G.R. No. 86693 July 2, 1990
Sancho
COSMOPOLITAN FUNERAL HOMES,
INC., petitioner,
vs.
NOLI MAALAT and NATIONAL LABOR
RELATIONS COMMISSION, respondents.
GUTIERREZ, JR., J.:
FACTS:
1. Sometime in 1962, petitioner Cosmopolitan Funeral
Homes, Inc. engaged the services of private
respondent Noli Maalat as a "supervisor" to handle
the solicitation of mortuary arrangements, sales and
collections. The funeral services which he sold refer
to the taking of the corpse, embalming, casketing,
viewing and delivery. The private respondent was
paid on a commission basis of 3.5% of the amounts
actually collected and remitted.
2. On January 15, 1987, respondent Maalat was
dismissed by the petitioner for commission of the
following violations despite previous warnings:
(a) Understatement of the reported
contract price against the actual
contract price charged to and paid
by the customers;
(b) Misappropriation of funds or
collections by non-remittance of
collections and non-issuance of
Official Receipt;
(c) Charging customers additional
amount and pocketing the same for
the cost of medicines, linen, and
security services without issuing
Official Receipt;
(d) Non-reporting of some
embalming and re-embalming
charges and pocketing the same
and non-issuance of Official
Receipt;
(e) Engaging in tomb making and
inclusion of the price of the tomb in
the package price without prior
knowledge of the customers and
the company. (At p. 16, Records)
3. Maalat filed a complaint for illegal dismissal and
non-payment of commissions.
LA Decision: Labor Arbiter Newton R.
rendered a decision declaring Maalat's dismissal
illegal and ordering the petitioner to pay separation
pay, commission, interests and attorney's fee in the
total amount of P205,571.52.
NLRC Decision: Reversed the Arbiter's action and
rendered a new decision:
Judgment is hereby
rendered declaring the dismissal of
complainant Noli Maalat by
respondent-appellant as justified
and with lawful cause. By way of
equitable relief and in the interest of
social and compassionate justice,
We hereby order and direct
respondent Cosmopolitan Funeral
Homes, Inc. to pay complainant
Maalat his separation pay
equivalent to one-half (1/2%) month
average income for every year of
service to appellant, computed on
his last year of service immediately
preceding his separation from
respondent, subject to allowable
set-offs and deductions of the
counter-claims of respondent
company, after due notice and
hearing.
ISSUE: Whether or not the nature of the work of a
"funeraria" supervisor, whether employee or
commission agent, thus if an employment relationship
existed between the parties.
HELD: Yes Private respondent Maalat is an
employee of petitioner corporation Cosmopolitan
Funeral Homes.
RATIO: In determining whether a person who
performs work for another is the latter's employee or
an independent contractor, the prevailing test is the
"right of control" test. Under this test, 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
manner and means to be used in reaching that end.
The petitioner argues that Maalat was never its
employee for he was only a commission agent whose
work was not subject to its control. Citing Investment
Planning Corporation of the Philippines v. Social
Security System (21 SCRA 924 [1967]), the petitioner
states that the work of its agents approximates that of
an independent contractor since the agent is not
under control by the latter with respect to the means
and methods employed in the performance of the
work, but only as to the results.
The NLRC, after its perusal of the facts and evidence
on record, stated that there exists an employment
relationship between the parties. The petitioner has
failed to overcome this factual finding.
The fact that the petitioner imposed and applied its
rule prohibiting superiors from engaging in other
funeral business which it considered inimical to
company interests proves that it had the right of
control and actually exercised its control over the
private respondent. In other words, Maalat worked
exclusively for the petitioner.
Moreover, the private respondent was prohibited from
engaging in part-time embalming business outside of
the company and a violation thereof was cause for
dismissal. Incurring absences without leave was
likewise subject to disciplinary action: a reprimand for
the first offense, one week suspension for the second
offense, and dismissal for the third offense.
The petitioner admits that these prohibitive rules
bound the private respondent but states that these
rules have no bearing on the means and methods
ordinarily required of a supervisor. The overall picture
is one of employment. The petitioner failed to prove
that the contract with private respondent was but a
mere agency, which indicates that a "supervisor" is
free to accomplish his work on his own terms and
may engage in other means of livelihood.
In Investment Planning Corporation, supra, cited by
the petitioner, the majority of the "commission agents"
are regularly employed elsewhere. Such a
circumstance is absent in Maalat's case. Moreover,
the private respondent's job description states that ". .
. he attends to the needs of the clientele and arranges
the kind of casket and funeral services the customers
would like to avail themselves of" and indicates that
he must always be on the job or at least most of time.
Likewise, the private respondent was not allowed to
issue his own receipts, nor was he allowed to directly
deduct his commission as truly independent salesmen
practice.
Worthy of note too are two other company rules which
provide that "negotiation and making of contract with
customers shall be done inside the office" and
"signing of contract should be made immediately
before the cadaver or deceased is place in the
casket." Said rules belie the petitioner's stand that it
does not have control over the means and methods
by which the work is accomplished. The control test
has been satisfied. (Social Security System v. Court
of Appeals, 156 SCRA 383 [1987])
The finding by the public respondent that the
petitioner has reported private respondent to the
Social Security System as a covered employee adds
strength to the conclusion that Maalat is an employee.
The non-observance of regular office hours does not
sufficiently show that Maalat is a "supervisor on
commission basis" nor does the same indicate that he
is an independent salesman. As a supervisor,
although compensated on commission basis, he is
exempt from the observance of normal hours of work
for his compensation is measured by the number of
sales he makes. He may not have had the usual fixed
time for starting and ending his work as in other types
of employment but he had to spend most of his
working hours at his job. People die at all times of the
day or night.
G.R. No. 145443. March 18, 2005
RAQUEL P. CONSULTA, Petitioner,
vs.
COURT OF APPEALS, PAMANA PHILIPPINES,
INC., RAZUL Z. REQUESTO, and ALETA
TOLENTINO, Respondents.
CARPIO, J.:
FACTS:
Pamana Philippines, Inc. ("Pamana") is engaged in
health care business. Raquel P. Consulta ("Consulta")
was a Managing Associate of Pamana. Consultas
appointment dated 1 December 1987 states:
This appointment is on a non-employer-employee
relationship basis, and shall be in accordance with the
Company Guidelines on Appointment,
Reclassification and Transfer of Sales Associates.
Sometime in 1987, Consulta negotiated with the
Federation of Filipino Civilian Employees Association
("FFCEA") working at the United States Subic Naval
Base for a Health Care Plan for the FFCEA members.
Pamana issued Consulta a Certification4 dated 23
November 1987, as follows:
This certifies that the Emerald Group under Ms.
Raquel P. Consulta, as Managing Consultant, is duly
authorized to negotiate for and in behalf of PAMANA
with the Federation of Filipino Civilian Employees
Association covering all U.S. facilities in the
Philippines, the coverage of FFCEA members under
the Pamana Golden Care Health Plans.
Upon such negotiation and eventual execution of the
contract agreements, entitlements of all benefits due
the Emerald Group in its [sic] entirely including its [sic]
Supervising Consultants and Health Consultants, by
of commissions, over-rides and other package of
benefits is hereby affirmed, obligated and confirmed
as long as the contracts negotiated and executed are
in full force and effect, including any and all renewals
made. And provided further that the herein authorized
consultants remain in active status with the Pamana
Golden Care sales group.5
On 4 March 1988, Pamana and the U.S. Naval
Supply Depot signed the FFCEA account. Consulta,
claiming that Pamana did not pay her commission for
the FFCEA account, filed a complaint for unpaid
wages or commission against Pamana, its President
Razul Z. Requesto ("Requesto"), and its Executive
Vice-President Aleta Tolentino ("Tolentino").
LA and NLRC Decisions:
In a Decision promulgated on 23 June 1993, Labor
Arbiter Alex Arcadio Lopez ruled, as follows:
ACCORDINGLY, respondent is hereby ordered to pay
complainant her unpaid commission to be computed
as against actual transactions between respondent
PAMANA and the contracting Department of U.S.
Naval Supply Depot upon presentation of pertinent
document.
Respondent is further ordered to pay ten (10%)
percent attorneys fees.
Pamana, Requesto and Tolentino ("Pamana et al.")
appealed the Decision of the Labor Arbiter.
In a Resolution7 promulgated on 22 July 1994, the
NLRC dismissed the appeal and affirmed the
Decision of the Labor Arbiter. In its Order
promulgated on 3 October 1994, the NLRC denied
the motion for reconsideration of Pamana et al.
CA Decision:
In its Decision promulgated on 28 April 2000, the
appellate court reversed the NLRC Decision. The
appellate court ruled that Consulta was a commission
agent, not an employee of Pamana. The appellate
court also ruled that Consulta should have litigated
her claim for unpaid commission in an ordinary civil
action.
ISSUES:
1. Whether Consulta was an employee of Pamana.
2. Whether the Labor Arbiter had jurisdiction over
Consultas claim for unpaid commission.
HELD:
1. NO Consulta was an independent agent and not
an employee of Pamana.
2. NO The LA had no jurisdiction over Consultas
unpaid commission.
RATIO:
The Four-Fold Test
In Viaa v. Al-Lagadan,9 the Court first laid down the
four-fold test to determine the existence of an
employer-employee relationship. The four elements of
an employer-employee relationship, which have since
been adopted in subsequent jurisprudence, 10 are (1)
the power to hire; (2) the payment of wages; (3) the
power to dismiss; and (4) the power to control. The
power to control is the most important of the four
elements.
In the present case, the power to control is missing.
Pamana tasked Consulta to organize, develop,
manage, and maintain a sales division, submit a
number of enrollments and revenue attainments in
accordance with company policies and guidelines,
and to recruit, train and direct her Supervising
Associates and Health Consultants.12However, the
manner in which Consulta was to pursue these
activities was not subject to the control of Pamana.
Consulta failed to show that she had to report for work
at definite hours. The amount of time she devoted to
soliciting clients was left entirely to her discretion. The
means and methods of recruiting and training her
sales associates, as well as the development,
management and maintenance of her sales division,
were left to her sound judgment.
Consulta claims that the documents she submitted
show that Pamana had control on the conduct of her
work and the means and methods to accomplish the
work. However, the documents only prove the
absence of the power to control. The Minutes of the
meeting on 31 May 1988 of the Managing Associates
with Fely Whitfield, Vice-President for Sales of
Pamana, reflect the following:
Clearly, the Managing Associates only received
suggestions from Pamana on how to go about their
recruitment and sales activities. They could adopt the
suggestions but the suggestions were not binding on
them. They could adopt other methods that they
deemed more effective.
Further, the Managing Associates had to ask the
Management of Pamana to shoulder half of the
advertisement cost for their recruitment campaign.
They shelled out their own resources to bolster their
recruitment. They shared in the payment of the
salaries of their secretaries. They gave cash
incentives to their sales associates from their own
pocket. These circumstances show that the Managing
Associates were independent contractors, not
employees, of Pamana.
Finally, Pamana paid Consulta not for labor she
performed but only for the results of her
labor.16 Without results, Consultas labor was her own
burden and loss. Her right to compensation, or to
commission, depended on the tangible results of her
work17 - whether she brought in paying recruits.
Consultas appointment paper provides:
Aside from commissions, bonuses and other benefits
that depended solely on actual sales, Pamana did not
pay Consulta any compensation for managing her
sales division, or for recruiting and training her sales
consultants. As a Managing Associate, she was only
entitled to commissions, bonuses and other benefits,
which depended solely on her sales and on the sales
of her group.
The Exclusivity Provision
Consultas appointment had an exclusivity provision.
The appointment provided that Consulta must
represent Pamana on an exclusive basis. She must
not engage directly or indirectly in activities of other
companies that compete with the business of
Pamana. However, the fact that the appointment
required Consulta to solicit business exclusively for
Pamana did not mean that Pamana exercised control
over the means and methods of Consultas work as
the term control is understood in labor
jurisprudence.20 Neither did it make Consulta an
employee of Pamana. Pamana did not prohibit
Consulta from engaging in any other business, or
from being connected with any other company, for as
long as the business or company did not compete
with Pamanas business.
The prohibition applied for one year after the
termination of the contract with Pamana. In one of
their meetings, one of the Managing Associates
reported that he was transferring his sales force and
account from another company to Pamana.21 The
exclusivity provision was a reasonable restriction
designed to prevent similar acts prejudicial to
Pamanas business interest. Article 1306 of the Civil
Code provides that "[t]he contracting parties may
establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs,
public order, or public policy."
Jurisdiction over Claim for Unpaid Commission
There being no employer-employee relationship
between Pamana and Consulta, the Labor Arbiter and
the NLRC had no jurisdiction to entertain and rule on
Consultas money claim.
Article 217 of the Labor Code provides:
ART. 217. Jurisdiction of Labor Arbiters and the
Commission. - (a) Except as otherwise provided
under this Code the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the
case by the parties for decision without extension,
even in the absence of stenographic notes, the
following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement,
those cases that workers may file involving wages,
rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other
forms of damages arising from the employer-
employee relations;
5. Cases arising from any violation of Article 264 of
this Code, including questions involving the legality of
strikes and lockouts; and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations,
including those of persons in domestic or household
service, involving an amount exceeding five thousand
pesos (5,000.00) regardless of whether
accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or
implementation of collective bargaining agreements
and those arising from the interpretation or
enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same
to the grievance machinery and voluntary arbitration
as may be provided in said agreements.
Consulta filed her action under Article 217(a)(6) of the
Labor Code. However, since there was no employer-
employee relationship between Pamana and
Consulta, the Labor Arbiter should have dismissed
Consultas claim for unpaid commission. Consultas
remedy is to file an ordinary civil action to litigate her
claim.
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
MELECIO BASIAO, respondents.
NARVASA, J.:
FACTS: 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 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
LA and NLRC Decision: 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.
ISSUE: Whether, as Basiao asserts, he had become
the Company's employee by virtue of the contract
invoked by him, 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.
HELD: NO Basiao was not an employee of the
petitioner, but a commission agent, an independent
contractor whose claim for unpaid commissions
should have been litigated in an ordinary civil action.
RATIO: 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-Lagadan10
... 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
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 contract of service that
gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his
performance of the engagement.
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."

The Labor Arbiter's decision makes reference to

Basiao's claim of having been connected with the
Company for twenty-five years. Whatever this is
meant to imply, the obvious reply would be that what
is germane here is Basiao's status under the contract
of July 2, 1968, not the length of his relationship with
the Company.