FACTS:

The Calamba Medical Center engaged the services of medical doctors-spouses Ronaldo Lanzanas and Merceditha Lanzanas as part of its team of resident physicians. They were paid a monthly retainer and were also given a percentage share out of fees charged for out-patient treatments, operating room assistance, and discharge billings. The work schedules of the resident physicians were fixed by the medical director of the hospital. Dr. Lanzanas was issued a memorandum and placed under preventive suspension due to a telephone conversation about low patient admission. Dr. Merceditha was not given any work schedule and was informed by the Human Resource Department that it was part of cost-cutting measures. The rank-and-file employees union of the hospital went on strike, and Dr. Lanzanas filed a complaint for illegal suspension. Dr. Merceditha later filed a complaint for illegal dismissal. The labor dispute was certified to the National Labor Relations Commission for compulsory arbitration, and the Secretary of Labor issued a return-to-work order to the striking union officers and employees. The medical director of the hospital subsequently ordered the union members to report for work. Dr. Lanzanas received a notice of termination for failure to report back to work and his supposed role in the striking union. He amended his complaint to include illegal dismissal, and their complaints were consolidated.

The case involves a dispute between petitioner and the spouses-respondents who were hired as resident physicians in petitioner's hospital. The Labor Arbiter ruled in favor of the respondents, finding that they were illegally dismissed. However, the NLRC reversed the decision on appeal, ordering the respondents to be paid their full backwages, separation pay, moral and exemplary damages, and attorney's fees. The petitioner filed a motion for reconsideration, which was denied, prompting it to bring the case to the Court of Appeals. The appellate court initially granted the petition and set aside the NLRC ruling, but upon a motion for reconsideration filed by the respondents, it reinstated the NLRC decision with modifications to the award of damages. The appellate court found that there exists an employer-employee relationship between the parties, and that the petitioner had control over the respondents. The petitioner argued that there was no employer-employee relationship due to the respondents' flexibility in their schedule and their entitlement to a share of fees. The Court, however, was not convinced and proceeded to determine the existence of an employer-employee relationship between the parties.

ISSUES:

1. Whether there exists an employer-employee relationship between petitioner and the spouses-respondents.

2. Whether the dismissal of the respondents was legal.

3. Whether the employees in question are considered supervisory employees and therefore barred from membership in the union of rank and file.

4. Whether the termination of Dr. Lanzanas and Dr. Merceditha was valid and complied with due process.

5. Whether the circulation of the "watchlist" by the petitioner constituted harassment and oppression.

6. Whether the circulation of a "watch out list" containing names of alleged union members constitutes unfair labor practice

7. Whether the complainant is entitled to damages for the besmirching of her reputation and the damage to her personal and professional life

8. Whether the award of attorney's fees should be reinstated

RULING:

1. Yes, there exists an employer-employee relationship between petitioner and the spouses-respondents.

2. • Under the "control test," an employment relationship exists between a physician and a hospital if the hospital controls both the means and the details of the process by which the physician is to accomplish his task.
3. • Private respondents had specific work schedules determined by petitioner, were subject to administrative sanctions for non-compliance, and their work was monitored by petitioner through its nursing supervisors, charge nurses, and orderlies.
4. • The sharing of hospital fees does not sever the employment relationship, as it is merely an additional form of compensation or incentive.
5. • Petitioner issued identification cards, payslips, and BIR W-2 (now 2316) Forms reflecting their employee status, classified their remuneration as "salary," and enrolled them in the SSS and Medicare programs.

6. No, the dismissal of the respondents was illegal.

7. • Respondent Dr. Lanzanas was not a managerial or supervisory employee but part of the rank-and-file.
8. • The Secretary of Labor's resolution stated that there was no evidence to prove that Dr. Lanzanas was a supervisor.
9. • The termination letter indicated Dr. Lanzanas' employment status, contradicting petitioner's argument.

10. The employees in question are not considered supervisory employees and are therefore not barred from membership in the union of rank and file.

11. The termination of Dr. Lanzanas and Dr. Merceditha was not valid and did not comply with due process.

12. The circulation of the "watchlist" by the petitioner constituted harassment and oppression.

13. Yes, the circulation of a "watch out list" containing names of alleged union members constitutes unfair labor practice, giving a right of action for damages by the employees prejudiced.

14. Yes, the complainant is entitled to damages for the besmirching of her reputation and the damage to her personal and professional life.

15. The award of attorney's fees should be reinstated.

PRINCIPLES:

• Under the control test, an employment relationship exists if the employer controls both the means and the details of the employee's work.

• The sharing of additional compensation or incentives does not sever the employment relationship.

• Documentary evidence such as identification cards, payslips, and enrollment in employee programs can prove the existence of an employment relationship.

• The dismissal of an employee must be in accordance with the law and the employee's employment status.

• Mere membership in a labor union does not automatically mean participation in a strike.

• In order for immediate dismissal in a "national interest" case to be justified, participation in a strike and intransigence to a return-to-work order must be duly proved.

• The two requirements of notice and hearing before dismissal constitute essential elements of the statutory process.

• Non-observance of the requirements of notice and hearing runs afoul of procedural mandate.

• Termination of employment without just or authorized cause and without observance of due process is not valid.

• Mere suspicion or belief, no matter how strong, cannot substitute for factual findings carefully established through orderly procedure.

• Circulation of a "watchlist" with the intention to harass and malign an individual is unprofessional and constitutes oppression.

• The circulation of a "watch out list" containing names of alleged union members, intended to prevent employment of workers for union activities, constitutes unfair labor practice.

• Employees prejudiced by the circulation of such a list have a right of action for damages.

• Damages may be awarded for the besmirching of a person's reputation and the damage caused to their personal and professional life.

• Exemplary damages may be awarded in cases where the defendant's act was wanton, oppressive, or done in bad faith.

• The award of attorney's fees is appropriate when exemplary damages are awarded.