Case Summary (G.R. No. 84484)
Petitioner
Insular Life Assurance Co., Ltd., a Philippine life insurance company.
Respondents
National Labor Relations Commission; Melecio T. Basiao, who acted as a commission agent for Insular Life.
Key Dates
• July 2, 1968 – Underwriting (agent) contract executed
• April 1972 – Agency Manager’s Contract executed
• May 1979 – Agency Manager’s Contract terminated
• April 1, 1980 – Commissions under first contract discontinued
• 1983 – Labor complaint filed (RAB Case No. VI-0010-83)
• 1986 – NLRC affirms Labor Arbiter’s award
• November 15, 1989 – Supreme Court decision
Applicable Law
• 1935 Philippine Constitution (operative in 1989)
• Insurance Code and implementing regulations of the Insurance Commissioner
• Labor Code, Section 217 (1974) – grants Labor Arbiters original and exclusive jurisdiction over money claims of “workers”
Background of Contracts
Under the July 2, 1968 agreement, Basiao was authorized to solicit insurance applications in the Philippines in exchange for commissions determined by the Company’s Schedule of Commissions. The contract incorporated the Company’s Rate Book, Agent’s Manual, and circulars, and provided for contract termination and commission entitlements under specified conditions.
Content of the Underwriting Agreement
• Agent’s independence: “free to exercise his own judgment as to time, place and means of soliciting insurance”
• No employer-employee relationship created; agent must comply with Company rules and regulations
• Prohibited practices: rebates, misrepresentations, over-selling
• Termination: at will by either party; commissions on renewals and unpaid first-year balances subject to conditions
• Assignment: prohibited without Company’s written consent
Agency Manager’s Contract
In April 1972, Basiao agreed to organize “M. Basiao and Associates” under a separate Agency Manager’s Contract, while continuing to perform under the 1968 contract.
Termination and Subsequent Proceedings
• May 1979 – Insular Life terminated the Agency Manager’s Contract.
• Basiao’s civil suit allegedly prompted termination of the 1968 contract and cessation of commissions as of April 1, 1980.
• Basiao filed before the Ministry of Labor for unpaid commissions and attorney’s fees.
Procedural History
The Labor Arbiter found an employer-employee relationship, awarded Basiao the balance of first-year commissions plus 10% attorney’s fees. The NLRC affirmed. Insular Life then filed for certiorari and prohibition before the Supreme Court, challenging jurisdiction.
Issue
Whether Basiao was an “employee” (vesting jurisdiction in the Labor Arbiter under Section 217) or an independent contractor (requiring resolution by ordinary civil courts).
Insular Life’s Argument
Contract terms granted Basiao freedom over hours, methods, and places of solicitation; compensation was purely commission-based; no fixed quotas or direct supervision—hallmarks of an independent contractor relationship.
Basiao’s Argument and NLRC’s Position
Invoked the “control test”: Company’s authority to prescribe rules and regulations, process applications, and determine premiums evidenced control akin to employer-employee relations.
Control Test and Its Application
The Court acknowledged that control is a key factor but distinguished between:
• Guidelines aimed at regulatory compliance and desired results (permissible without creating employment)
• Direct control over
Case Syllabus (G.R. No. 84484)
Facts of the Case
- On July 2, 1968, Insular Life Assurance Co., Ltd. (“the Company”) and Melecio T. Basiao executed an agency contract.
- Under this contract, Basiao was authorized to solicit insurance policies and annuities in the Philippines in accordance with the Company’s rules.
- Basiao’s compensation was exclusively in the form of commissions as set out in the contract’s Schedule of Commissions.
- The Company’s Rate Book, Agent’s Manual, and circulars were incorporated by reference into the agreement.
- In April 1972, Basiao entered into a separate Agency Manager’s Contract and formed an office named M. Basiao and Associates while continuing to perform under the 1968 contract.
- In May 1979, the Company terminated the Agency Manager’s Contract; Basiao sought reconsideration and filed a civil action.
- Basiao alleged that, following his civil suit, the Company also terminated his original agency contract and stopped his commissions as of April 1, 1980.
- Basiao filed a complaint with the Ministry of Labor (later docketed as RAB Case No. VI-0010-83) seeking unpaid commissions and attorney’s fees.
Contractual Provisions
- Authorization: Basiao could solicit applications for policies and annuities anywhere in the Philippines, subject to Company rules.
- Compensation: Basiao would earn commissions according to a predefined schedule; no salary or benefits beyond commissions.
- Incorporated Materials: The Company’s Rate Book, Agent’s Manual, and circulars formed part of the contract.
- Relations Clause: The contract expressly disclaimed an employer-employee relationship, recognizing Basiao’s freedom in time, place, and means of solicitation.
- Illegal Practices: Prohibited acts included rebates, misrepresentation, over-selling, and breaches of the Agent’s Manual or Insurance Commissioner circulars.
- Termination: The Company could terminate at will for specified causes without prior notice; either party could terminate with written notice; termination by revocation or non-renewal of Basiao’s certificate of authority was automatic.
- Post-Termination Commissions: Basiao retained no right to renewal commissions after termination except for disability or death in service; first-year premium balances were payable if collected, less collection costs, unl