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 the Philippines." 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 x The 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.1avvphi1.net
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 agent’s 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 company’s 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 company’s 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 Manulife’s insurance agent.17 This
agreement is supplemented by the company’s 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 Manulife’s employee. On the other hand, Manulife cites the Carungcong 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 as these cited cases dealt with the proper legal characterization of a subsequent management contract that superseded the original agency contract between the insurance company and its agent. 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 Agreement’s 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 Agreement’s express terms, Tongko served as an "insurance agent" for Manulife, not as an employee. To be sure, the Agreement’s 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.1awph!1 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 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 Manulife’s 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 Tongko’s 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 latter’s 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, Tongko’s occupation was to sell Manulife’s 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 Tongko’s admissions against his interest. Strictly speaking, Tongko’s 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 layman’s 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 concept28 –
necessarily must come into play. Tongko’s 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 Velasco’s dissenting opinion states that Tongko was forced to declare himself a business or self- employed person by Manulife’s 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 Tongko’s 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