GREAT PACIFIC LIFE ASSURANCE CORPORATION, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, ERNESTO RUIZ AND RODRIGO RUIZ, RESPONDENTS.

Brothers Rodrigo and Ernesto Ruiz (private respondents herein)
entered into individual agency agreements with petitioner Grepalife
in 1977, each starting out as trainee-agents and later promoted to higher
positions.  On July 6, 1981, Ernesto was designated as district
manager under a three-year
Agreement of Managership [Annex “A”, Rollo, p. 34.] However, he was dismissed from service on
November 30, 1983, before the lapse of the period fixed in the contract, when
upon audit he was found to have delayed the remittance of premium collections
in his possession and to have appropriated for his own use the sum of Twelve
Thousand Eight Hundred Eighteen Pesos and Seventy-Three Centavos (P12,818.73)
by remitting smaller amounts of premiums than that actually paid by policy
holders.  Grepalife
then designated Rodrigo as officer-in charge to take over the functions of
district manager in the Butuan district effective December 5, 1983, in addition to his
responsibilities then as zone supervisor. 
Unfortunately, Rodrigo proved to be made of the same stuff as his
brother.  After his designation as
officer-in-charge was recalled in January 1984, he instigated the other zone
supervisors and debit agents of the Butuan district
not to submit their weekly reports of business and not to remit the premium
collections.  Rodrigo’s insistent
violation despite warnings from the Vice-President for VisMin
Sales prompted Grepalife to terminate his employment
effective March 5, 1984 in a
letter dated March 8, 1984.  Although the ground for Rodrigo’s dismissal
was not given in said letter, petitioner maintained that it was for
substantially the same infractions committed by Ernesto.

In the consolidated illegal dismissal cases (NLRC RAB X Case Nos.
4-0210-84 and 2-0103-85) filed by the brothers, the labor arbiter found that
Rodrigo and Ernesto:  (1) were employees
of Grepalife; (2) committed acts inimical to Grepalife’s business; and (3) were dismissed without first
being afforded due process by way of a notice in writing of the grounds for their
dismissal.

However, despite such findings, the labor arbiter ordered their
reinstatement without backwages [Rollo,
pp. 51-52.]

Upon appeal, the National Labor Relations Commission (NLRC)
affirmed the factual findings of the labor arbiter but reversed the order of
reinstatement on the ground that Grepalife cannot be
compelled to retain an employee found guilty of acts inimical to its
interest.  Nevertheless, “separation pay”
was awarded in favor of private respondents for petitioner’s failure to observe
due process prior to their termination from employment.  The dispositive
portion of the decision reads:

. . . for failure of respondents [Grepalife
and the branch manager] to give timely notice in writing to complainants of the
acts constituting the grounds for their dismissal pursuant to Section 2, Rule
XIV, of Batas Pambansa Blg.
130, respondent should be ordered to pay complainants Rodrigo Ruiz and Ernesto
Ruiz separation pay, equivalent to one-half month’s salary for
every year of service.

 [NLRC Resolution, p. 5; Rollo, p. 9; Underscoring supplied.]

Hence, the present petition.

The Solicitor General filed its comment on behalf of public
respondent.  Petitioner filed a reply
thereto.  Subsequently, the Court
resolved to give the petition due course and to require the parties to submit
their memoranda.  Petitioner and public
respondent complied and duly submitted their respective memoranda.  On the other hand, private respondents did
not file their comment and memorandum.

The existence of valid grounds for private respondents’ dismissal
is not disputed herein, and therefore the finding that the Ruiz brothers were
dismissed for just cause is final.  The
only issues in this petition are (1) Whether or not there was grave abuse of
discretion on the part of public respondent in holding that Ernesto and Rodrigo
are employees of Grepalife; and (2) Whether or not
there was grave abuse of discretion on the part of public respondent in
ordering the award of separation pay to private respondents as sanction for Grepalife’s failure to accord them due process even though
there was finding of just cause
for their dismissal.

With respect to the first issue, the Court finds no grave abuse
of discretion.

Grepalife contends that Rodrigo and
Ernesto are agents, not employees, of the company by alleging that they
were hired under agency agreements, that they were not among the
company’s “organic personnel” who handled technical and administrative
functions of the company, that they were paid on the basis of production/output
(by way of commissions and bonuses, and not salaries), and that they were
neither under any form of control whatsoever as to hours of work nor were they
“on call” by the company.  On the basis
of the foregoing, Grepalife concluded that the
relationship was one of principal-agent and therefore, necessarily, it is the
Civil Code and the Insurance Code which properly govern the relationship, to
the exclusion of the Labor Code.

This contention is devoid of merit.

Article 280 of the Labor Code provides that “[t]he provisions of
written agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer. . . .”
Furthermore, in determining who is considered an “employee”, the Court has time
and again applied the “four-fold” test,* with control
being the most crucial and determinative indicator of an employer-employee
relationship.  The “employer” must have
control (or must have reserved the right to control) not only over the result
of the “employee’s” work but also the means and methods by which it is to be
accomplished [Investment Planning Corp. of the Philippines
v. SSS, G.R. No. L-19124, November
18, 1967, 21 SCRA 924; Mafinco Trading
Corp. v. Ople, G.R. No. L-37790, March 25, 1976, 70
SCRA 139; Rosario Brothers, Inc. v. Ople, G.R. No.
53590, July 31, 1984, 131 SCRA 72; Brotherhood Labor Unity Movement of the
Philippines v. Zamora, G.R. No. L-48645, January
7, 1987, 147 SCRA 49; Grepalife v. NLRC,
G.R. No. 73887, December 21, 1989.]

Applying the above, the Court finds that, as correctly held by public
respondent, the relationships of the Ruiz brothers and Grepalife
were those of employer-employee.

First, their work at the time of their dismissal as zone
supervisor and district manager are necessary and desirable to the usual
business of the insurance company.  They
were entrusted with supervisory, sales and other functions to guard Grepalife’s business interests and to bring in more clients
to the company, and even with administrative functions to ensure that all
collections, reports and data are faithfully brought to the company.

Furthermore, it cannot be gainsaid that Grepalife
had control over private respondents’ performance as well as the result of
their efforts.  A cursory reading of
their respective functions as enumerated in their contracts reveals that the
company practically dictates the manner by which their jobs are to be carried
out.  For instance, the District Manager
must properly account, record and document the company’s funds, spot-check and
audit the work of the zone supervisors, conserve the company’s business in the
district through “reinstatements”, follow up the submission of weekly
remittance reports of the debit agents and zone supervisors, preserve company
property in good condition, train understudies for the position of district
manager, and maintain his quota of sales (the failure of which is a ground for
termination).  On the other hand, a zone
supervisor must direct and supervise the sales activities of the debit agents
under him, conserve company property through “reinstatements”, undertake and
discharge the functions of absentee debit agents, spot-check the records of
debit agents, and insure proper documentation of sales and collections by the
debit agents.

True, it cannot be denied that based on the definition of an
“insurance agent” in the Insurance Code [Art. 300] some of the functions
performed by private respondents were those of insurance agents.  Nevertheless, it does not follow that they
are not employees of Grepalife.  The Insurance Code may govern the licensing
requirements and other particular duties of insurance agents, but it does not
bar the application of the Labor Code with regard to labor standards and labor
relations.

Moreover, it is well-settled that the existence of an
employer-employee relationship is ultimately a question of fact, and such
findings of fact of the labor arbiter and the NLRC shall be accorded not only
respect but even finality when supported by substantial evidence [RJL Martinez
Fishing Corporation v. NLRC, G.R. Nos. 63550-51, January 31, 1984, 127 SCRA
454; Asim v. Castro, G.R. Nos. 75063-64, June
30, 1988, 163 SCRA 344; Murillo v. Sun Valley Realty, Inc., G.R. No. 67272,
June 30, 1988, 163 SCRA 271,) as in this case.

With respect to the second issue, petitioner argues that private
respondents are not entitled to separation pay since there was clear finding of
just cause for dismissal, and furthermore “neither the law nor the rules
implementing the same authorizes the award of separation pay as ‘penalty’.”
[Petition, p. 8; Rollo, p. 25.]

Again, the contention is devoid of merit.

It must be emphasized that the monetary award fixed by public
respondent, although erroneously termed as “separation pay”, was in fact a sanction for the
employer’s failure to observe the procedural requirements of due process
provided under Rule XIV, Secs. 2, 5 and 6 of the
rules implementing Batas Pambansa Blg.
130, and the parties’ own covenant (Annex “A”, Rollo,
p. 38.] The imposition of such a sanction is in consonance with the ruling in
the case of Wenphil v. NLRC,
[G.R. No. 80587, February 8, 1989,
170 SCRA 69.) The Court held
therein that an indemnity, not “separation pay”, must be imposed on the
employer for failure to observe the procedural requirements of notice and
hearing prior to the dismissal of an employee for just cause.  Considering the circumstances of the case at
bar, petitioner must indemnify private respondents in the amount of One
Thousand Pesos (P1, 000.00) each [See also Shoemart,
Inc. v. NLRC, G.R. No. 74229, August
11, 1989.]

IN VIEW OF THE
FOREGOING, the
decision of the NLRC is hereby MODIFIED insofar
as the award of “separation pay” is concerned. 
In lieu of “separation pay” petitioner Grepalife
is hereby ordered to indemnify private respondents Rodrigo Ruiz and
Ernesto Ruiz the amount of One Thousand Pesos (P1, 000.00) each.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr.,
Feliciano, and Bidin,
JJ., concur.

* The elements of the “four-fold”
test are:

(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 employee’s conduct.