AN insurance agent is not an employee of an insurance company. While there may be some traits in the relationship between the agent and the insurance company that might appear to reflect an employer-employee relationship, the Supreme Court (SC) held in Tongko v The Manufacturers Life Insurance Co. (Phils.) Inc. (Manulife) (Resolution, GR 167622, January 25, 2011) that “there are built-in elements of control specific to an insurance agency [that] do not amount to the elements of control that characterize an employment relationship governed by the Labor Code.”
“The Insurance Code provides definite parameters in the way an agent negotiates for the sale of the company’s products, his collection activities and his delivery of the insurance contract or policy. In addition, the Civil Code defines an agent as a person who binds himself to do something on behalf of another, with the consent or authority of the latter,” the SC said.
“Article 1887 of the Civil Code also provides that, in the execution of the agency, the agent shall act in accordance with the instructions of the principal. x x x All these, read without any clear understanding of fine legal distinctions, appear to speak of control by the insurance company over its agents. They are, however, controls aimed only at specific results in undertaking an insurance agency, and are, in fact, parameters set by law in defining an insurance agency and the attendant duties and responsibilities an insurance agent must observe and undertake. They do not reach the level of control into the means and manner of doing an assigned task that invariably characterizes an employment relationship, as defined by labor law. From this perspective, the petitioner’s contentions cannot prevail,” it added.
Moreover, “Manulife’s instructions regarding the objectives and sales targets, in connection with the training and engagement of other agents, are among the directives that the principal may impose on the agent to achieve the assigned tasks. They are targeted results that Manulife wishes to attain through its agents. Manulife’s codes of conduct, likewise, do not necessarily intrude into the insurance agents’ means and manner of conducting their sales. Codes of conduct are norms or standards of behavior, rather than employer directives into how specific tasks are to be done. These codes, as well as insurance-industry rules and regulations, are not, per se, indicative of labor-law control under our jurisprudence,” the High Court said.
“The duties that the petitioner enumerated in his motion are not supported by evidence and, therefore, deserve scant consideration. Even assuming their existence, however, they mostly pertain to the duties of an insurance agent, such as remitting insurance fees to Manulife, delivering policies to the insured, and after-sale services. For agents leading other agents, these include the task of overseeing other insurance agents, the recruitment of other insurance agents engaged by Manulife as principal and ensuring that these other agents comply with the paperwork necessary in selling insurance. That Manulife exercises the power to assign and remove agents under the petitioner’s supervision is in keeping with its role as a principal in an agency relationship; they are Manulife agents in the same manner that the petitioner had, all along, been a Manulife agent,” it added.
Allowing an agent to supervise other agents and granting him managerial titles should not also be used as an indication of employment. Thus, the SC also said: “Manulife permitted him to exercise guiding authority over other agents who operate under their own agency agreements with Manulife and whose commissions he shared. Under this scheme—an arrangement that pervades the insurance industry—[the] petitioner, in effect, became a ‘lead agent’ and his own commissions increased as they included his share in the commissions of the other agents; he also received greater reimbursements for expenses and was allowed to use Manulife’s facilities.”
“His designation also changed from unit manager to branch manager, and then to regional sales manager, to reflect the increase in the number of agents he recruited and guided, as well as the increase in the area where these agents operated. x x x As our assailed resolution concluded and as we now similarly conclude, these arrangements, and the titles and positions the petitioner was invested with, did not change his status from the insurance agent that he had always been [as evidenced by the agreement that governed his relationship with Manulife from the start to its disagreeable end]. The petitioner simply progressed from his individual agency to being a lead agent who could use other agents in selling insurance and share in the earnings of these other agents,” it added.
Tongko took the effort to distinguish it from other cases, in which there were findings of an employer-employee relationship over purported insurance agents. In Great Pacific Life Assurance Corp. v National Labor Relations Commission (NLRC) (187 Supreme Court Reports Annotated 694) and Insular Life Assurance Co. Ltd. v NLRC (350 Phil. 918 [1998]), there were findings of an employer-employee relationship, since “the cited cases all dealt with the proper legal characterization of subsequent management contracts that superseded the original agency contract between the insurance company and the agent.”
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Atty. Dennis B. Funa is the Insurance Commission’s deputy commissioner for legal services. Send comments to dennisfuna@yahoo.com.