SECOND DIVISION

[G.R. NO. 167622 : November 7, 2008]

GREGORIO V. TONGKO, Petitioner v. THE MANUFACTURERS
LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL
DE DIOS, Respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the
reversal of the March 29, 2005 Decision1 of the Court of Appeals
(CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life
Insurance Co. (Phils.), Inc. v. National Labor Relations Commission
and Gregorio V. Tongko. The assailed decision set aside the
Decision dated September 27, 2004 and Resolution dated December
16, 2004 rendered by the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 040220-04.
The 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 Agreement2 (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.
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 or to 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. x x x
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, may be summarized as follows:
January to December
10, 2002
2001
2000
1999
1998
1997

- P 865,096.07
-

6,214,737.11
8,003,180.38
6,797,814.05
4,805,166.34
2,822,620.003

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, 20014 to Tongko regarding an October 18, 2001

Metro North Sales Managers Meeting. In the letter, De Dios stated:
The first step to transforming Manulife into a big league player has
been very clear - to increase the number of agents to at least 1,000
strong for a start. This may seem diametrically opposed to the way
Manulife was run when you first joined the organization. Since then,
however, substantial changes have taken place in the organization,
as these have been influenced by developments both from within
and without the company.
xxxx
The issues around agent recruiting are central to the intended
objectives hence the need for a Senior Managers' meeting earlier
last month when Kevin O'Connor, SVP - Agency, took to the floor to
determine from our senior agency leaders what more could be done
to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your 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.
While discussions, in general, were positive other than for certain
comments from your end which were perceived to be uncalled for, it
became clear that a one-on-one meeting with you was necessary to
ensure that you and management, were on the same plane. As
gleaned from some of your previous comments in prior meetings
(both in group and one-on-one), it was not clear that we were
proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one
of which I joined briefly. In those subsequent meetings you
reiterated certain views, the validity of which we challenged and
subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the
rest of the Metro North Managers may be a bit confused as to the
directions the company was taking. For this reason, I sought a
meeting with everyone in your management team, including you, to

clear the air, so to speak.

This note is intended to confirm the items that were discussed at
the said Metro North Region's Sales Managers meeting held at the
7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and
would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with
Kevin. For this reason, I placed the issue on the table before the
rest of your Region's Sales Managers to verify its validity. As you
must have noted, no Sales Manager came forward on their own to
confirm your statement and it took you to name Malou Samson as a
source of the same, an allegation that Malou herself denied at our
meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid
basis at all. I now believe what I had thought all along, that these
allegations were simply meant to muddle the issues surrounding the
inability of your Region to meet its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them
to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked
and we found that you made a lot more money in the Year 2000
versus 1999. In addition, you also volunteered the information to
Kevin when you said that you probably will make more money in the
Year 2001 compared to Year 2000. Obviously, your above statement
about making "less money" did not refer to you but the way you
argued this point had us almost believing that you were spouting
the gospel of truth when you were not. x x x
xxxx

All of a sudden, Greg, I have become much more worried about

your ability to lead this group towards the new direction that we
have been discussing these past few weeks, i.e., Manulife's goal to
become a major agency-led distribution company in the Philippines.
While as you claim, you have not stopped anyone from recruiting, I
have never heard you proactively push for greater agency
recruiting. You have not been proactive all these years when it
comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its
developmental goals next year and so, we are making the following
changes in the interim:
1. You will hire at your expense a competent assistant who can
unload you of much of the routine tasks which can be easily
delegated. This assistant should be so chosen as to
complement your skills and help you in the areas where you
feel "may not be your cup of tea".
You have stated, if not implied, that your work as Regional
Manager may be too taxing for you and for your health. The
above could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency
Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x
I have decided to make this change so as to reduce your span
of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your
Central Unit and the rest of the Sales Managers in Metro North.
I will hold you solely responsible for meeting the objectives of
these remaining groups.

xxxx
The above changes can end at this point and they need not go any
further. This, however, is entirely dependent upon you. But you have
to understand that meeting corporate objectives by everyone is
primary and will not be compromised. We are meeting tough
challenges next year and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly.
Subsequently, De Dios wrote Tongko another letter dated December
18, 2001,5terminating Tongko's services, thus:
It would appear, however, that despite the series of meetings and
communications, both one-on-one meetings between yourself and
SVP Kevin O'Connor, some of them with me, as well as group
meetings with your Sales Managers, all these efforts have failed in
helping you align your directions with Management's avowed agency
growth policy.
xxxx
On account thereof, Management is exercising its prerogative under
Section 14 of your Agents Contract as we are now issuing this notice
of termination of your Agency Agreement with us effective fifteen
days from the date of this letter.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with
the NLRC against Manulife for illegal dismissal. The case, docketed
as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter
Marita V. Padolina.
In the Complaint, Tongko, in a bid to establish an employeremployee relationship, alleged that De Dios gave him specific
directives on how to manage his area of responsibility in the latter's
letter dated November 6, 2001. He further claimed that Manulife
exercised control over him as follows:
Such control was certainly exercised by respondents over the herein
complainant. It was Manulife who hired, promoted and gave various
assignments to him. It was the company who set objectives as
regards productions, recruitment, training programs and all
activities pertaining to its business. Manulife prescribed a Code of
Conduct which would govern in minute detail all aspects of the work

to be undertaken by employees, including the sales process, the

underwriting process, signatures, handling of money, policyholder
service, confidentiality, legal and regulatory requirements and
grounds for termination of employment. The letter of Mr. De Dios
dated 06 November 2001 left no doubt as to who was in control.
The subsequent termination letter dated 18 December 2001 again
established in no uncertain terms the authority of the herein
respondents to control the employees of Manulife. Plainly, the
respondents wielded control not only as to the ends to be achieved
but the ways and means of attaining such ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co.,
Ltd. v. NLRC (4thDivision)7 and Great Pacific Life Assurance
Corporation v. NLRC,8 which Tongko claimed to be similar to the
instant case.
Tongko further claimed that his dismissal was without basis and that
he was not afforded due process. He also cited the Manulife Code of
Conduct by which his actions were controlled by the company.
Manulife then filed a Position Paper with Motion to Dismiss dated
February 27, 2003,9 in which it alleged that Tongko is not its
employee, and that it did not exercise "control" over him. Thus,
Manulife claimed that the NLRC has no jurisdiction over the case.
In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina
dismissed the complaint for lack of an employer-employee
relationship. Padolina found that applying the four-fold test in
determining the existence of an employer-employee relationship,
none was found in the instant case. The dispositive portion thereof
states:
WHEREFORE, premises considered, judgment is hereby rendered
DISMISSING the instant complaint for lack of jurisdiction, there
being no employer-employee relationship between the parties.
SO ORDERED.
Tongko appealed the arbiter's Decision to the NLRC which reversed
the same and rendered a Decision dated September 27, 2004
finding Tongko to have been illegally dismissed.

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. It further stated that
Manulife exercised control over Tongko as evidenced by the letter
dated November 6, 2001 of De Dios and wrote:
The above-mentioned letter shows the extent to which respondents
controlled complainant's manner and means of doing his work and
achieving the goals set by respondents. The letter shows how
respondents concerned themselves with the manner complainant
managed the Metro North Region as Regional Sales Manager, to the
point that respondents even had a say on how complainant
interacted with other individuals in the Metro North Region. The
letter is in fact replete with comments and criticisms on how
complainant carried out his functions as Regional Sales Manager.
More importantly, the letter contains an abundance of directives or
orders that are intended to directly affect complainant's authority
and manner of carrying out his functions as Regional Sales
Manager.10 x x x
Additionally, the First Division also ruled that:
Further evidence of [respondents'] control over complainant can be
found in the records of the case. [These] are the different codes of
conduct such as the Agent Code of Conduct, the Manulife Financial
Code of Conduct, and the Manulife Financial Code of Conduct
Agreement, which serve as the foundations of the power of control
wielded by respondents over complainant that is further manifested
in the different administrative and other tasks that he is required to
perform. These codes of conduct corroborate and reinforce the
display of respondents' power of control in their 06 November 2001
Letter to complainant.11
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby
reversed and set aside. We find complainant to be a regular
employee of respondent Manulife and that he was illegally dismissed
from employment by respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to
pay complainant separation pay as above set forth. Respondent
Manulife is further ordered to pay complainant backwages from the

time he was dismissed on 02 January 2002 up to the finality of this

decision also as indicated above.
xxxx
All other claims are hereby dismissed for utter lack of merit.
From this Decision, Manulife filed a motion for reconsideration which
was denied by the NLRC First Division in a Resolution dated
December 16, 2004.12
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP
No. 88253. 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. The CA arrived at this conclusion while
again applying the four-fold test. The CA found that Manulife did not
exercise control over Tongko that would render the latter an
employee of Manulife. The dispositive portion reads:
WHEREFORE, premises considered, the present petition is hereby
GRANTED and the writ prayed for accordingly GRANTED. The
assailed Decision dated September 27, 2004 and Resolution dated
December 16, 2004 of the National Labor Relations Commission in
NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 04022004) are hereby ANNULLED and SET ASIDE. The Decision dated April
15, 2004 of Labor Arbiter Marita V. Padolina is hereby REINSTATED.
Hence, Tongko filed this petition and presented the following issues:
A
The Court of Appeals committed grave abuse of discretion in
granting respondents' petition for certiorari.
B
The Court of Appeals committed grave abuse of discretion in
annulling and setting aside the Decision dated September 27, 2004
and Resolution dated December 16, 2004 in finding that there is no
employer-employee relationship between petitioner and respondent.
C

The Court of Appeals committed grave abuse of discretion in

annulling and setting aside the Decision dated September 27, 2004
and Resolution dated December 16, 2004 which found petitioner to
have been illegally dismissed and ordered his reinstatement with
payment of backwages.13
Restated, the issues are: (1) Was there an employer-employee
relationship between Manulife and Tongko? and (2) If yes, was
Manulife guilty of illegal dismissal?
The Court's Ruling
This petition is meritorious.
Tongko Was An Employee of Manulife
The basic issue of whether or not the NLRC has jurisdiction over the
case resolves itself into the question of whether an employeremployee relationship existed between Manulife and Tongko. If no
employer-employee relationship existed between the two parties,
then jurisdiction over the case properly lies with the Regional Trial
Court.
In the determination of whether an employer-employee relationship
exists between two parties, this Court applies the four-fold test to
determine the existence of the elements of such relationship.
In Pacific Consultants International Asia, Inc. v. Schonfeld, the
Court set out the elements of an employer-employee relationship,
thus:
Jurisprudence is firmly settled that whenever the existence of an
employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer's power to control the employee's conduct. It
is the so-called "control test" which constitutes the most important
index of the existence of the employer-employee relationship that
is, whether the employer controls or has reserved the right to
control the employee not only as to the result of the work to be
done but also as to the means and methods by which the same is to

be accomplished. Stated otherwise, an employer-employee

relationship exists where the person for whom the services are
performed reserves the right to control not only the end to be
achieved but also the means to be used in reaching such end.14
The NLRC, for its part, applied the four-fold test and found the
existence of all the elements and declared Tongko an employee of
Manulife. The CA, on the other hand, found that the element of
control as an indicator of the existence of an employer-employee
relationship was lacking in this case. The NLRC and the CA based
their rulings on the same findings of fact but differed in their
interpretations.
The NLRC arrived at its conclusion, first, on the basis of the letter
dated November 6, 2001 addressed by De Dios to Tongko.
According to the NLRC, the letter contained "an abundance of
directives or orders that are intended to directly affect complainant's
authority and manner of carrying out his functions as Regional Sales
Manager." It enumerated these "directives" or "orders" as follows:
1. You will hire at your expense a competent assistant who can
unload you of much of the routine tasks which can be easily
delegated. x x x
xxxx
This assistant should be hired immediately.
2. Effective immediately, Kevin and the rest of the Agency
Operations will deal with the North Star Branch (NSB) in
autonomous fashion x x x.
xxxx
I have decided to make this change so as to reduce your span
of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your
Central Unit and the rest of the Sales Managers in Metro North.
xxx

3. Any resistance or holding back by anyone will be dealt with

accordingly.
4. I have been straightforward in this my letter and I know that
we can continue to work together... but it will have to be on
my terms. Anything else is unacceptable!
The NLRC further ruled that the different codes of conduct that were
applicable to Tongko served as the foundations of the power of
control wielded by Manulife over Tongko that is further manifested
in the different administrative and other tasks that he was required
to perform.
The NLRC also found that Tongko was required to render exclusive
service to Manulife, further bolstering the existence of an employeremployee relationship.
Finally, the NLRC ruled that Tongko was integrated into a
management structure over which Manulife exercised control,
including the actions of its officers. The NLRC held that such
integration added to the fact that Tongko did not have his own
agency belied Manulife's claim that Tongko was an independent
contractor.
The CA, however, considered the finding of the existence of an
employer-employee relationship by the NLRC as far too sweeping
having as its only basis the letter dated November 6, 2001 of De
Dios. The CA did not concur with the NLRC's ruling that the
elements of control as pointed out by the NLRC are "sufficient
indicia of control that negates independent contractorship and
conclusively establish an employer-employee relationship
between"15 Tongko and Manulife. The CA ruled that there is no
employer-employee relationship between Tongko and Manulife.
An impasse appears to have been reached between the CA and the
NLRC on the sole issue of control over an employee's conduct. It
bears clarifying that such control not only applies to the work or
goal to be done but also to the means and methods to accomplish
it.16 In Sonza v. ABS-CBN Broadcasting Corporation, we explained

that not all forms of control would establish an employer-employee

relationship, to wit:
Further, not every form of control that a party reserves to himself
over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employeremployee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that
merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or
methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party
hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee
relationship unlike the second, which address both the result
and the means used to achieve it.17 (Emphasis supplied.)
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:
It is, therefore, usual and expected for an insurance company to
promulgate a set of rules to guide its commission agents in selling
its policies that they may not run afoul of the law and what it
requires or prohibits. Of such a character are the rules which
prescribe the qualifications of persons who may be insured, subject
insurance applications to processing and approval by the Company,
and also reserve to the Company the determination of the
premiums to be paid and the schedules of payment. None of these
really invades the agent's contractual prerogative to adopt his own
selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.18
Hence, we ruled in Insular that no employer-employee relationship
existed therein. However, such ruling was tempered with the
qualification that had there been evidence that the company
promulgated rules or regulations that effectively controlled or
restricted an insurance agent's choice of methods or the methods
themselves in selling insurance, an employer-employee relationship
would have existed. In other words, the Court in Insularin no way
definitively held that insurance agents are not employees of

insurance companies, but rather made the same a case-to-case

basis. We held:
The respondents limit themselves to pointing out that Basiao's
contract with the Company bound him to observe and conform to
such rules and regulations as the latter might from time to time
prescribe. No showing has been made that any such rules or
regulations were in fact promulgated, much less that any
rules existed or were issued which effectively controlled or
restricted his choice of methods or the methods themselves
of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed
on the express provision of the contract leaving Basiao "...
free to exercise his own judgment as to the time, place and
means of soliciting insurance."19 (Emphasis supplied.)
There is no conflict between our rulings in Insular and in Great
Pacific Life Assurance Corporation. We said in the latter case:
[I]t cannot be gainsaid that Grepalife had control over private
respondents' performance as well as the result of their efforts. A
cursory reading of their respective functions as enumerated
in their contracts reveals that the company practically
dictates the manner by which their jobs are to be carried
out. For instance, the District Manager must properly account,
record and document the company's funds spot-check and audit the
work of the zone supervisors, conserve the company's business in
the district through `reinstatements', follow up the submission of
weekly remittance reports of the debit agents and zone supervisors,
preserve company property in good condition, train understudies for
the position of district manager, and maintain his quota of sales (the
failure of which is a ground for termination). On the other hand, a
zone supervisor must direct and supervise the sales activities of the
debit agents under him, conserve company property through
"reinstatements", undertake and discharge the functions of
absentee debit agents, spot-check the records of debit agents, and
insure proper documentation of sales and collections by the debit
agents.20 (Emphasis supplied.)
Based on the foregoing cases, if the specific rules and regulations
that are enforced against insurance agents or managers are such
that would directly affect the means and methods by which such
agents or managers would achieve the objectives set by the

insurance company, they are employees of the insurance company.

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.21
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.
In its Comment (Re: Petition for Review dated 15 April 2005) dated
August 5, 2005, Manulife attached affidavits of its agents

purportedly to support its claim that Tongko, as a Regional Sales

Manager, did not perform any administrative functions. An
examination of these affidavits would, however, prove the opposite.
In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional
Sales Manager of Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife
as an Agency Regional Sales Manager ("RSM") for Metro South
Region pursuant to an Agency Contract. As such RSM, I have
the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents
affiliated to my region.
While Amada Toledo, a Branch Manager of Manulife, stated in her
Affidavit dated April 29, 200323 that:
3. In January 1997, I was assigned as a Branch Manager ("BM")
of Manulife for the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission
agents;
c. Coordinate activities of Agency Managers who, in turn,
train and coordinate activites of other commission
agents;
d. Achieve agreed production objectives in terms of Net
Annualized Commissions and Case Count and recruitment
goals; and

e. Sell the various products of Manulife to my personal

clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in
her Affidavit dated April 28, 200324 that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North
Peaks Unit, North Star Branch, Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be
licensed, trained and contracted to sell Manulife products
and who will be part of my Unit;
b. To coordinate activities of the agents under my Unit in
their daily, weekly and monthly selling activities, making
sure that their respective sales targets are met;
c. To conduct periodic training sessions for my agents to
further enhance their sales skills.
d. To assist my agents with their sales activities by way of
joint fieldwork, consultations and one-on-one evaluation
and analysis of particular accounts.
e. To provide opportunities to motivate my agents to
succeed like conducting promos to increase sales
activities and encouraging them to be involved in
company and industry activities.
f. To provide opportunities for professional growth to my
agents by encouraging them to be a member of the
LUCAP (Life Underwriters Association of the Philippines).
A comparison of the above functions and those contained in the
Agreement with those cited in Great Pacific Life Assurance
Corporation25 reveals a striking similarity that would more than
support a similar finding as in that case. Thus, there was an
employer-employee relationship between the parties.

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.
In his letter dated November 6, 2001, De Dios harped on the
direction of Manulife of becoming a major agency-led distribution
company whereby greater agency recruitment is required of the
managers, including Tongko. De Dios made it clear that agent
recruitment has become the primary means by which Manulife
intends to sell more policies. More importantly, it is Tongko's alleged
failure to follow this principle of recruitment that led to the
termination of his employment with Manulife. With this, it is
inescapable that Tongko was an employee of Manulife.
Tongko Was Illegally Dismissed
In its Petition for Certiorari dated January 7, 200526 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. x x x
xxxx
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.
We cannot, therefore, accept Manulife's position.
In Quebec, Sr. v. National Labor Relations Commission, we ruled
that:
When there is no showing of a clear, valid and legal cause for the
termination of employment, the law considers the matter a case of
illegal dismissal and the burden is on the employer to prove that the
termination was for a valid or authorized cause. This burden of proof
appropriately lies on the shoulders of the employer and not on the
employee because a worker's job has some of the characteristics of
property rights and is therefore withinthe constitutional mantle of
protection. No person shall be deprived of life, liberty or property
without due process of law, nor shall any person be denied the
equal protection of the laws.
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 evidentialburden would necessarily mean that the
dismissal was not justified, and, therefore, illegal.27
We again ruled in Times Transportation Co., Inc. v. National Labor
Relations Commissionthat:
The law mandates that the burden of proving the validity of the
termination of employment rests with the employer. Failure to
discharge this evidentiary burden would necessarily mean that the
dismissal was not justified, and, therefore, illegal. Unsubstantiated
suspicions, accusations and conclusions of employers do not provide
for legal justification for dismissing employees. In case of doubt,
such cases should be resolved in favor of labor, pursuant to the
social justice policy of our labor laws and Constitution.28
This burden of proof was clarified in Community Rural Bank of San
Isidro (N.E.), Inc. v. Paez to mean substantial evidence, to wit:

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.29
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. In Quebec,
Sr., we also stated:
Furthermore, not only does our legal system dictate that the
reasons for dismissing a worker must be pertinently substantiated,
it also mandates that the manner of dismissal must be properly
done,otherwise, the termination itself is gravely defective and may
be declared unlawful.30
For breach of the due process requirements, Manulife is liable to
Tongko in the amount of PhP 30,000 as indemnity in the form of
nominal damages.31
Finally, Manulife raises the issue of the correctness of the
computation of the award to Tongko made by the NLRC by claiming
that Songco v. National Labor Relations Commission32 is inapplicable
to the instant case, considering that Songco was dismissed on the
ground of retrenchment.

An examination of Songco reveals that it may be applied to the

present case. In that case, Jose Songco was a salesman of F.E.
Zuellig (M), Inc. which terminated the services of Songco on the
ground of retrenchment due to financial losses. The issue raised to
the Court, however, was whether commissions are considered as
part of wages in order to determine separation pay. Thus, the fact
that Songco was dismissed due to retrenchment does not hamper
the application thereof to the instant case. What is pivotal is that we
ruled in Songco that commissions are part of wages for the
determination of separation pay.
Article 279 of the Labor Code on security of tenure pertinently
provides that:
In cases of regular employment the employer shall not terminate
the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him
up to the time of his actual reinstatement.
In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we
thus stated that an illegally dismissed employee shall be entitled to
backwages and separation pay, if reinstatement is no longer viable:
As the law now stands, an illegally dismissed employee is entitled to
two reliefs, namely: backwages and reinstatement. These are
separate and distinct from each other. However, separation pay is
granted where reinstatement is no longer feasible because of
strained relations between the employee and the employer. In
effect, an illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if reinstatement is no
longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find
correct the computation of the NLRC that the monthly gross wage of
Tongko in 2001 was PhP 518,144.76. For having been illegally
dismissed, Tongko is entitled to reinstatement with full backwages
under Art. 279 of the Labor Code. Due to the strained relationship
between Manulife and Tongko, reinstatement, however, is no longer
advisable. Thus, Tongko will be entitled to backwages from January

2, 2002 (date of dismissal) up to the finality of this decision.

Moreover, Manulife will pay Tongko separation pay of one (1) month
salary for every year of service that is from 1977 to 2001
amounting to PhP 12,435,474.24, considering that reinstatement is
not feasible. Tongko shall also be entitled to an award of attorney's
fees in the amount of ten percent (10%) of the aggregate amount
of the above awards.
WHEREFORE, the petition is hereby GRANTED. The assailed March
29, 2005 Decision of the CA in CA-G.R. SP No. 88253
is REVERSED and SET ASIDE. The Decision dated September 27,
2004 of the NLRC is REINSTATED with the following modifications:
Manulife shall pay Tongko the following:
(1) Full backwages, inclusive of allowances and other benefits or
their monetary equivalent from January 2, 2002 up to the finality of
this Decision;
(2) Separation pay of one (1) month salary for every year of service
from 1977 up to 2001 amounting to PhP 12,435,474.24;
(3) Nominal damages of PhP 30,000 as indemnity for violation of
the due process requirements; and
(4) Attorney's fees equivalent to ten percent (10%) of the
aforementioned backwages and separation pay.
Costs against respondent Manulife.
SO ORDERED.
Carpio-Morales, and Brion, JJ., concur.
Quisumbing, (Chairperson), pls. see dissenting opinion.
Tinga, J., join J. Quisumbing's dissent.
Endnotes: