Facts:

In the case at hand, Calamba Medical Center, Inc. (petitioner) faces off against Ronaldo Lanzanas and Merceditha Lanzanas (respondents). Both respondents were engaged as resident physicians at the Calamba Medical Center; Dr. Ronaldo Lanzanas began his employment in March 1992, while Dr. Merceditha Lanzanas was hired in August 1995. Their roles involved working two days a week on 24-hour shifts with a monthly retainer of PHP 4,800.00 each. The respondents were entitled to additional income through a percentage of fees for outpatient treatments, operating room assistance, and discharge billings. Their work schedules were fixed by the medical director of the hospital, Dr. Raul Desipeda, and they were issued identification cards, enrolled in the Social Security System (SSS), and had income taxes withheld from their pay.

On March 7, 1998, Dr. Meluz Trinidad, another physician at the hospital, overheard a conversation between Dr. Lanzanas and another employee, which led to serious all

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Facts:

Parties and Employment Arrangement

• Calamba Medical Center, Inc. (petitioner), a privately owned hospital, engaged resident physicians including Dr. Ronaldo Lanzanas and Dr. Merceditha Lanzanas (respondents) as part of its team.
• The resident physicians reported to the hospital twice a week for twenty‐four hour shifts and received a fixed monthly “retainer” of P4,800.00 each, in addition to a share of fees from outpatient treatments, operating room assistance, and discharge billings.
• Their work schedules were fixed by the hospital’s Medical Director, Dr. Raul Desipeda.
• Additional evidence of their employee status included the issuance of identification cards, enrollment in the Social Security System (SSS), and the withholding of income taxes.

The Incident Leading to Dispute

• On March 7, 1998, Dr. Meluz Trinidad, also a resident physician, inadvertently overheard a telephone conversation between respondent Dr. Lanzanas and an employee, Diosdado Miscala, regarding the hospital’s low patient census.
• Acting on this information, Dr. Desipeda issued a memorandum to Dr. Lanzanas on the same day, warning him of “inimical acts” against the hospital and imposing a 30-day preventive suspension pending an investigation.
• Dr. Merceditha, although not involved in the incident, was subsequently deprived of her work schedule without explanation; she was later informed by the Human Resource Department that this was part of the hospital’s cost-cutting measures.

Developments in the Labor Dispute

• In response to the memorandum, Dr. Lanzanas submitted a letter on March 9, 1998, acknowledging that he had spoken with Miscala but contending that his conversation was taken out of context.
• On March 14, 1998, the rank-and-file employees of the hospital went on strike over unresolved grievances regarding employment conditions.
• On March 20, 1998, Dr. Lanzanas filed a complaint before the NLRC-Regional Arbitration Board (RAB) IV for illegal suspension, and Dr. Merceditha subsequently filed a complaint for illegal dismissal.

Certification and Subsequent Orders

• The Department of Labor and Employment (DOLE), through then Secretary Cresenciano Trajano, certified the labor dispute to the NLRC and issued a return-to-work order on April 21, 1998, directed at union officers and employees pending resolution of the dispute.
• On April 22, 1998, Dr. Desipeda issued a memorandum echoing the DOLE order, instructing union officers and members to report for work “as soon as possible,” except those already terminated or under disciplinary investigation.

Termination of Employment

• On April 25, 1998, petitioner sent Dr. Lanzanas a termination notice citing his failure to report for work after the DOLE order and alleging his involvement in union activities despite his managerial-like functions.
• The grounds for termination included observed non-compliance with work schedules, alleged unauthorized participation in union activities, and a reference to an order that forbade union involvement among employees with certain supervisory functions.
• Petitioner’s justification extended to its claim that Dr. Merceditha’s dismissal was premised solely on the presumption of her sympathies with her husband, which was not supported by any valid cause.

Proceedings and Decisions Prior to the Supreme Court

• The complaints of the spouses were consolidated and docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.
• On March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the complaints for lack of jurisdiction, asserting the absence of an employer-employee relationship as determined by the “control test.”
• The NLRC, on May 3, 2002, reversed the Labor Arbiter’s decision and ordered petitioner to pay backwages, separation pay (computed at one month’s salary for every year of service), and awarded moral and exemplary damages.
• Petitioner filed a motion for reconsideration, and the case was brought to the Court of Appeals on certiorari.
• The Court of Appeals initially set aside the NLRC ruling on June 30, 2004, but later, upon a subsequent motion for reconsideration by the respondents, reinstated an amended decision on September 26, 2006, reducing the amounts for moral and exemplary damages and omitting the award of attorney’s fees initially.

Core Factual Determinations

• The existence of an employer-employee relationship was established on the basis of:
• The direct control exercised by the petitioner through fixed work schedules and the supervision by its Medical Director.
• The issuance of hospital identification cards, payslips, tax withholding, and enrollment in the SSS and other statutory benefits.
• The dismissal of Dr. Lanzanas and Dr. Merceditha was challenged on procedural grounds (lack of due process involving notice and hearing) as well as substantive grounds.
• Additional practices, such as the circulation of a “watch list” allegedly designed to bar the dismissed employees from future employment, compounded the dispute by raising issues of unfair labor practice and damage to reputation.

Issue:

• Whether there exists an employer-employee relationship between Calamba Medical Center and the resident physicians, particularly in view of the “control test” and other evidences of employment.
• Whether the dismissals of Dr. Ronaldo Lanzanas and Dr. Merceditha were justified, taking into account both substantiated and unsubstantiated grounds, including alleged participation in union activities and disbelief in their own job roles.
• Whether the contested dismissals were carried out in strict compliance with due process requirements, specifically the obligation to provide notice and an opportunity to be heard before termination.
• Whether the petitioner’s actions—ranging from the imposition of preventive suspension and subsequent termination based on alleged union activities, to the circulation of a “watch list”—amounted to unfair labor practice under prevailing labor laws.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)