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

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

G.R. No. 167622 January 25, 2011

Principle: In an agency relationship, the principal is allowed to have an element of control over
his agent without intruding to the labor law concept of control for purpose of employment.

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 Agreement (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. 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. 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. 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. Stating that Tongko’s 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.

Other issues were: "Some Managers are unhappy with their earnings and would want to revert to
the position of agents." And "Sales Managers are doing what the company asks them to do but,
in the process, they earn less." Tongko was then terminated. Therefrom, Tongko filed a
Complaint dated November 25, 2002 with the NLRC against Manulife for illegal dismissal in the
Complaint. In a Decision dated April 15, 2004, Labor Arbiter dismissed the complaint for lack of
an employer-employee relationship. 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. Thus, Manulife filed an appeal with the CA. 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.

Issues:

1.) Whether or not Tongko was an employee of Manulife; 2.) Whether or not Tongko was illegally
dismissed.

Ruling: 
On the first Issue:
Yes. 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.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. 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.

On the second Issue:

In its Petition for Certiorari dated January 7, 2005[26] 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. 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. 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. 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. 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.