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Insular Life v. NLRC (Nov. 15, 1989)
FACTS:
Insular Life (company) and Basiao entered into a contract by which Basiao was authorized to solicit for insurance in accordance with
the rules of the company. He would also receive compensation, in the form of commissions. The contract also contained the relations
of the parties, duties of the agent and the acts prohibited to him including the modes of termination. After 4 years, the parties
entered into another contract an Agency Manager’s Contact – and to implement this end of it, Basiao organized an agency while
concurrently fulfilling his commitment under the first contract. The company terminated the Agency Manager’s Contract. Basiao sued
the company in a civil action. Thus, the company terminated Basiao’s engagement under the first contract and stopped payment
of his commissions.
ISSUE:
W/N Basiao had become the company’s employee by virtue of the contract, thereby placing his claim for unpaid commissions
HELD:
No. Rules and regulations governing the conduct of the business are provided for in the Insurance Code. These rules merely serve as
guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it. Its aim is only to promote the result, thereby creating no employer-employee relationship. It is usual and expected for
an insurance company to promulgate a set of rules to guide its commission agents in selling its policies which prescribe the
qualifications of persons who may be insured. 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 justifiable be said to establish an employer-
employee relationship between Basiao and the company. The respondents limit themselves to pointing out that Basiao’s contract
with the company bound him observe and conform to such rules.
No showing that such rules were in fact promulgated which effectivelycontrolled or restricted his choice of methods of selling
insurance. Therefore, Basiao was not an employee of the petitioner, but a commission agent, an independent contract whose claim
for unpaid commissions should have been litigated in an ordinary civil action. Wherefore, the complain of Basiao is dismissed.
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO,
respondents.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a
contract
1
by which:
1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in
accordance with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of
the contract to "constitute a part of the consideration of ... (said) agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which
may from time to time be promulgated by it, ..." were made part of said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts
prohibited to him, and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means
of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee
and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and
regulations which the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any
form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts
prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or
on account of ... (explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso
facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should
the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right

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to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause
whatsoever, except when the termination is due to disability or death in line of service. As to commission
corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement,
the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless
the termination is due to a violation of this contract, involving criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be
valid without the prior consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract and to implement
his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling
his commitments under the first contract with the Company.
2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the
Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first
contract and to stop payment of his commissions starting April 1, 1980.
3
Basiao thereafter filed with the then Ministry of Labor a complaint
4
against the Company and its president. Without contesting the
termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an
independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his
contract.
5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an
employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate
his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's
premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the
respondent company ..." plus 10% attorney's fees.
6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission.
7
Hence, the present petition
for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the
contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor
Arbiter under the provisions of Section 217 of the Labor Code,
8
or, contrarily, as the Company would have it, that under said
contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor
case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao,
is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the
master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no
accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of
working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and
was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the
respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to
the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is,
whether or not the party who engages the services of another has the power to control the latter's conduct in rendering such
services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe
and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the
Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of
insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company.
9
It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-
Lagadan
10
... In determining the existence of employer-employee relationship, the following elements are generally
considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control the employees' conduct although the latter is the most important
element (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent.
11
Indeed, it is without question a valid test of the character of a
contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves
to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an
employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare

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Insular Life v. NLRC (Nov. 15, 1989) FACTS: Insular Life (company) and Basiao entered into a contract by which Basiao was authorized to solicit for insurance in accordance with the rules of the company. He would also receive compensation, in the form of commissions. The contract also contained the relations of the parties, duties of the agent and the acts prohibited to him including the modes of termination. After 4 years, the parties entered into another contract – an Agency Manager’s Contact – and to implement this end of it, Basiao organized an agency while concurrently fulfilling his commitment under the first contract. The company terminated the Agency Manager’s Contract. Basiao sued the company in a civil action. Thus, the company terminated Basiao’s engagement under the first contract and stopped payment of his commissions. ISSUE: W/N Basiao had become the company’s employee by virtue of the contract, thereby placing his claim for unpaid commissions HELD: No. Rules and regulations governing the conduct of the business are provided for in the Insurance Code. These rules merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it. Its aim is only to promote the result, thereby creating no employer-employee relationship. It is usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its polici ...
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