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GREGORIO V. TONGKO, vs. THE MANUFACTURERS LIFE INSURANCE CO.

(PHILS.), INC. and RENATO A. VERGEL DE DIOS.


G.R. No. 167622, June 29, 2010

Motion for Reconsideration - to set aside SC Decision of November 7, 2008.


In the assailed decision = √ employer-employee relationship, Manulife to pay Tongko
(backwages & separation pay for illegal dismissal)

FACTS:

2 BASIC PHASES of contractual relationship btw Tongko & Manulife

[FIRST PHASE] – began on July 1, 1977


Career Agent’s Agreement (Agreement) that provided: It is understood and agreed that
the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between
the Company and the Agent.
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

Tongko additionally agreed


(1) to comply with all regulations and requirements of Manulife, and
(2) to maintain a standard of knowledge and competency in the sale of
Manulife’s products, satisfactory to Manulife and sufficient to meet the volume
of the new business, required by his Production Club membership.

[SECOND PHASE] – started in 1983 when Tongko was named Unit Manager
Promotion: 1990 = Branch Manager ,1996 = Regional Sales Manager, Metro North
Tongko’s gross earnings:
(1) commissions,
(2) persistency income,
(3) management overrides
Since then, he declared himself self-employed in his income tax returns (ITR)
Manulife= withheld the corresponding 10% tax on Tongko’s earnings
2001= instituted development programs at the regional sales management level
Respondent Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001
Company goal: 1000 agents

Letter:
 Kevin O’Connor, SVP-Agency = instituted Sr Managers’ meeting about
objectives
 Tongko’s region = lowest performer, made previous comments in prior meetings,
NOT same in direction
 Kevin (SVP) held series of meetings, one of which de Dios joined briefly.
 Repeated issue raised by Tongko: "Some Managers are unhappy with their
earnings and would want to revert to the position of agents."
o No Sales Manager came forward on their own to confirm your statement
o Malou Samson as a source = she denied it in their meeting
o Gregorio Tongko’s comments= no solid basis at all
 Another issue: "Sales Managers are doing what the company asks them to do
but, in the process, they earn less."
o Regional Mgr Tongko made a lot more money in the Year 2000 versus
1999
 De Dios worries about Tongko’s capacity to lead
 Changes in interim:
o Hire at assistant to unload routine tasks (Tongko’s own expense)
o SVP Kevin and the rest of the Agency Operations will deal with the
North Star Branch (NSB) in autonomous fashion
(reason: to concentrate more fully on overseeing the remaining groups
under Metro North, his Central Unit and the rest of the Sales Managers in
Metro North. He will only be accountable on these remaining groups)

ANOTHER LETTER- Dec 18, 2001 (De Dios to Tongko)


 all these efforts have failed in helping you align your directions with Management
 issuing notice of termination effective 15 days from the date of this letter
Tongko filed illegal dismissal complaint with the NLRC
Alleged that he was Manulife’s employee before he was illegally dismissed

ISSUE: WON there is an existence of an employer-employee relationship.

A. Tongko’s Case for Employment Relationship

As Unit Manager
 annual ₱50k, regardless of production levels attained
 exclusive of commissions and bonuses
As a Regional Sales Manager
 travel and entertainment allowance of ₱36k per year
 administrative functions and supervisory authority
 assigned a definite place in the office
 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.
 required to follow at least 3 codes of conduct

B. Manulife’s Case – Agency Relationship with Tongko

 Manulife argues that Tongko had no fixed wage or salary, only commissions
 Tongko declared himself to be self-employed and consistently paid taxes
 asserts that the labor tribunals have no jurisdiction over Tongko’s claim as he
 was not its employee as characterized in the four-fold test and our ruling in
Carungcong v. National Labor Relations Commission.

RULINGS:

L. Arbiter= (x) NO er-ee relationship


NLRC= (√) ee-er, illegally dismissal
CA= (x) NO er-ee relationship, Affirm LA, NLRC grave abuse of discretion
SC= 11/7/08 (√) ee-er, Reversed CA ruling
 Reason:
o Our ruling in the first Insular case did not foreclose the
possibility of an insurance agent becoming an employee
of an insurance company. (Existence of er-ee= case-to-
case basis depending on the evidence on record)
o Manulife had the power of control over Tongko
 Tongko undertook to comply with Manulife’s rules,
regulations and other reqs
 Performed administrative duties that established
employment with Manulife
 tasked to recruit some agents in addition to his
other administrative functions
MANULIFE DISAGREED = MOTION FOR RECONSIDERATION (NOV 7 DECISION)
(1) violates Manulife’s right to due process by:
a. confining the review only to the issue of "control" and utterly
disregarding all the other issues that had been joined in this case;
b. mischaracterizing the divergence of conclusions between the CA and
the NLRC decisions as confined only to that on "control"
c. grossly failing to consider the findings and conclusions of the CA on the
majority of the material evidence, especially Tongko’s declaration in his
income tax returns that he was a "business person" or "self-
employed";
d. allowing Tongko to repudiate his sworn statement in a public
document

(2) contravenes settled rules in contract law and agency, ignores the
constitutional and policy context of contract law vis-à-vis labor law

(3) 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) 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) unsustainable and reversible errors, which should be corrected (illegally
dismissal, backwages, separation pay, nominal damages and attorney’s fees.)

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