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FACTS: On 2 July 1968, Insurance Life Co., Ltd., petitioner (hereinafter simply called

Company), entered into a contract of agency with Melecio T. Basiao, respondent, the terms of

which, to wit:

1. 

That Basiao was authorized to solicit within the Philippines applications for insuranceand annuities policies in accordance to company rules and regulation;

2.  That Basiao, as agent, is free to exercise his own will and judgment as to the time, place,

and means of soliciting insurance, and therefore, is not an employee of the company (no

employee-employer relationship);

3.  That Basiao would receive compensation in the form of commissions based from the

Company’s Schedule of Commissions; 

4.  That the rules in the Company’s Rate Book and Agent’s Manual apply in the contract,

including regulation on company standards of soliciting insurances as well as prohibition

on illegal and unethical practices; and

5.  That the Company may terminate the contract at will without any previous notice to the

agent on account of explicitly specified causes, and that when either party wishes to

terminate the contract, he shall give to the other a written notice to that effect.

Around 4 years later, in April 1972, the parties entered into an Agency Manager’s Contract, and

to implement the contract respondent created an agency, M. Basiao and Associates, all the while

maintaining still his first contract. In May 1979 petitioner terminated the second contract. In

vain, respondent sought appeal from the company, but later sued the Company in a civil action.

Consequently, the Company also terminated the first contract with respondent. The complaint

was about unpaid commissions plus the case’s attorney’s fees, which the respondent filed to the

Ministry of Labor that ruled in favor of respondent on the grounds that the underwriting had

established an employee-employer relationship. The NLRC affirmed this decision. Petitioner

contends that they erred in determining the employee-employer relationship, stipulated in the

contract, and that they have no obligation for unpaid commissions under the terms of the

contract, hence the instant petition.

ISSUE: Whether or not Basiao is an employee of Insular Life.

DECISION: The decision was ruled in favor of petitioners. In order to fully adjudicate this issue,

the elements of what an employee-employer relationship should be clarified, especially on

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control. The control test, as pronounced from the 1956 case if Viana v. Alejo al-Lagadan,

 provides that (A) there is a selection and engagement of employee, (2) there is payment of

wages, (3) there is power of dismissal, and (4) there is power of control on the employees

conduct. Here, petitioner contends that there is a clear distinction between company practice

standards (misconstrued as “control”)  and actual, direct control on the engagement of the

employee with the job. The first only aims to promote a mutually desirable result, while the other

seeks to control the means achieving that result as well as the end result. The first constitutes

only an independent contractor, while the other is an employee. Nuancing to the case, the

respondent is clearly an independent contractor. This is because, while he may regulated in terms

of company standards and regulations, he is still free to exercise his own free will in

implementing the contract, expressly provided “… free to exercise his own judgment as to the

time, place, and manner of soliciting insurance”. Finally, the Labor Arbiter’s decision was wrong

 because it relied on the fact that respondent has been working with the company for 25 years,

which, has no bearing in the determination of an employee-employer relationship. Therefore, the

case is granted to petitioner and ruled against the respondent.