SAN BEDA UNIVERSITY COLLEGE OF LAW

Labor Law 1 & Agrarian Law and Social Legislation

Atty. Mercader

Tongko v. Manufacturer’s Life Insurance Company

Brion, J.
G.R. No. 167622 – 29 June 2010

This resolves the Motion for Reconsideration dated December 3, 2008 filed by Manufacturer’s Life Insurance
Company (Manulife for brevity) to set aside the November 7, 2008 decision that an employer-employee relationship
existed between Manulife and Gregorio Tongko and that ordered Manulife to pay Tongko backwages and separation pay
for illegal dismissal.

FACTS:
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 which provided 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.” The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s Sales
Agency Organization. In 1990, he became a Branch Manager. Six years later, he became a Regional Sales Manager.
Tongko’s gross earnings consisted of commissions, persistency income, and management overrides. Since the beginning,
Tongko consistently declared himself self-employed in his income tax returns. Thus, under oath, he declared his taxable
business income. Manulife withheld the corresponding 10% tax on Tongko’s earnings.
In 2001, Manulife instituted manpower development programs at the regional sales management level which
directed the managers to increase the number of agents to at least 1,000 for a start. It was found that Tongko’s region
was the lowest performer in terms of recruiting in 2000. On November 6, 2001, respondent Renato Vergel de Dios wrote
Tangko a letter regarding concerns that were brought up during the Metro North Sales Managers Meeting, expressing
dissatisfaction of Tongko’s performance in their agent recruiting business, which resulted in some changes on how
Tongko would conduct his duties, including that Tongko hire at his expense a competent assistant to unload him of
routine tasks, which he had been complaining to be too taxing for him.
On December 18, 2001, de Dios wrote another letter to Tongko terminating his services. Tongko responded by
filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC) Arbitration Branch. He alleged
that he was Manulife’s employee before he was illegally dismissed. Manulife argues that Tongko had no fixed wage or
salary and that 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. Manulife also asserts that
the labor tribunals have no jurisdiction over Tongko’s claims as he was not its employee as characterized in the four-fold
test and ruling in Carungcong v NLRC.
The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the
NLRC reversed this decision and found that Tongko had been illegally dismissed. In the petition for certiorari, the CA
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. The Supreme Court, on November 7, 2008,
reversed the CA’s ruling and found that an employment relationship existed. Manulife disagreed with the Decision and
filed the present motion for reconsideration.

ISSUE:
W/N an employee-employer relationship exists between Tongko and Manulife.

HELD: ​MOTION FOR RECONSIDERATION GRANTED​. ​PETITION DISMISSED.

No. An employee-employer relationship does not exist between Tongko and Manulife.
SAN BEDA UNIVERSITY COLLEGE OF LAW
Labor Law 1 & Agrarian Law and Social Legislation
Atty. Mercader
● The primary evidence in the case is the Agreement that governed and defined the parties relations until the
Agreements termination in 2001. This Agreement stood for more than two decades and was never modified
or novated. It assumes primacy because it directly dealt with the nature of the parties relationship up to the
very end. By the Agreement’s express terms, Tongko served as an insurance agent for Manulife, not as an
employee. Evidence shows that Tongko’s role as an insurance agent never changed during his relationship
with Manulife. If changes occurred at all, the changes did not appear to be in the nature of their core
relationship. Tongko essentially remained an agent, but moved up in this role through Manulifes recognition
that he could use other agents approved by Manulife, but operating under his guidance and in whose
commissions he had a share. 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. For want of a better term, Tongko
perhaps can be labeled as a ‘lead agent’ who guided under his wing other Manulife agents.
● Furthermore, the Court distinguished control under the Insurance Code and the Labor Code. 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.
● Based on decided 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 this case, while Tongko was later on designated
unit manager, branch manager, and then regional sales manager, 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.
● There was 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. Manulife had practically left
Tongko alone not only in doing the business of selling insurance, but also in guiding the agents under his
wing. Furthermore, the mere presentation of codes or of rules and regulations is not per se indicative of
labor law control. The codes of conduct do not intrude into the agents’ means and manner of conducting
their sales and only control them as to the desired results. Guidelines indicative of labor law control, based
on Insular Life v NLRC, 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.
● Hence, 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.
 SAN BEDA UNIVERSITY COLLEGE OF LAW
Labor Law 1 & Agrarian Law and Social Legislation
Atty. Mercader
NOTES:
AGREEMENT:

It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed or interpreted
as creating an employeremployee 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.

NOVEMBER 7, 2008 DECISION: ​The SC reversed CA’s ruling and found that an employment relationship existed between Tongko and
Manulife.

1. Our ruling in the first Insular 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:
a. 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;
b. 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; and
c. 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.

JANUARY 25, 2011 RESOLUTION ​(Tongko filed a Motion for Reconsideration arguing that he performed administrative functions and
exercised supervisory authority over employees and agents of Manulife, in addition to his insurance agent functions. And in 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)

The Court finds no basis or any error to merit the reconsideration of our June 29, 2010 Resolution.
 SAN BEDA UNIVERSITY COLLEGE OF LAW
Labor Law 1 & Agrarian Law and Social Legislation
Atty. Mercader
I. 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. Petitioner failed to show
that the control Manulife exercised over him was the control required to exist in an employer-​employee relationship; Manulife’s
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.

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. In
this case, Manulife’s 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. Manulife’s 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.

II. NO RESULTING INEQUITY

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 ₱2,822,620; in 1998, ₱4,805,166.34; in 1999,
₱6,797,814.05; in 2001, ₱6,214,737.11; and in 2002, ₱8,003,180.38. 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.

The Dissent’s discussion on this aspect 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. Nonetheless, the Court cannot simply create an
employment relationship even when there is none because of the unavoidable and inherently weak position of an individual over a
giant corporation.

III. EARNINGS WERE COMMISSIONS

That his earnings were agent’s 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.