Agency presumed for compensation
An agency is presumed to be for a compensation, unless otherwise agreed and upon and there is such a proof.
Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc.
G.R. No. 167622, 29 June 2010 (En Banc)
Complainant Gregorio V. Tongko filed a labor complaint against defendant The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) for illegal dismissal. Prior thereto, the parties entered into a contractual relationship which had two basic phases: (a) 1st Phase (started on 01 July 1977) was under a Career Agent’s Agreement (the “Agreement”) which expressly provided, among others, 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”; (b) 2nd Phase (started in 1983) was when complainant was named Unit Manager in Manulife’s Sales Agency Organization, and subsequently he became Branch Manager in 1990, and afterwards Regional Sales Manager in 1996. Complainant’s gross earnings consisted of commissions, persistency income, and management overrides. Whenever complainant submitted his tax returns which are under oath, he declared that himself as self-employed from the beginning applying deductions for business expenses to arrive at his taxable business income. Hence, Manulife withheld 10% tax on complainant’s earnings.
Sometime in 2001, defendant Manulife commenced manpower development programs at the regional sales management level. Through written notice, defendant informed complainant of the poor performance of their region bringing into question his leadership skills. A month later, defendant ended the services of complainant by sending a notice of termination of agency. Hence, complainant instituted a labor complaint against defendant. As a defense, defendant challenged the jurisdiction of the labor tribunals on the ground that no employer-employee relationship existed as the parties entered into a contract of agency.
The labor arbiter dismissed the complaint finding no employer-employee relationship. The National Labor Relations Commission (NLRC) reversed the labor and found defendant liable for illegal dismissal. The Court of Appeals (CA) overturned the NLRC and reinstated the labor arbiter’s decision. Before the Supreme Court, the high tribunal initially found the insurance company liable and ordered it to pay Tongko backwages and separation pay for illegal dismissal. The insurance company elevated the case to the en banc.
HELD: Manulife was not liable. Considering the factual antecedents were set in the insurance industry, the Insurance Code primarily governs with the Labor Code and Civil Code applying suppletorily. “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.”
An insurance agency contract is required to be expressly agreed upon. “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. This agreement is supplemented by the company’s agency practices and usages, duly accepted by the agent in carrying out the agency. By authority of the Insurance Code, an insurance agency is for compensation, a matter the Civil Code Rules on Agency presumes in the absence of proof to the contrary.”
The rule requiring the agent to act in accordance with the instructions of the principal 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.”
Here, it must be pointed out that “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” and by the express terms of the Agreement the parties agreed to a contract of agency. Thus, “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.”
While not conclusive, the parties’ legal characterization of their intent is critical. The Supreme Court took 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.” (Emphasis supplied.)
Moreover, Tongko did not adduce evidence that would establish the fact that Manulife exercised “means-and-manner control” over him as he climbed the 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 Tongko’s appointment as branch manager in 1990, and as Regional Sales Manager in 1996. The best evidence of control – the agreement or directive relating to Tongko’s 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.”
It must be noted that the general law on agency “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.” The principal may issue directives to achieve the assigned tasks insofar as “they do not involve the means and manner of undertaking these tasks.”
– – –
 Ibid. Article 1875.