Benchmark Labor Standards Cases in the Last 5 Years: Atty. Cesario A. Azucena

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A Lecture by
C.A. Azucena
PMAP National Conference
Cebu City, October 13 to 15, 2010

Taylor and Stern in their book “The Trouble with
HR” (2009, pp. 178-180) insist that the HR
manager must get involved in his organization’s
business strategy and objectives. When HR
gains the trust of the business and the
employees, suddenly it’s as if they can’t do
without HR. The two words that establish HR as
an integral part of an organization are credibility
and relationship.

Professors Kossek and Block of the universally
respected School of Labor and Industrial
Relations of the Michigan State University
enumerate eleven (11) contemporary leading
HRM issues. Three of them that concern us
today are:
Outsourcing of many functions including HRM
Lessened job security and increasing use of temporary
or contingent workers
Continuous demand for high performance

In the 2010 edition of “Principles of Human Resource
Management, “Arnell and Bohlander observe:
Companies today are facing sharply rising costs,
including higher product transportation costs and
skyrocketing employee health care costs. As a result,
many firms are under extreme pressure to improve their
productivity in order to maximize their efficiency and
keep their prices competitive. Like other functional
department managers, human resources managers
are under pressure to show top managers the
“bottomline” financial results their departments are
achieving. Labor costs are one of the largest
expenditures of any organization, particularly in service
and knowledge intensive companies. Organizations are
taking many approaches to lowering labor-related costs.
In addition to shifting some of the rising costs of
health care back on to employees, firms are also
downsizing, outsourcing, offshoring, and engaging
in employee leasing in an attempt to enhance
productivity. Each of these efforts has a big impact on
HR policies and practices.

Over the past twenty-five years, the employment
relationship between companies and employees has
shifted from relationship-based to transaction-based.
Outsourcing is evidence of this trend. Outsourcing
simply means hiring someone outside the company to
perform business processes that could be done within a
firm. Companies hire accounting firms to take care of
their financial services. They hire advertising firms to
handle promotions, software firms to develop data-
processing, and payroll are often outsourced in order to
increase the organization’s flexibility and lower its
overhead costs. Some management experts predict
companies will one day strip away every function not
regarded as crucial. Even now, many firms are
outsourcing what would seem to be their core functions.

B. Twin Issues: Whenever and wherever the issue
of outsourcing arises, there arises too the
question of employer-employee relationship.
They are inseparable sides of the same coin but
they negate each other. A worker is either an
employee or a non-employee, perhaps a
contractor. The effect is crucial: the worker is
either covered by the Labor Code or he is not.
Either he has the rights to minimum labor
standards, to join a union, or to security of
tenure. He has none of these if he is a

The rules to navigate the waters
between employment and contractorship
are neither clear nor certain. They are
rather confusing and mutable and this can
be seen from the Supreme Court
decisions themselves. Figuratively, it can
modify or reverse today what it said
yesterday, not because the law changes
abruptly but because the particular facts of
cases do differ. Different facts lead to
different conclusions.

Tongko vs Manufacturers Life Insurance,
June 29, 2010, per Justice Brion; En Banc
On November 7, 2008, the court decided this case by
ruling that the insurance agents (a group of about 41
thousand people) are employees of Manulife mainly
because: (1) Manulife had control over Tongko’s manner
and means of doing his work as an agent, as evidenced
by a letter from the CEO containing comments and
criticisms on how the agent carried out his functions as
Regional Sales Manager; and (2) the agent has to
observe different codes of conduct such as the Agent’s
Code of Conduct, the Financial Code of Conduct, the
Manulife Code of Conduct Agreement.

This decision of 2008 was written by Justice
Velasco with the concurrence of Justice Carpio-
Morales and Brion. But Justice Quisumbing,
joined in by Justice Tinga, dissented.
Reiterating the absence of employer-
employee relationship with the agents, Manulife
moved for reconsideration. The whole court
entertained the motion, then came up with this
NEW DECISION that those agents are not
employees. The decision in effect adopted the
dissenting opinion of Justice Quisumbing. This
time the Court, thru Justice Brion, declares that
Tongko and his agents are not Manulife
employees for three reasons:

In brief, the factual reason is grounded on
the lack of evidentiary support of the conclusion
that Manulife exercised control over Tongko in
the sense understood in the Labor Code. The
legal reason, partly based on the lack of factual
basis, is the erroneous legal conclusion that
Manuilfe controlled Tongko and was thus its
employee. The practical reason, on the other
hand, is the havoc that the dissents (by Justices
Carpio-Morales and Velasco) unwarranted
conclusion would cause the insurance industry
that, by the law’s own design, operated along
the lines of principal-agent relationship in the
sale of insurance.