G.R. No. 80750 -51, July 23, 1990
GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ERNESTO RUIZ and RODRIGO RUIZ, respondents.

FACTS

Brothers Ernesto and Rodrigo Ruiz entered into agency agreements with Grepalife in 1977. Ernesto was later designated as a district manager under a three-year contract. He was dismissed in November 1983 after an audit revealed he had delayed remitting premium collections and had misappropriated funds. Subsequently, Rodrigo was designated as officer-in-charge of the Butuan district. His designation was later recalled, and he was found to have instigated other agents to withhold reports and premium remittances. After warnings, Grepalife terminated Rodrigo’s employment in March 1984.
The Ruiz brothers filed illegal dismissal cases. The labor arbiter found they were Grepalife’s employees, had committed acts inimical to the company’s business, but were dismissed without due process. The arbiter ordered reinstatement without backwages. The NLRC affirmed the findings of employee status and just cause for dismissal but reversed the reinstatement order. However, the NLRC awarded “separation pay” to the brothers as a sanction for Grepalife’s failure to observe procedural due process prior to termination.

ISSUE

The issues were: (1) whether the NLRC gravely abused its discretion in ruling that the Ruiz brothers were employees of Grepalife, and (2) whether the NLRC gravely abused its discretion in awarding separation pay despite a finding of just cause for dismissal.

RULING

The Supreme Court found no grave abuse of discretion on the first issue. Grepalife argued the brothers were independent agents governed by the Civil and Insurance Codes, not the Labor Code. The Court applied the four-fold test for an employer-employee relationship, with the right of control being the most determinative factor. It found that the brothers, as district manager and zone supervisor, performed functions necessary and desirable to Grepalife’s insurance business. They were subject to company control through directives, performance standards, and company policies. The fact that they also performed duties of insurance agents under the Insurance Code did not preclude the existence of an employer-employee relationship for labor law purposes. The factual findings of the NLRC on this matter, supported by substantial evidence, are final.
On the second issue, the Court modified the NLRC’s decision. It agreed that a sanction was warranted for Grepalife’s failure to provide the required written notice and hearing before dismissal, a violation of procedural due process. However, the award termed “separation pay” was incorrect. Following the precedent in Wenphil v. NLRC, the proper sanction for such a procedural lapse, when dismissal is for a just cause, is an indemnity or nominal damages, not separation pay. Consequently, the Court ordered Grepalife to indemnify Ernesto and Rodrigo Ruiz in the amount of One Thousand Pesos (P1,000.00) each, in lieu of the separation pay awarded by the NLRC.