no
illegal dismissal.[8] Fly Ace submitted a copy of its agreement with Milmar Hauling Services and copies
of acknowledgment receipts evidencing payment to Javier for his contracted services bearing the words,
daily manpower (pakyaw/piece rate pay) and the latters signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed
to present proof that he was a regular employee of Fly Ace. He wrote:

Complainant has no employee ID showing his employment with the Respondent nor any document
showing that he received the benefits accorded to regular employees of the Respondents. His
contention that Respondent failed to give him said ID and payslips implies that indeed he was not a
regular employee of Fly Ace considering that complainant was a helper and that Respondent company
has contracted a regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries.
Since there is a regular hauler to deliver its products, we give credence to Respondents claim that
complainant was contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll presented by the Respondents showing salaries
of workers on pakiao basis has evidentiary weight because although the signature of the complainant
appearing thereon are not uniform, they appeared to be his true signature.

xxxx
Hence, as complainant received the rightful salary as shown by the above described payrolls,
Respondents are not liable for salary differentials. [9]
Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and
immediately concluded that he was not a regular employee simply because he failed to present proof. It
was of the view that a pakyaw-basis arrangement did not preclude the existence of employer-employee
relationship. Payment by result x x xis a method of compensation and does not define the essence of the
relation. It is a mere method of computing compensation, not a basis for determining the existence or
absence of an employer-employee relationship.[10] The NLRC further averred that it did not follow that
a worker was a job contractor and not an employee, just because the work he was doing was not
directly related to the employers trade or business or the work may be considered as extra helper as in
this case; and that the relationship of an employer and an employee was determined by law and the
same would prevail whatever the parties may call it. In this case, the NLRC held that substantial
evidence was sufficient basis for judgment on the existence of the employer-employee relationship.
Javier was a regular employee of Fly Ace because there was reasonable connection between the
particular activity performed by the employee (as a pahinante) in relation to the usual business or trade
of the employer (importation, sales and delivery of groceries). He may not be considered as an
independent contractor because he could not exercise any judgment in the delivery of company
products. He was only engaged as a helper.

Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For
failing to present proof of a valid cause for his termination, Fly Ace was found to be liable for illegal
dismissal of Javier who was likewise entitled to backwages and separation pay in lieu of reinstatement.
The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is partially GRANTED. The assailed Decision of
the labor arbiter is VACATED and a new one is hereby entered holding respondent FLY ACE
CORPORATION guilty of illegal dismissal and non-payment of 13th month pay. Consequently, it is hereby
ordered to pay complainant DANILO Bitoy JAVIER the following:

1. Backwages -45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.[11]

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly
Ace and reinstated the dismissal of Javiers complaint as ordered by the LA. The CA exercised its
authority to make its own factual determination anent the issue of the existence of an employeremployee relationship between the parties.According to the CA:

xxx

In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a
valid cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship
must first be established. x x x it is incumbent upon private respondent to prove the employee-employer
relationship by substantial evidence.

xxx

It is incumbent upon private respondent to prove, by substantial evidence, that he is an employee of

petitioners, but he failed to discharge his burden. The non-issuance of a company-issued identification
card to private respondent supports petitioners contention that private respondent was not its
employee.[12]

The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of
evidence to bolster his contention, pointed to the inescapable conclusion that he was not an employee
of Fly Ace. Further, it found that Javiers work was not necessary and desirable to the business or trade of
the company, as it was only when there were scheduled deliveries, which a regular hauling service could
not deliver, that Fly Ace would contract the services of Javier as an extra helper. Lastly, the CA declared
that the facts alleged by Javier did not pass the control test.

He contracted work outside the company premises; he was not required to observe definite hours of
work; he was not required to report daily; and he was free to accept other work elsewhere as there was

no exclusivity of his contracted service to the company, the same being co-terminous with the trip
only.[13] Since no substantial evidence was presented to establish an employer-employee relationship,
the case for illegal dismissal could not prosper.

The petitioners moved for reconsideration, but to no avail.

Hence, this appeal anchored on the following grounds:

I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER WAS NOT A
REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS.[14]

The petitioner contends that other than its bare allegations and self-serving affidavits of the other
employees, Fly Ace has nothing to substantiate its claim that Javier was engaged on a pakyaw basis.
Assuming that Javier was indeed hired on a pakyaw basis, it does not preclude his regular employment
with the company. Even the acknowledgment receipts bearing his signature and the confirming receipt
of his salaries will not show the true nature of his employment as they do not reflect the necessary
details of the commissioned task. Besides, Javiers tasks as pahinante are related, necessary and
desirable to the line of business by Fly Ace which is engaged in the importation and sale of grocery
items. On days when there were no scheduled deliveries, he worked in petitioners warehouse, arranging
and cleaning the stored cans for delivery to clients.[15] More importantly, Javier was subject to the
control and supervision of the company, as he was made to report to the office from Monday to
Saturday, from 7:00 oclock in the morning until 5:00 oclock in the afternoon. The list of deliverable
goods, together with the corresponding clients and their respective purchases and addresses, would
necessarily have been prepared by Fly Ace. Clearly, he was subjected to compliance with company rules
and regulations as regards working hours, delivery schedule and output, and his other duties in the
warehouse.[16]

The petitioner chiefly relied on Chavez v. NLRC,[17] where the Court ruled that payment to a worker on
a per trip basis is not significant because this is merely a method of computing compensation and not a
basis for determining the existence of employer-employee relationship. Javier likewise invokes the rule
that, in controversies between a laborer and his master, x x x doubts reasonably arising from the
evidence should be resolved in the formers favour. The policy is reflected is no less than the
Constitution, Labor Code and Civil Code.[18]

Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latters
failure to observe substantive and procedural due process. Since his dismissal was not based on any of
the causes recognized by law, and was implemented without notice, Javier is entitled to separation pay
and backwages.

In its Comment,[19] Fly Ace insists that there was no substantial evidence to prove employer-employee
relationship. Having a service contract with Milmar Hauling Services for the purpose of transporting and
delivering company products to customers, Fly Ace contracted Javier as an extra helper or pahinante on
a mere per trip basis. Javier, who was actually a loiterer in the area, only accompanied and assisted the
company driver when Milmar could not deliver or when the exigency of extra deliveries arises for
roughly five to six times a month. Before making a delivery, Fly Ace would turn over to the driver and
Javier the delivery vehicle with its loaded company products. With the vehicle and products in their
custody, the driver and Javier would leave the company premises using their own means, method, best
judgment and discretion on how to deliver, time to deliver, where and [when] to start, and manner of
delivering the products.[20]

Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his bare allegations,
he presented nothing to substantiate his status as an employee. It is a basic rule of evidence that each
party must prove his affirmative allegation. If he claims a right granted by law, he must prove his claim
by competent evidence, relying on the strength of his own evidence and not upon the weakness of his
opponent.[21] Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists that in an illegal dismissal
case, the burden of proof is upon the complainant who claims to be an employee. It is essential that an
employer-employee relationship be proved by substantial evidence. Thus, it cites:

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an
employee was for a valid cause. However, before a case for illegal dismissal can prosper, an employeremployee relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, which
are unfortunately not supported by proof, documentary or otherwise.[23] Javier simply assumed that he
was an employee of Fly Ace, absent any competent or relevant evidence to support it. He performed his
contracted work outside the premises of the respondent; he was not even required to report to work at
regular hours; he was not made to register his time in and time out every time he was contracted to
work; he was not subjected to any disciplinary sanction imposed to other employees for company
violations; he was not issued a company I.D.; he was not accorded the same benefits given to other
employees; he was not registered with the Social Security System (SSS) as petitioners employee; and, he
was free to leave, accept and engage in other means of livelihood as there is no exclusivity of his

contracted services with the petitioner, his services being co-terminus with the trip only. All these lead
to the conclusion that petitioner is not an employee of the respondents.[24]
Moreover, Fly Ace claims that it had no right to control the result, means, manner and methods by
which Javier would perform his work or by which the same is to be accomplished.[25] In other words,
Javier and the company driver were given a free hand as to how they would perform their contracted
services and neither were they subjected to definite hours or condition of work.

Fly Ace likewise claims that Javiers function as a pahinante was not directly related or necessary to its
principal business of importation and sales of groceries. Even without Javier, the business could operate
its usual course as it did not involve the business of inland transportation. Lastly, the acknowledgment
receipts bearing Javiers signature and words pakiao rate, referring to his earned salaries on a per trip
basis, have evidentiary weight that the LA correctly considered in arriving at the conclusion that Javier
was not an employee of the company.

The Court affirms the assailed CA decision.

It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the existence of an
employer-employee relationship between him and Fly Ace. This is essentially a question of fact.
Generally, the Court does not review errors that raise factual questions. However, when there is conflict
among the factual findings of the antecedent deciding bodies like the LA, the NLRC and the CA, it is
proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the factual issues and to look
into the records of the case and re-examine the questioned findings.[26] In dealing with factual issues in
labor cases, substantial evidence that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion is sufficient.[27]

As the records bear out, the LA and the CA found Javiers claim of employment with Fly Ace as wanting
and deficient. The Court is constrained to agree. Although Section 10, Rule VII of the New Rules of
Procedure of the NLRC[28] allows a relaxation of the rules of procedure and evidence in labor cases, this
rule of liberality does not mean a complete dispensation of proof. Labor officials are enjoined to use
reasonable means to ascertain the facts speedily and objectively with little regard to technicalities or
formalities but nowhere in the rules are they provided a license to completely discount evidence, or the
lack of it. The quantum of proof required, however, must still be satisfied. Hence, when confronted with
conflicting versions on factual matters, it is for them in the exercise of discretion to determine which
party deserves credence on the basis of evidence received, subject only to the requirement that their
decision must be supported by substantial evidence.[29] Accordingly, the petitioner needs to show by

substantial evidence that he was indeed an employee of the company against which he claims illegal
dismissal.

Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and
cheese. It is, therefore, incumbent upon the Court to determine whether the party on whom the burden
to prove lies was able to hurdle the same. No particular form of evidence is required to prove the
existence of such employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted. Hence, while no particular form of evidence is required, a finding that
such relationship exists must still rest on some substantial evidence. Moreover, the substantiality of the
evidence depends on its quantitative as well as its qualitative aspects.[30]Although substantial evidence
is not a function of quantity but rather of quality, the x x x circumstances of the instant case demand
that something more should have been proffered. Had there been other proofs of employment, such as
x x x inclusion in petitioners payroll, or a clear exercise of control, the Court would have affirmed the
finding of employer-employee relationship.[31]

In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate
such claim by the requisite quantum of evidence.[32] Whoever claims entitlement to the benefits
provided by law should establish his or her right thereto x x x.[33] Sadly, Javier failed to adduce
substantial evidence as basis for the grant of relief.

In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly
Ace. By way of evidence on this point, all that Javier presented were his self-serving statements
purportedly showing his activities as an employee of Fly Ace. Clearly, Javier failed to pass the
substantiality requirement to support his claim. Hence, the Court sees no reason to depart from the
findings of the CA.

While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work
in the company premises during weekdays arranging and cleaning grocery items for delivery to clients,
no other proof was submitted to fortify his claim. The lone affidavit executed by one Bengie Valenzuela
was unsuccessful in strengthening Javiers cause. In said document, all Valenzuela attested to was that
he would frequently see Javier at the workplace where the latter was also hired as
stevedore.[34]Certainly, in gauging the evidence presented by Javier, the Court cannot ignore the
inescapable conclusion that his mere presence at the workplace falls short in proving employment
therein. The supporting affidavit could have, to an extent, bolstered Javiers claim of being tasked to
clean grocery items when there were no scheduled delivery trips, but no information was offered in this
subject simply because the witness had no personal knowledge of Javiers employment status in the
company. Verily, the Court cannot accept Javiers statements, hook, line and sinker.

The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to
determine the existence of an employer-employee relationship, viz: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employees conduct. Of these elements, the most important criterion is whether the employer controls
or has reserved the right to control the employee not only as to the result of the work but also as to the
means and methods by which the result is to be accomplished.[35]

In this case, Javier was not able to persuade the Court that the above elements exist in his case. He
could not submit competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace
paid his wages as an employee, or that Fly Ace could dictate what his conduct should be while at work.
In other words, Javiers allegations did not establish that his relationship with Fly Ace had the attributes
of an employer-employee relationship on the basis of the above-mentioned four-fold test. Worse, Javier
was not able to refute Fly Aces assertion that it had an agreement with a hauling company to undertake
the delivery of its goods. It was also baffling to realize that Javier did not dispute Fly Aces denial of his
services exclusivity to the company. In short, all that Javier laid down were bare allegations without
corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a per trip rate as a stevedore, albeit
on a pakyaw basis. The Court cannot fail to note that Fly Ace presented documentary proof that Javier
was indeed paid on a pakyaw basis per the acknowledgment receipts admitted as competent evidence
by the LA. Unfortunately for Javier, his mere denial of the signatures affixed therein cannot
automatically sway us to ignore the documents because forgery cannot be presumed and must be
proved by clear, positive and convincing evidence and the burden of proof lies on the party alleging
forgery.[36]

Considering the above findings, the Court does not see the necessity to resolve the second issue
presented.

One final note. The Courts decision does not contradict the settled rule that payment by the piece is just
a method of compensation and does not define the essence of the relation.[37] Payment on a piece-rate
basis does not negate regular employment. The term wage is broadly defined in Article 97 of the Labor
Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis. Payment by the piece is just a method of
compensation and does not define the essence of the relations. Nor does the fact that the petitioner is
not covered by the SSS affect the employer-employee relationship. However, in determining whether
the relationship is that of employer and employee or one of an independent contractor, each case must
be determined on its own facts and all the features of the relationship are to be considered.[38]

Unfortunately for Javier, the attendant facts and circumstances of the instant case do not provide the
Court with sufficient reason to uphold his claimed status as employee of Fly Ace.

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically decided in favor of labor.
Management also has its rights which are entitled to respect and enforcement in the interest of simple
fair play. Out of its concern for the less privileged in life, the Court has inclined, more often than not,
toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however,
has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and doctrine.[39]

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7,
2010 Resolution, in CA-G.R. SP No. 109975, are herebyAFFIRMED.
SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice
Acting Chairperson

JOSE PORTUGAL PEREZ

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

DIOSDADO M. PERALTA
Associate Justice
Acting Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

CESAR C. LIRIO, doing business under the name and style of CELKOR AD SONICMIX,
Petitioner,

- versus -

WILMER D. GENOVIA,
Respondent.

G.R. No. 169757

Present:

VELASCO, JR., J., Chairperson,

PERALTA,
ABAD,
PEREZ,* and
MENDOZA, JJ.

Promulgated:

November 23, 2011

x----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 88899
dated August 4, 2005 and its Resolution dated September 21, 2005, denying petitioners motion for
reconsideration.

The Court of Appeals reversed and set aside the resolution of the NLRC, and reinstated the decision of
the Labor Arbiter with modification, finding that respondent is an employee of petitioner, and that
respondent was illegally dismissed and entitled to the payment of backwages and separation pay in lieu
of reinstatement.

The facts are as follows:

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Cesar Lirio and/or
Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-payment of commission and award of
moral and exemplary damages.

In his Position Paper,[1] respondent Genovia alleged, among others, that on August 15, 2001, he was
hired as studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). He
was employed to manage and operate Celkor and to promote and sell the recording studio's services to
music enthusiasts and other prospective clients. He received a monthly salary of P7,000.00. They also
agreed that he was entitled to an additional commission of P100.00 per hour as recording technician
whenever a client uses the studio for recording, editing or any related work. He was made to report for
work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work half-day
only, but most of the time, he still rendered eight hours of work or more. All the employees of
petitioner, including respondent, rendered overtime work almost everyday, but petitioner never kept a
daily time record to avoid paying the employees overtime pay.

Respondent stated that a few days after he started working as a studio manager, petitioner approached
him and told him about his project to produce an album for his 15-year-old daughter, Celine Mei Lirio, a
former talent of ABS-CBN Star Records. Petitioner asked respondent to compose and arrange songs for
Celine and promised that he (Lirio) would draft a contract to assure respondent of his compensation for
such services. As agreed upon, the additional services that respondent would render included
composing and arranging musical scores only, while the technical aspect in producing the album, such as
digital editing, mixing and sound engineering would be performed by respondent in his capacity as
studio manager for which he was paid on a monthly basis. Petitioner instructed respondent that his
work on the album as composer and arranger would only be done during his spare time, since his other
work as studio manager was the priority. Respondent then started working on the album.

Respondent alleged that before the end of September 2001, he reminded petitioner about his
compensation as composer and arranger of the album. Petitioner verbally assured him that he would be
duly compensated. By mid-November 2001, respondent finally finished the compositions and musical
arrangements of the songs to be included in the album. Before the month ended, the lead and back-up
vocals in the ten (10) songs were finally recorded and completed. From December 2001 to January 2002,
respondent, in his capacity as studio manager, worked on digital editing, mixing and sound engineering
of the vocal and instrumental audio files.

Thereafter, respondent was tasked by petitioner to prepare official correspondence, establish contacts
and negotiate with various radio stations, malls, publishers, record companies and manufacturers,
record bars and other outlets in preparation for the promotion of the said album. By early February
2002, the album was in its manufacturing stage. ELECTROMAT, manufacturer of CDs and cassette tapes,
was tapped to do the job. The carrier single of the album, which respondent composed and arranged,
was finally aired over the radio on February 22, 2002.

On February 26, 2002, respondent again reminded petitioner about the contract on his compensation as
composer and arranger of the album. Petitioner told respondent that since he was practically a nobody
and had proven nothing yet in the music industry, respondent did not deserve a high compensation, and
he should be thankful that he was given a job to feed his family. Petitioner informed respondent that he
was entitled only to 20% of the net profit, and not of the gross sales of the album, and that the salaries
he received and would continue to receive as studio manager of Celkor would be deducted from the
said 20% net profit share. Respondent objected and insisted that he be properly compensated. On
March 14, 2002, petitioner verbally terminated respondents services, and he was instructed not to
report for work.

Respondent asserts that he was illegally dismissed as he was terminated without any valid grounds, and
no hearing was conducted before he was terminated, in violation of his constitutional right to due

process. Having worked for more than six months, he was already a regular employee. Although he was
a so called studio manager, he had no managerial powers, but was merely an ordinary employee.

Respondent prayed for his reinstatement without loss of seniority rights, or, in the alternative, that he
be paid separation pay, backwages and overtime pay; and that he be awarded unpaid commission in the
amount of P2,000.00 for services rendered as a studio technician as well as moral and exemplary
damages.

Respondents evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002, which was
certified correct by petitioner,[2] and Petty Cash Vouchers[3] evidencing receipt of payroll payments by
respondent from Celkor.

In defense, petitioner stated in his Position Paper[4] that respondent was not hired as studio manager,
composer, technician or as an employee in any other capacity of Celkor. Respondent could not have
been hired as a studio manager, since the recording studio has no personnel except petitioner.
Petitioner further claimed that his daughter Celine Mei Lirio, a former contract artist of ABS-CBN Star
Records, failed to come up with an album as the latter aborted its project to produce one. Thus, he
decided to produce an album for his daughter and established a recording studio, which he named
Celkor Ad Sonicmix Recording Studio. He looked for a composer/arranger who would compose the songs
for the said album. In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who
claimed to be an amateur composer, an arranger with limited experience and musician without any
formal musical training. According to petitioner, respondent had no track record as a composer, and he
was not known in the field of music. Nevertheless, after some discussion, respondent verbally agreed
with petitioner to co-produce the album based on the following terms and conditions: (1) petitioner
shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio shall sing all the
songs; (3) respondent shall act as composer and arranger of all the lyrics and the music of the five songs
he already composed and the revival songs; (4) petitioner shall have exclusive right to market the album;
(5) petitioner was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were each
entitled to 20% of the net profit; and (6) respondent shall be entitled to draw advances of P7,000.00 a
month, which shall be deductible from his share of the net profits and only until such time that the
album has been produced.
According to petitioner, they arrived at the foregoing sharing of profits based on the mutual
understanding that respondent was just an amateur composer with no track record whatsoever in the
music industry, had no definite source of income, had limited experience as an arranger, had no
knowledge of the use of sound mixers or digital arranger and that petitioner would help and teach him
how to use the studio equipment; that petitioner would shoulder all the expenses of production and
provide the studio and equipment as well as his knowledge in the use thereof; and Celine Mei Lirio
would sing the songs. They embarked on the production of the album on or about the third week of
August 2002.

Petitioner asserted that from the aforesaid terms and conditions, his relationship with respondent is one
of an informal partnership under Article 1767[5] of the New Civil Code, since they agreed to contribute
money, property or industry to a common fund with the intention of dividing the profits among
themselves. Petitioner had no control over the time and manner by which respondent composed or
arranged the songs, except on the result thereof. Respondent reported to the recording studio between
10:00 a.m. and 12:00 noon. Hence, petitioner contended that no employer-employee relationship
existed between him and the respondent, and there was no illegal dismissal to speak of.

On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a decision,[6] finding that an
employer-employee relationship existed between petitioner and respondent, and that respondent was
illegally dismissed. The dispositive portion of the decision reads:

WHEREFORE, premises considered, we find that respondents CELKOR AD SONICMIX RECORDING STUDIO
and/ or CESAR C. LIRIO (Owner), have illegally dismissed complainant in his status as regular employee
and, consequently, ORDERING said respondents:

1)
To pay him full backwages from date of illegal dismissal on March 14, 2002 until finality of
this decision and, in lieu of reinstatement, to [pay] his separation pay of one (1) month pay per year of
service reckoned from [the] date of hire on August 15, 2001 until finality of this decision, which as of
date amounts to full backwages total of 145,778.6 (basic P7,000.00 x 19.6 mos.=P133,000.00 + 1/12
thereof as 13th month pay of P11,083.33 + SILP P7,000/32.62 days=P214.59/day x 5=P1,072.96 x 1.58
yrs.=P1,695.27); separation pay of P22,750.00 (P7,000.00 x 3.25 yrs.);

2)

To pay complainant's unpaid commission of P2,000.00;

3)

To pay him moral and exemplary damages in the combined amount of P75,000.00.

Other monetary claims of complainant are dismissed for lack of merit.[7]

The Labor Arbiter stated that petitioners denial of the employment relationship cannot overcome
respondents positive assertion and documentary evidence proving that petitioner hired respondent as
his employee.[8]

Petitioner appealed the decision of the Labor Arbiter to the National Labor Relations Commission
(NLRC).

In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside the decision of the Labor
Arbiter. The dispositive portion of the Resolution reads:

WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the Decision appealed from is
REVERSED and, hence, SET ASIDE and a new one ENTERED dismissing the instant case for lack of
merit.[9]

The NLRC stated that respondent failed to prove his employment tale with substantial evidence.
Although the NLRC agreed that respondent was able to prove that he received gross pay less deduction
and net pay, with the corresponding Certification of Correctness by petitioner, covering the period from
July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to proved with substantial
evidence that he was selected and engaged by petitioner, that petitioner had the power to dismiss him,
and that they had the power to control him not only as to the result of his work, but also as to the
means and methods of accomplishing his work.

Respondents motion for reconsideration was denied by the NLRC in a Resolution9 dated December 14,
2004.

Respondent filed a petition for certiorari before the Court of Appeals.

On August 4, 2005, the Court of Appeals rendered a decision[10] reversing and setting aside the
resolution of the NLRC, and reinstating the decision of the Labor Arbiter, with modification in regard to
the award of commission and damages. The Court of Appeals deleted the award of commission, and
moral and exemplary damages as the same were not substantiated. The dispositive portion of the Court
of Appeals decision reads:

WHEREFORE, the petition is GRANTED and the assailed resolutions dated October 14, 2004 and
December 14, 2004 are hereby REVERSED and SET ASIDE. Accordingly, the decision dated October 31,
2003 of the Labor Arbiter is REINSTATED, with the modification that the awards of commission and
damages are deleted.[11] (Emphasis supplied.)

Petitioners motion for reconsideration was denied for lack of merit by the Court of Appeals in its
Resolution[12] dated September 21, 2005.

Hence, petitioner Lirio filed this petition.

Petitioner states that respondent appealed to the Court of Appeals via a petition for certiorari under
Rule 65, which will prosper only if there is a showing of grave abuse of discretion or an act without or in
excess of jurisdiction on the part of the NLRC.[13] However, petitioner contends that the Court of
Appeals decided the case not in accordance with law and applicable rulings of this Court as petitioner
could not find any portion in the Decision of the Court of Appeals ruling that the NLRC acted without or
in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.
Petitioner submits that the Court of Appeals could not review an error of judgment by the NLRC raised
before it on a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Moreover,
petitioner contends that it was error on the part of the Court of Appeals to review the finding of facts of
the NLRC on whether there exists an employer-employee relationship between the parties.

Petitioners argument lacks merit.

It is noted that respondent correctly sought judicial review of the decision of the NLRC via a petition for
certiorari under Rule 65 of the Rules of Court filed before the Court of Appeals in accordance with the
decision of the Court in St. Martin Funeral Home v. NLRC,[14] which held:
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC
to the Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari
under Rule 65. Consequently, all such petitions should henceforth be initially filed in the Court of
Appeals in strict observance of the doctrine on the hierarchy of courts as the appropriate forum for the
relief desired.[15]

The Court of Appeals stated in its decision that the issue it had to resolve was whether or not the public
respondent [NLRC] committed grave abuse of discretion when it declared that no employer-employee
relationship exists between the petitioner and the private respondents, since the petitioner failed to
prove such fact by substantial evidence.[16]
Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special
civil action for certiorari, which is merely confined to issues of jurisdiction or grave abuse of
discretion.[17] By grave abuse of discretion is meant such capricious and whimsical exercise of judgment
as is equivalent to lack of jurisdiction, and it must be shown that the discretion was exercised arbitrarily
or despotically.[18]

The Court of Appeals, therefore, could grant the petition for certiorari if it finds that the NLRC, in its
assailed decision or resolution, committed grave abuse of discretion by capriciously, whimsically, or
arbitrarily disregarding evidence that is material to or decisive of the controversy; and it cannot make
this determination without looking into the evidence of the parties.[19] Necessarily, the appellate court
can only evaluate the materiality or significance of the evidence, which is alleged to have been
capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence on
record.[20] Thus, contrary to the contention of petitioner, the Court of Appeals can review the finding of
facts of the NLRC and the evidence of the parties to determine whether the NLRC gravely abused its
discretion in finding that no employer-employee relationship existed between petitioner and
respondent.[21]

Respondent raised before the Court of Appeals the following issues:

I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION

IN SHIFTING THE BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE
PETITIONER AND THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF ESTABLISHED
PROVISION OF LAWS AND JURISPRUDENCE.

II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF

DISCRETION IN HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE
PETITIONER AND THE PRIVATE RESPONDENTS.

III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF

DISCRETION IN DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH VOUCHERS AS AN
INDICIA OF EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE RESPONDENTS.[22]

Between the documentary evidence presented by respondent and the mere allegation of petitioner
without any proof by way of any document evincing their alleged partnership agreement, the Court of
Appeals agreed with the Labor Arbiter that petitioner failed to substantiate his claim that he had a
partnership with respondent, citing the Labor Arbiters finding, thus:

In this case, complainant's evidence is substantial enough to prove the employment relationship that on
August 14, 2001, he was hired as 'Studio manager' by respondent Lirio to manage and operate the
recording studio and to promote and sell its services to music enthusiasts and clients, proven by his
receipt for this purpose from said respondent a fixed monthly compensation of P7,000.00, with

commission of P100.00 per hour when serving as recording technician, shown by the payroll from July
31, 2001-March 15, 2002. The said evidence points to complainant's hiring as employee so that the case
comes within the purview of our jurisdiction on labor disputes between an employer and an employee. x
x x.
Respondent Lirio's so-called existence of a partnership agreement was not substantiated and his
assertion thereto, in the face of complainant's evidence, constitute but a self-serving assertion, without
probative value, a mere invention to justify the illegal dismissal.
xxxx

Indeed, we find credible that what caused complainant's dismissal on March 14, 2002 was due to his
refusal to respondent's Lirio's insistences on merely giving him 20% based on net profit on sale of the
album which he composed and arranged during his free time and, moreover, that salaries which he
received would be deducted therefrom, which obviously, soured the relations from the point of view of
respondent Lirio.[23]

Hence, based on the finding above and the doctrine that if doubt exists between the evidence presented
by the employer and the employee, the scales of justice must be tilted in favor of the latter,[24] the
Court of Appeals reversed the resolution of the NLRC and reinstated the decision of the Labor Arbiter
with modification. Even if the Court of Appeals was remiss in not stating it in definite terms, it is implied
that the Court of Appeals found that the NLRC gravely abused its discretion in finding that no employeremployee relationship existed between petitioner and respondent based on the evidence on record.

We now proceed to the main issue raised before this Court: Whether or not the decision of the Court of
Appeals is in accordance with law, or whether or not the Court of Appeals erred in reversing and setting
aside the decision of the NLRC, and reinstating the decision of the Labor Arbiter with modification.

In petitions for review, only errors of law are generally reviewed by this Court. This rule, however, is not
ironclad.[25] Where the issue is shrouded by a conflict of factual perceptions by the lower court or the
lower administrative body, in this case, the NLRC, this Court is constrained to review the factual findings
of the Court of Appeals.[26]

Before a case for illegal dismissal can prosper, it must first be established that an employer-employee
relationship existed between petitioner and respondent.[27]

The elements to determine the existence of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employees conduct. The most important element is the employers

control of the employees conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.[28]

It is settled that no particular form of evidence is required to prove the existence of an employeremployee relationship.[29] Any competent and relevant evidence to prove the relationship may be
admitted.[30]

In this case, the documentary evidence presented by respondent to prove that he was an employee of
petitioner are as follows: (a) a document denominated as "payroll" (dated July 31, 2001 to March 15,
2002) certified correct by petitioner,[31] which showed that respondent received a monthly salary of
P7,000.00 (P3,500.00 every 15th of the month and another P3,500.00 every 30th of the month) with the
corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash
vouchers,[32]showing the amounts he received and signed for in the payrolls.

The said documents showed that petitioner hired respondent as an employee and he was paid monthly
wages of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that he was verbally
dismissed by petitioner, and respondent, thereafter, filed an action for illegal dismissal against
petitioner. The power of control refers merely to the existence of the power.[33] It is not essential for
the employer to actually supervise the performance of duties of the employee, as it is sufficient that the
former has a right to wield the power.[34] Nevertheless, petitioner stated in his Position Paper that it
was agreed that he would help and teach respondent how to use the studio equipment. In such case,
petitioner certainly had the power to check on the progress and work of respondent.

On the other hand, petitioner failed to prove that his relationship with respondent was one of
partnership. Such claim was not supported by any written agreement. The Court notes that in the
payroll dated July 31, 2001 to March 15, 2002,[35] there were deductions from the wages of respondent
for his absence from work, which negates petitioners claim that the wages paid were advances for
respondents work in the partnership. In Nicario v. National Labor Relations Commission,[36] the Court
held:

It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and
the employee, the scales of justice must be tilted in favor of the latter. It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in the formers favor. The policy is to extend
the doctrine to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection of labor. This rule

should be applied in the case at bar, especially since the evidence presented by the private respondent
company is not convincing. x x x[37]

Based on the foregoing, the Court agrees with the Court of Appeals that the evidence presented by the
parties showed that an employer-employee relationship existed between petitioner and respondent.
In termination cases, the burden is upon the employer to show by substantial evidence that the
termination was for lawful cause and validly made.[38] Article 277 (b) of the Labor Code[39] puts the
burden of proving that the dismissal of an employee was for a valid or authorized cause on the
employer, without distinction whether the employer admits or does not admit the dismissal.[40] For an
employees dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the employee must
be afforded due process.[41] Procedural due process requires the employer to furnish an employee with
two written notices before the latter is dismissed: (1) the notice to apprise the employee of the
particular acts or omissions for which his dismissal is sought, which is the equivalent of a charge; and (2)
the notice informing the employee of his dismissal, to be issued after the employee has been given
reasonable opportunity to answer and to be heard on his defense.[42] Petitioner failed to comply with
these legal requirements; hence, the Court of Appeals correctly affirmed the Labor Arbiters finding that
respondent was illegally dismissed, and entitled to the payment of backwages, and separation pay in
lieu of reinstatement.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88899,
dated August 4, 2005, and its Resolution dated September 21, 2005, are AFFIRMED.

No costs.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

ROBERTO A. ABAD JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Third Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify
that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

Republic of the Philippines

Supreme Court
Baguio City
FIRST DIVISION

CHARLIE JAO,
Petitioner,

- versus -

BCC PRODUCTS SALES INC.,

and TERRANCE TY,
Respondents. G.R. No. 163700

Present:

CORONA, C.J., Chairperson,

LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

Promulgated:
April 18, 2012
x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:

The issue is whether petitioner was respondents employee or not. Respondents denied an employeremployee relationship with petitioner, who insisted the contrary.

Through his petition for review on certiorari, petitioner appeals the decision promulgated by the Court
of Appeals (CA) on February 27, 2004,[1] finding no employee-employer relationship between him and
respondents, thereby reversing the ruling by the National Labor Relations Commission (NLRC) to the
effect that he was the employee of respondents.

Antecedents

Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President, respondent
Terrance Ty (Ty), employed him as comptroller starting from September 1995 with a monthly salary of
P20,000.00 to handle the financial aspect of BCCs business;[2] that on October 19,1995, the security
guards of BCC, acting upon the instruction of Ty, barred him from entering the premises of BCC where
he then worked; that his attempts to report to work in November and December 12, 1995 were
frustrated because he continued to be barred from entering the premises of BCC;[3] and that he filed a
complaint dated December 28, 1995 for illegal dismissal, reinstatement with full backwages, nonpayment of wages, damages and attorneys fees.[4]

Respondents countered that petitioner was not their employee but the employee of Sobien Food
Corporation (SFC), the major creditor and supplier of BCC; and that SFC had posted him as its
comptroller in BCC to oversee BCCs finances and business operations and to look after SFCs interests or
investments in BCC.[5]

Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996,[6] the NLRC vacated the
ruling and remanded the case for further proceedings.[7]Thereafter, Labor Arbiter Jovencio Ll. Mayor
rendered a new decision on September 20, 2001, dismissing petitioners complaint for want of an
employer-employee relationship between the parties.[8] Petitioner appealed the September 20, 2001
decision of Labor Arbiter Mayor.

On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter Mayors decision, and declaring
that petitioner had been illegally dismissed. It ordered the payment of unpaid salaries, backwages and
13th month pay, separation pay and attorneys fees.[9] Respondents moved for the reconsideration of
the NLRC decision, but their motion for reconsideration was denied on September 30, 2002.[10] Thence,
respondents assailed the NLRC decision on certiorari in the CA.

Ruling of the CA

On February 27, 2004, the CA promulgated its assailed decision,[11] holding:

After a judicious review of the records vis--vis the respective posturing of the contending parties, we
agree with the finding that no employer-employee relationship existed between petitioner BCC and the
private respondent. On this note, the conclusion of the public respondent must be reversed for being
issued with grave abuse of discretion.

Etched in an unending stream of cases are the four (4) standards in determining the existence of an
employer-employee relationship, namely, (a) the manner of selection and engagement of the putative
employee; (b) the mode of payment of wages; (c) the presence or absence of power of dismissal; and,
(d) the presence or absence of control of the putative employees conduct. Of these powers the power
of control over the employees conduct is generally regarded as determinative of the existence of the
relationship.

Apparently, in the case before us, all these four elements are absent. First, there is no proof that the
services of the private respondent were engaged to perform the duties of a comptroller in the petitioner
company. There is no proof that the private respondent has undergone a selection procedure as a
standard requisite for employment, especially with such a delicate position in the company. Neither is
there any proof of his appointment nor is there any showing that the parties entered into an
employment contract, stipulating thereof that he will receive P20,000.00/month salary as comptroller,
before the private respondent commenced with his work as such. Second, as clearly established on
record, the private respondent was not included in the petitioner companys payroll during the time of
his alleged employment with the former. True, the name of the private respondent Charlie Jao appears
in the payroll however it does not prove that he has received his remuneration for his services. Notably,
his name was not among the employees who will receive their salaries as represented by the payrolls.
Instead, it appears therein as a comptroller who is authorized to approve the same. Suffice it to state
that it is rather obscure for a certified public accountant doing the functions of a comptroller from
September 1995 up to December 1995 not to receive his salary during the said period. Verily, such
scenario does not conform with the usual and ordinary experience of man. Coming now to the most
controlling factor, the records indubitably reveal the undisputed fact that the petitioner company did
not have nor did not exercise the power of control over the private respondent. It did not prescribe the
manner by which the work is to be carried out, or the time by which the private respondent has to
report for and leave from work. As already stated, the power of control is such an important factor that
other requisites may even be disregarded. In Sevilla v. Court of Appeals, the Supreme Court emphatically
held, thus:

The control test, under which the person for whom the services are rendered reserves the right to direct
not only the end to be achieved but also the means for reaching such end, is generally relied on by the
courts.

We have carefully examined the evidence submitted by the private respondent in the formal offer of
evidence and unfortunately, other than the bare assertions of the private respondent which he
miserably failed to substantiate, we find nothing therein that would decisively indicate that the
petitioner BCC exercised the fundamental power of control over the private respondent in relation to his
employmentnot even the ID issued to the private respondent and the affidavits executed by Bertito
Jemilla and Rogelio Santias. At best, these pieces of documents merely suggest the existence of
employer-employee relationship as intimated by the NLRC. On the contrary, it would appear that the
said sworn statement provided a substantial basis to support the contention that the private respondent

worked at the petitioner BCC as SFCs representative, being its major creditor and supplier of goods and
merchandise. Moreover, as clearly pointed out by the petitioner in his Reply to the private respondents
Comment, it is unnatural for SFC to still employ the private respondent to oversee and supervise
collections of account receivables due SFC from its customers or clients like the herein petitioner BCC on
a date later than December, 1995 considering that a criminal complaint has already been instituted
against him.

Sadly, the private respondent failed to sufficiently discharge the burden of showing with legal certainty
that employee-employer relationship existed between the parties. On the other hand, it was clearly
shown by the petitioner that it neither exercised control nor supervision over the conduct of the private
respondents employment. Hence, the allegation that there is employer-employee relationship must
necessarily fail.

Consequently, a discussion on the issue of illegal dismissal therefore becomes unnecessary.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision of the public
respondent NLRC dated July 31, 2002 and the Resolution dated September 30, 2002are REVERSED and
SET ASIDE. Accordingly, the decision of the Labor Arbiter dated September 20, 2001 is hereby
REINSTATED.

SO ORDERED.

After the CA denied petitioners motion for reconsideration on May 14, 2004,[12] he filed a motion for
extension to file petition for review, which the Court denied through the resolution dated July 7, 2004
for failure to render an explanation on why the service of copies of the motion for extension on
respondents was not personally made.[13] The denial notwithstanding, he filed his petition for review
on certiorari. The Court denied the petition on August 18, 2004 in view of the denial of the motion for
extension of time and the continuing failure of petitioner to render the explanation as to the nonpersonal service of the petition on respondents.[14] However, upon a motion for reconsideration, the
Court reinstated the petition for review on certiorari and required respondents to comment.[15]

Issue

The sole issue is whether or not an employer-employee relationship existed between petitioner and
BCC. A finding on the existence of an employer-employee relationship will automatically warrant a
finding of illegal dismissal, considering that respondents did not state any valid grounds to dismiss
petitioner.

Ruling

The petition lacks merit.

The existence of an employer-employee relationship is a question of fact. Generally, a re-examination of

factual findings cannot be done by the Court acting on a petition for review on certiorari because the
Court is not a trier of facts but reviews only questions of law. Nor may the Court be bound to analyze
and weigh again the evidence adduced and considered in the proceedings below.[16] This rule is not
absolute, however, and admits of exceptions. For one, the Court may look into factual issues in labor
cases when the factual findings of the Labor Arbiter, the NLRC, and the CA are conflicting.[17]

Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA. This conflict among
such adjudicating offices compels the Courts exercise of its authority to review and pass upon the
evidence presented and to draw its own conclusions therefrom.

To prove his employment with BCC, petitioner offered the following: (a) BCC Identification Card (ID)
issued to him stating his name and his position as comptroller, and bearing his picture, his signature, and
the signature of Ty; (b) a payroll of BCC for the period of October 1-15, 1996 that petitioner approved as
comptroller; (c) various bills and receipts related to expenditures of BCC bearing the signature of
petitioner; (d) various checks carrying the signatures of petitioner and Ty, and, in some checks, the
signature of petitioner alone; (e) a court order showing that the issuing court considered petitioners ID
as proof of his employment with BCC; (f) a letter of petitioner dated March 1, 1997 to the Department
of Justice on his filing of a criminal case for estafa against Ty for non-payment of wages; (g) affidavits of
some employees of BCC attesting that petitioner was their co-employee in BCC; and (h) a notice of raffle
dated December 5, 1995 showing that petitioner, being an employee of BCC, received the notice of
raffle in behalf of BCC.[18]

Respondents denied that petitioner was BCCs employee. They affirmed that SFC had installed petitioner
as its comptroller in BCC to oversee and supervise SFCs collections and the account of BCC to protect
SFCs interest; that their issuance of the ID to petitioner was only for the purpose of facilitating his entry
into the BCC premises in relation to his work of overseeing the financial operations of BCC for SFC; that
the ID should not be considered as evidence of petitioners employment in BCC;[19] that petitioner
executed an affidavit in March 1996,[20] stating, among others, as follows:

1. I am a CPA (Certified Public Accountant) by profession but presently associated with, or employed
by, Sobien Food Corporation with the same business address as abovestated;

2. In the course of my association with, or employment by, Sobien Food Corporation (SFC, for short), I
have been entrusted by my employer to oversee and supervise collections on account of receivables due
SFC from its customers or clients; for instance, certain checks due and turned over by one of SFCs
customers is BCC Product Sales, Inc., operated or run by one Terrance L. Ty, (President and General
manager), pursuant to, or in accordance with, arrangements or agreement thereon; such arrangement
or agreement is duly confirmed by said Terrance Ty, as shown or admitted by him in a public instrument
executed therefor, particularly par. 2 of that certain Counter-Affidavit executed and subscribed on
December 11, 1995, xerox copy of which is hereto attached, duly marked as Annex A and made integral
part hereof.

3. Despite such admission of an arrangement, or agreement insofar as BCC-checks were delivered to,
or turned over in favor of SFC, Mr. Terrance Ty, in a desire to blemish my reputation or to cause me
dishonor as well as to impute unto myself the commission of a crime, state in another public instrument
executed therefor in that:

3. That all the said 158 checks were unlawfully appropriated by a certain Charlie Jao absolutely without
any authority from BCC and the same were reportedly turned over by said Mr. Jao to a person who is
not an agent or is not authorized representative of BCC.

xerox copy of which document (Affidavit) is hereto attached, duly marked as Annex B and made integral
part hereof. (emphasis supplied)

and that the affidavit constituted petitioners admission of the arrangement or agreement between BCC
and SFC for the latter to appoint a comptroller to oversee the formers operations.

Petitioner counters, however, that the affidavit did not establish the absence of an employer-employee
relationship between him and respondents because it had been executed in March 1996, or after his
employment with respondents had been terminated on December 12, 1995; and that the affidavit
referred to his subsequent employment by SFC following the termination of his employment by BCC.[21]

We cannot side with petitioner.

Our perusal of the affidavit of petitioner compels a conclusion similar to that reached by the CA and the
Labor Arbiter to the effect that the affidavit actually supported the contention that petitioner had really
worked in BCC as SFCs representative. It does seem more natural and more believable that petitioners

affidavit was referring to his employment by SFC even while he was reporting to BCC as a comptroller in
behalf of SFC. As respondents pointed out, it was implausible for SFC to still post him to oversee and
supervise the collections of accounts receivables due from BCC beyond December 1995 if, as he insisted,
BCC had already illegally dismissed him and had even prevented him from entering the premises of BCC.
Given the patent animosity and strained relations between him and respondents in such circumstances,
indeed, how could he still efficiently perform in behalf of SFC the essential responsibility to oversee and
supervise collections at BCC? Surely, respondents would have vigorously objected to any arrangement
with SFC involving him.

We note that petitioner executed the affidavit in March 1996 to refute a statement Ty himself made in
his own affidavit dated December 11, 1995 to the effect that petitioner had illegally appropriated some
checks without authority from BCC.[22] Petitioner thereby sought to show that he had the authority to
receive the checks pursuant to the arrangements between SFC and BCC. This showing would aid in
fending off the criminal charge respondents filed against him arising from his mishandling of the checks.
Naturally, the circumstances petitioner adverted to in his March 1996 affidavit concerned those
occurring before December 11, 1995, the same period when he actually worked as comptroller in BCC.

Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC, whom petitioner
offered as a rebuttal witness, lent credence to respondents denial of petitioners employment. So
declared in that affidavit, among others, that he had known petitioner for being earlier his retained
accountant having his own office but did not hold office in SFCs premises; that Ty had approached him
(So) looking for an accountant or comptroller to be employed by him (Ty) in [BCCs] distribution business
of SFCs general merchandise, and had later asked him on his opinion about petitioner; and that he (So)
had subsequently learned that Ty had already employed [petitioner] as his comptroller as of September
1995.[23]

The statements of So really supported respondents position in that petitioners association with SFC prior
to his supposed employment by BCC went beyond mere acquaintance with So. That So, who had earlier
merely retained petitioner as his accountant, thereafter employed petitioner as a retained accountant
after his supposed illegal dismissal by BCC raised a doubt as to his employment by BCC, and rather
confirmed respondents assertion of petitioner being an employee of SFC while he worked at BCC.

Moreover, in determining the presence or absence of an employer-employee relationship, the Court has
consistently looked for the following incidents, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control
the employee on the means and methods by which the work is accomplished. The last element, the socalled control test, is the most important element.[24]

Hereunder are some of the circumstances and incidents occurring while petitioner was supposedly
employed by BCC that debunked his claim against respondents.

It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his authority
to deliver some 158 checks to SFC. Considering that he contested respondents challenge by pointing to
the existing arrangements between BCC and SFC, it should be clear that respondents did not exercise
the power of control over him, because he thereby acted for the benefit and in the interest of SFC more
than of BCC.

In addition, petitioner presented no document setting forth the terms of his employment by BCC. The
failure to present such agreement on terms of employment may be understandable and expected if he
was a common or ordinary laborer who would not jeopardize his employment by demanding such
document from the employer, but may not square well with his actual status as a highly educated
professional.

Petitioners admission that he did not receive his salary for the three months of his employment by BCC,
as his complaint for illegal dismissal and non-payment of wages[25] and the criminal case for estafa he
later filed against the respondents for non-payment of wages[26] indicated, further raised grave doubts
about his assertion of employment by BCC. If the assertion was true, we are puzzled how he could have
remained in BCCs employ in that period of time despite not being paid the first salary
ofP20,000.00/month. Moreover, his name did not appear in the payroll of BCC despite him having
approved the payroll as comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of the
insincerity of petitioners assertion of employment by BCC. In the petition for review on certiorari, he
averred that he had been barred from entering the premises of BCC on October 19, 1995,[27] and thus
was illegally dismissed. Yet, his complaint for illegal dismissal stated that he had been illegally dismissed
on December 12, 1995 when respondents security guards barred him from entering the premises of
BCC,[28] causing him to bring his complaint only on December 29, 1995, and after BCC had already filed
the criminal complaint against him. The wide gap between October 19, 1995 andDecember 12, 1995
cannot be dismissed as a trivial inconsistency considering that the several incidents affecting the
veracity of his assertion of employment by BCC earlier noted herein transpired in that interval.

With all the grave doubts thus raised against petitioners claim, we need not dwell at length on the other
proofs he presented, like the affidavits of some of the employees of BCC, the ID, and the signed checks,
bills and receipts. Suffice it to be stated that such other proofs were easily explainable by respondents
and by the aforestated circumstances showing him to be the employee of SFC, not of BCC.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and ORDERS petitioner to pay the
costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of
the Courts Division.

RENATO C. CORONA
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 167622

November 7, 2008

GREGORIO V. TONGKO, petitioner

vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005 Decision1
of the Court of Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life Insurance Co.
(Phils.), Inc. v. National Labor Relations Commission and Gregorio V. Tongko. The assailed decision set
aside the Decision dated September 27, 2004 and Resolution dated December 16, 2004 rendered by the
National Labor Relations Commission (NLRC) in NLRC NCR CA No. 040220-04.
The Facts
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life
insurance business. Renato A. Vergel De Dios was, during the period material, its President and Chief
Executive Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977
by virtue of a Career Agent's Agreement2 (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

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.
xxxx
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 or to 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.
xxxx
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. x x x
In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In 1990, he
became a Branch Manager. As the CA found, Tongko's gross earnings from his work at Manulife,
consisting of commissions, persistency income, and management overrides, may be summarized as
follows:
January to December 10, 2002 2001

6,214,737.11

2000

8,003,180.38

1999

6,797,814.05

1998

4,805,166.34

1997

2,822,620.003

P 865,096.07

The problem started sometime in 2001, when Manulife instituted manpower development programs in
the regional sales management level. Relative thereto, De Dios addressed a letter dated November 6,
20014 to Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter, De
Dios stated:
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.
xxxx
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.
xxxx
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."
xxxx

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.
xxx
xxxx
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.
xxxx
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.
xxxx
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.
xxxx
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.
Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,5 terminating Tongko's
services, thus:
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.
xxxx
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.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife for
illegal dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter
Marita V. Padolina.
In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios
gave him specific directives on how to manage his area of responsibility in the latter's letter dated
November 6, 2001. He further claimed that Manulife exercised control over him as follows:
Such control was certainly exercised by respondents over the herein complainant. It was Manulife who
hired, promoted and gave various assignments to him. It was the company who set objectives as regards
productions, recruitment, training programs and all activities pertaining to its business. Manulife
prescribed a Code of Conduct which would govern in minute detail all aspects of the work to be
undertaken by employees, including the sales process, the underwriting process, signatures, handling of
money, policyholder service, confidentiality, legal and regulatory requirements and grounds for
termination of employment. The letter of Mr. De Dios dated 06 November 2001 left no doubt as to who
was in control. The subsequent termination letter dated 18 December 2001 again established in no
uncertain terms the authority of the herein respondents to control the employees of Manulife. Plainly,
the respondents wielded control not only as to the ends to be achieved but the ways and means of
attaining such ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th Division)7 andGreat
Pacific Life Assurance Corporation v. NLRC,8 which Tongko claimed to be similar to the instant case.
Tongko further claimed that his dismissal was without basis and that he was not afforded due process.
He also cited the Manulife Code of Conduct by which his actions were controlled by the company.
Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,9 in which it
alleged that Tongko is not its employee, and that it did not exercise "control" over him. Thus, Manulife
claimed that the NLRC has no jurisdiction over the case.
In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of
an employer-employee relationship. Padolina found that applying the four-fold test in determining the
existence of an employer-employee relationship, none was found in the instant case. The dispositive
portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for
lack of jurisdiction, there being no employer-employee relationship between the parties.
SO ORDERED.

Tongko appealed the arbiter's Decision to the NLRC which reversed the same and rendered a Decision
dated September 27, 2004 finding Tongko to have been illegally dismissed.
The NLRC's First Division, while finding an employer-employee relationship between Manulife and
Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that
Manulife exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios
and wrote:
The above-mentioned letter shows the extent to which respondents controlled complainant's manner
and means of doing his work and achieving the goals set by respondents. The letter shows how
respondents concerned themselves with the manner complainant managed the Metro North Region as
Regional Sales Manager, to the point that respondents even had a say on how complainant interacted
with other individuals in the Metro North Region. The letter is in fact replete with comments and
criticisms on how complainant carried out his functions as Regional Sales Manager.
More importantly, the letter contains an abundance of directives or orders that are intended to directly
affect complainant's authority and manner of carrying out his functions as Regional Sales Manager.10 x x
x
Additionally, the First Division also ruled that:
Further evidence of [respondents'] control over complainant can be found in the records of the case.
[These] are the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial
Code of Conduct, and the Manulife Financial Code of Conduct Agreement, which serve as the
foundations of the power of control wielded by respondents over complainant that is further
manifested in the different administrative and other tasks that he is required to perform. These codes of
conduct corroborate and reinforce the display of respondents' power of control in their 06 November
2001 Letter to complainant.11
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside. We find
complainant to be a regular employee of respondent Manulife and that he was illegally dismissed from
employment by respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as
above set forth. Respondent Manulife is further ordered to pay complainant backwages from the time
he was dismissed on 02 January 2002 up to the finality of this decision also as indicated above.
xxxx
All other claims are hereby dismissed for utter lack of merit.
From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First
Division in a Resolution dated December 16, 2004.12
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued
the assailed Decision dated March 29, 2005, finding the absence of an employer-employee relationship
between the parties and deeming the NLRC with no jurisdiction over the case. The CA arrived at this

conclusion while again applying the four-fold test. The CA found that Manulife did not exercise control
over Tongko that would render the latter an employee of Manulife. The dispositive portion reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for
accordingly GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December
16, 2004 of the National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC
NCR CA No. 040220-04) are hereby ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of
Labor Arbiter Marita V. Padolina is hereby REINSTATED.
Hence, Tongko filed this petition and presented the following issues:
A
The Court of Appeals committed grave abuse of discretion in granting respondents' petition for
certiorari.
B
The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision
dated September 27, 2004 and Resolution dated December 16, 2004 in finding that there is no
employer-employee relationship between petitioner and respondent.
C
The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision
dated September 27, 2004 and Resolution dated December 16, 2004 which found petitioner to have
been illegally dismissed and ordered his reinstatement with payment of backwages.13
Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and
Tongko? and (2) If yes, was Manulife guilty of illegal dismissal?
The Court's Ruling
This petition is meritorious.
Tongko Was An Employee of Manulife
The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself into the question
of whether an employer-employee relationship existed between Manulife and Tongko. If no employeremployee relationship existed between the two parties, then jurisdiction over the case properly lies with
the Regional Trial Court.
In the determination of whether an employer-employee relationship exists between two parties, this
Court applies the four-fold test to determine the existence of the elements of such relationship. InPacific
Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employeremployee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute,
four elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee's conduct. It is the so-called "control test" which constitutes the most important index of the

existence of the employer-employee relationship that is, 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. Stated otherwise, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control
not only the end to be achieved but also the means to be used in reaching such end.14
The NLRC, for its part, applied the four-fold test and found the existence of all the elements and
declared Tongko an employee of Manulife. The CA, on the other hand, found that the element of control
as an indicator of the existence of an employer-employee relationship was lacking in this case. The NLRC
and the CA based their rulings on the same findings of fact but differed in their interpretations.
The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6, 2001 addressed by
De Dios to Tongko. According to the NLRC, the letter contained "an abundance of directives or orders
that are intended to directly affect complainant's authority and manner of carrying out his functions as
Regional Sales Manager." It enumerated these "directives" or "orders" as follows:
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. x x x
xxxx
This assistant should be hired immediately.
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.
xxxx
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. x x x
3. Any resistance or holding back by anyone will be dealt with accordingly.
4. I have been straightforward in this my letter and I know that we can continue to work together but
it will have to be on my terms. Anything else is unacceptable!
The NLRC further ruled that the different codes of conduct that were applicable to Tongko served as the
foundations of the power of control wielded by Manulife over Tongko that is further manifested in the
different administrative and other tasks that he was required to perform.
The NLRC also found that Tongko was required to render exclusive service to Manulife, further
bolstering the existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over which Manulife
exercised control, including the actions of its officers. The NLRC held that such integration added to the
fact that Tongko did not have his own agency belied Manulife's claim that Tongko was an independent
contractor.
The CA, however, considered the finding of the existence of an employer-employee relationship by the
NLRC as far too sweeping having as its only basis the letter dated November 6, 2001 of De Dios. The CA

did not concur with the NLRC's ruling that the elements of control as pointed out by the NLRC are
"sufficient indicia of control that negates independent contractorship and conclusively establish an
employer-employee relationship between"15 Tongko and Manulife. The CA ruled that there is no
employer-employee relationship between Tongko and Manulife.
An impasse appears to have been reached between the CA and the NLRC on the sole issue of control
over an employee's conduct. It bears clarifying that such control not only applies to the work or goal to
be done but also to the means and methods to accomplish it.16 In Sonza v. ABS-CBN Broadcasting
Corporation, we explained that not all forms of control would establish an employer-employee
relationship, to wit:
Further, not every form of control that a party reserves to himself over the conduct of the other party in
relation to the services being rendered may be accorded the effect of establishing an employeremployee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd.
vs. NLRC. In said case, we held that:
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.17
(Emphasis supplied.)
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:
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 employeremployee relationship between him and the company.18
Hence, we ruled in Insular that no employer-employee relationship existed therein. However, such
ruling was tempered with the qualification that had there been evidence 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 have existed. In
other words, the Court in Insular in no way definitively held that insurance agents are not employees of
insurance companies, but rather made the same a case-to-case basis. We held:
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to
observe and conform to such rules and regulations as the latter might from time to time prescribe. 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. Absent such showing, the Court will not speculate that any
exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "...

free to exercise his own judgment as to the time, place and means of soliciting insurance."19 (Emphasis
supplied.)
There is no conflict between our rulings in Insular and in Great Pacific Life Assurance Corporation. We
said in the latter case:
[I]t cannot be gain said 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 spotcheck 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.20 (Emphasis supplied.)
Based on the foregoing cases, if the specific rules and regulations that are enforced against insurance
agents or managers are such that would directly affect the means and methods by which such agents or
managers would achieve the objectives set by the insurance company, they are employees of the
insurance company.
In the instant case, Manulife had the power of control over Tongko that would make him its employee.
Several factors contribute to this conclusion.
In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:
The Agent hereby agrees to comply with all regulations and requirements of the Company as herein
provided as well as maintain a standard of knowledge and competency in the sale of the Company's
products which satisfies those set by the Company and sufficiently meets the volume of new business
required of Production Club membership.21
Under this provision, an agent of Manulife must comply with three (3) requirements: (1) compliance
with the regulations and requirements of the company; (2) maintenance of a level of knowledge of the
company's products that is satisfactory to the company; and (3) compliance with a quota of new
businesses.
Among the company regulations of Manulife are the different codes of conduct such as the Agent Code
of Conduct, Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct Agreement,
which demonstrate the power of control exercised by the company over Tongko. The fact that Tongko
was obliged to obey and comply with the codes of conduct was not disowned by respondents.
Thus, with the company regulations and requirements alone, the fact that Tongko was an employee of
Manulife may already be established. Certainly, these requirements controlled the means and methods
by which Tongko was to achieve the company's goals.

More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform
administrative duties that establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached
affidavits of its agents purportedly to support its claim that Tongko, as a Regional Sales Manager, did not
perform any administrative functions. An examination of these affidavits would, however, prove the
opposite.
In an Affidavit dated April 28, 2003,22 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 Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 200323that:
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 activites 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,
200324that:
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).
A comparison of the above functions and those contained in the Agreement with those cited in Great
Pacific Life Assurance Corporation25 reveals a striking similarity that would more than support a similar
finding as in that case. Thus, there was an employer-employee relationship between the parties.
Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a certain
number of agents, in addition to his other administrative functions, leads to no other conclusion that he
was an employee of Manulife.
In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming a major
agency-led distribution company whereby greater agency recruitment is required of the managers,
including Tongko. De Dios made it clear that agent recruitment has become the primary means by which
Manulife intends to sell more policies. More importantly, it is Tongko's alleged failure to follow this
principle of recruitment that led to the termination of his employment with Manulife. With this, it is
inescapable that Tongko was an employee of Manulife.
Tongko Was Illegally Dismissed
In its Petition for Certiorari dated January 7, 200526 filed before the CA, Manulife argued that even if
Tongko is considered as its employee, his employment was validly terminated on the ground of gross
and habitual neglect of duties, inefficiency, as well as willful disobedience of the lawful orders of
Manulife. Manulife stated:
In the instant case, private respondent, despite the written reminder from Mr. De Dios refused to shape
up and altogether disregarded the latter's advice resulting in his laggard performance clearly indicative
of his willful disobedience of the lawful orders of his superior. x x x
xxxx
As private respondent has patently failed to perform a very fundamental duty, and that is to yield
obedience to all reasonable rules, orders and instructions of the Company, as well as gross failure to
reach at least minimum quota, the termination of his engagement from Manulife is highly warranted
and therefore, there is no illegal dismissal to speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a single
iota of evidence to support its claims. Manulife did not even point out which order or rule that Tongko
disobeyed. More importantly, Manulife did not point out the specific acts that Tongko was guilty of that
would constitute gross and habitual neglect of duty or disobedience. Manulife merely cited Tongko's
alleged "laggard performance," without substantiating such claim, and equated the same to
disobedience and neglect of duty.
We cannot, therefore, accept Manulife's position.

In Quebec, Sr. v. National Labor Relations Commission, we ruled that:

When there is no showing of a clear, valid and legal cause for the termination of employment, the law
considers the matter a case of illegal dismissal and the burden is on the employer to prove that the
termination was for a valid or authorized cause. This burden of proof appropriately lies on the shoulders
of the employer and not on the employee because a worker's job has some of the characteristics of
property rights and is therefore within the constitutional mantle of protection. No person shall be
deprived of life, liberty or property without due process of law, nor shall any person be denied the equal
protection of the laws.
Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that the burden of
proving the validity of the termination of employment rests on the employer. Failure to discharge this
evidential burden would necessarily mean that the dismissal was not justified, and, therefore, illegal.27
We again ruled in Times Transportation Co., Inc. v. National Labor Relations Commission that:
The law mandates that the burden of proving the validity of the termination of employment rests with
the employer. Failure to discharge this evidentiary burden would necessarily mean that the dismissal
was not justified, and, therefore, illegal. Unsubstantiated suspicions, accusations and conclusions of
employers do not provide for legal justification for dismissing employees. In case of doubt, such cases
should be resolved in favor of labor, pursuant to the social justice policy of our labor laws and
Constitution.28
This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v. Paez to mean
substantial evidence, to wit:
The Labor Code provides that an employer may terminate the services of an employee for just cause and
this must be supported by substantial evidence. The settled rule in administrative and quasi-judicial
proceedings is that proof beyond reasonable doubt is not required in determining the legality of an
employer's dismissal of an employee, and not even a preponderance of evidence is necessary as
substantial evidence is considered sufficient. Substantial evidence is more than a mere scintilla of
evidence or relevant evidence as a reasonable mind might accept as adequate to support a conclusion,
even if other minds, equally reasonable, might conceivably opine otherwise.29
Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife even failed
to identify the specific acts by which Tongko's employment was terminated much less support the same
with substantial evidence. To repeat, mere conjectures cannot work to deprive employees of their
means of livelihood. Thus, it must be concluded that Tongko was illegally dismissed.
Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not being
its employee is not entitled to such notices. Since we have ruled that Tongko is its employee, however,
Manulife clearly failed to afford Tongko said notices. Thus, on this ground too, Manulife is guilty of
illegal dismissal. In Quebec, Sr., we also stated:
Furthermore, not only does our legal system dictate that the reasons for dismissing a worker must be
pertinently substantiated, it also mandates that the manner of dismissal must be properly done,
otherwise, the termination itself is gravely defective and may be declared unlawful.30

For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP 30,000 as
indemnity in the form of nominal damages.31
Finally, Manulife raises the issue of the correctness of the computation of the award to Tongko made by
the NLRC by claiming that Songco v. National Labor Relations Commission32 is inapplicable to the
instant case, considering that Songco was dismissed on the ground of retrenchment.
An examination of Songco reveals that it may be applied to the present case. In that case, Jose Songco
was a salesman of F.E. Zuellig (M), Inc. which terminated the services of Songco on the ground of
retrenchment due to financial losses. The issue raised to the Court, however, was whether commissions
are considered as part of wages in order to determine separation pay. Thus, the fact that Songco was
dismissed due to retrenchment does not hamper the application thereof to the instant case. What is
pivotal is that we ruled in Songco that commissions are part of wages for the determination of
separation pay.
Article 279 of the Labor Code on security of tenure pertinently provides that:
In cases of regular employment the employer shall not terminate the services of an employee except for
a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.
In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an illegally dismissed
employee shall be entitled to backwages and separation pay, if reinstatement is no longer viable:
As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely: backwages and
reinstatement. These are separate and distinct from each other. However, separation pay is granted
where reinstatement is no longer feasible because of strained relations between the employee and the
employer. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find correct the computation of the NLRC
that the monthly gross wage of Tongko in 2001 was PhP 518,144.76. For having been illegally dismissed,
Tongko is entitled to reinstatement with full backwages under Art. 279 of the Labor Code. Due to the
strained relationship between Manulife and Tongko, reinstatement, however, is no longer advisable.
Thus, Tongko will be entitled to backwages from January 2, 2002 (date of dismissal) up to the finality of
this decision. Moreover, Manulife will pay Tongko separation pay of one (1) month salary for every year
of service that is from 1977 to 2001 amounting to PhP 12,435,474.24, considering that reinstatement is
not feasible. Tongko shall also be entitled to an award of attorney's fees in the amount of ten percent
(10%) of the aggregate amount of the above awards.
WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in CAG.R. SP No. 88253 is REVERSED and SET ASIDE. The Decision dated September 27, 2004 of the NLRC is
REINSTATED with the following modifications:
Manulife shall pay Tongko the following:

(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent from January
2, 2002 up to the finality of this Decision;
(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001 amounting to
PhP 12,435,474.24;
(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process requirements; and
(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and separation
pay.
Costs against respondent Manulife.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice

WE CONCUR:

DISSENTING OPINION
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CONCHITA CARPIO MORALES
Associate Justice

DANTE O. TINGA

Associate Justice
ARTURO D. BRION
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.
LEONARDO A. QUISUMBING

Associate Justice
Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
REYNATO S. PUNO
Chief Justice

x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x

SECOND DIVISION
G.R. No. 167622

November 7, 2008

GREGORIO V. TONGKO, petitioner

vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents.
DISSENTING OPINION
QUISUMBING, J.:
With due respect, I cannot concur in the majority opinion. I vote to deny the petition and affirm the
decision of the Court of Appeals holding that the National Labor Relations Commission had no
jurisdiction over this case due to the absence of an employer-employee relationship between petitioner
Gregorio V. Tongko and respondent Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife).
The majority opinion states that Manulife had the power of control over petitioner that would make him
its employee. It advances several reasons that do not persuade me.
In my view, two points require stressing: (1) Manulife has no power of control over petitioner in the
pursuit of his own business; and (2) petitioner is compensated through sales agency commissions and
not through fixed wages or salary.

Time and again, the Court has indeed applied the "four-fold" test in determining the existence of an
employer-employee relationship. This test considers the following elements: (1) the power to hire; (2)
the payment of wages; (3) the power to dismiss; and (4) the power to control, the last being the most
important element.1
The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of
control.2 The company's codes of conduct such as the Agent Code of Conduct, Manulife Financial Code
of Conduct, and Manulife Financial Code of Conduct Agreement cannot be justifiably said to establish an
employer-employee relationship. These merely served as general guidelines for agents in selling
Manulife policies in keeping with ethical principles governing the insurance business and in accordance
with the rules promulgated by the Insurance Commissioner for proper regulation of the industry. None
of these rules and regulations negated petitioner's contractual prerogative to adopt his own selling
methods or to sell insurance at his own time and convenience.4 Nor did it overturn company or industry
practices. Petitioner made his own strategy on how to generate more insurance sales. In fact, he derived
his income from the agents under him through their sales volume. He was not bound to observe any
work schedule or any working hours. He had freedom to adopt his own methods in selling insurance
policies, so long as he and his recruited agents meet their quotas.
So too, petitioner's administrative functions are not indicative of control. Such functions which consisted
of recruitment of new agents, training, and supervision were exercised over other sales agents and not
employees of Manulife. Such functions relate to the insurance agents' work in pursuit of their agency's
contractual obligations.
Neither can the Letter dated November 6, 20014 addressed by Renato A. Vergel De Dios, Manulife's
President and Chief Executive Officer, to petitioner regarding greater agency recruitment be considered
as control. While the letter reminded petitioner that his Region was the lowest performer in terms of
agency recruitment, it did not dictate how petitioner would achieve this goal. Contrary to the finding of
the main opinion,5 the letter did not contain "an abundance of directives or orders" other than
suggesting to petitioner to hire a competent assistant to whom he could unload routine tasks. It is
obvious that said assistant would be paid by petitioner as part of his agency's staff, not of the company's
office personnel.
Clearly, following industry practice, petitioner had never been an employee of Manulife. He is an
independent contractor as stated in the Career Agent's Agreement. Although he was eventually
promoted as Regional Sales Manager, the Agreement subsisted since he still received commissions from
insurance he directly sold to third persons aside from the override commissions he received from his
own recruited agents' sales. The Agreement was never changed or altered by the parties.
Anent petitioner's compensation, he was paid through commissions from premium payments instead of
fixed wages or salary. Petitioner's commissions varied, based on the computed premiums paid in full
and actually received on policies obtained through his agency. His summary of commission, persistency,
and management overrides constituted the income earned from business activities, not traditional
office employment by Manulife, as follows:
2001

P6,214,737.11

2000

P8,003,180.38

1999

P6,797,814.05

1998

P4,805,166.34

1997

P2,822,620.006

Indeed, petitioner's earnings by way of commissions varied, depending on the clientele or those who
availed of the insurance policies he procured. As also noted by the Labor Arbiter, his annual income was
duly reflected in petitioner's income tax returns as agency earnings from which were deducted
operating expenses and taxes withheld at source by Manulife. His returns did not reflect regular wages
or salaries paid by the company.
Since no employer-employee relationship existed between petitioner and Manulife, there is no basis to
award backwages and separation pay to petitioner. There is no reason to apply Songco v. National Labor
Relations Commission7 which considered commission as part of the employee's salary in the
computation of separation pay. Here, there exists no employer-employee relationship. A contrary ruling
will reverse an industry practice long accepted in the insurance business. Such reversal could prove
detrimental to the insurance public.
To reiterate, the present case does not involve an employer-employee relationship which warrants the
application of the Labor Code provisions; rather, it calls for the implementation of the Career Agent's
Agreement that should be construed in an ordinary civil action.
I vote to DENY the petition.

LEONARDO A. QUISUMBING
Associate Justice