LABOR LAW CASES

ASIA PACIFIC CHARTERING (PHILS.) INC. v. MARIA LINDA R. FAROLAN

393 SCRA 454 (2002), THIRD DIVISION (Carpio Morales, J.)

The termination of a managerial employee on the ground of “loss of confidence” should have a basis and the
determination of the same cannot be left entirely to the employer.

FACTS:
Petitioner Asia Pacific Chartering (Phils.) Inc. (Asia) is tasked with the selling of passenger and cargo spaces
for Scandinavian Airlines System. Petitioner Asia, through its Vice President Catalino Bondoc (Bondoc),
offered Respondent Maria Linda R. Farolan (Farolan) the sales manager position to which Farolan accepted.
Upon Vice President Bondoc’s request, Farolan submitted a detailed report attributing the drop of sales
revenue to market forces beyond her control. Consequently, Asia directed Roberto Zozobrado (Zozobrado)
to implement solutions. Zozobrado informally took over Farolan’s marketing and sales responsibilities but
she continued to receive her salary. Asia claims that the increase in sales revenue was due to Zozobrado’s
management.

Asia then sent a letter of termination to Farolan on the ground of ―loss of confidence‖, forcing Farolan to
file a complaint for illegal dismissal. The Labor Arbiter found that the dismissal was illegal for lack of just
cause, however, such decision was reversed by the National Labor Relations Commission (NLRC) stating that
the termination of employment due to loss of confidence is within management prerogative. On appeal, the
Court of Appeals upheld the labor arbiter’s decision. Hence, the filing of this petition.

ISSUE:
Whether Respondent Farolan’s dismissal was illegal. (YES)

HELD:
A statement of the requisites for a valid dismissal of an employee is thus in order, to wit: (a) the employee
must be afforded due process, i.e., he must be given opportunity to be heard and to defend himself; and (b)
dismissal must be for a valid cause.

The manner by which Respondent Farolan was dismissed violated the basic precepts of fairness and due
process - Respondent Farolan was dismissed, without being afforded the opportunity to be heard and to
present evidence in her defense. She was never given a written notice stating the particular acts or omission
constituting the grounds for her dismissal as required by law.

With respect to rank and file personnel, loss of trust and confidence as ground for valid dismissal requires
proof of involvement in the alleged events in question and that mere uncorroborated assertions and
accusations by the employer will not be sufficient. But as regards a managerial employee, mere existence of a
basis for believing that such employee has breached the trust of his employer would suffice for his dismissal.
Loss of trust and confidence to be a valid ground for an employee’s dismissal must be based on a willful
breach and founded on clearly established facts. A breach is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse.

It is not disputed that Farolan’s job description, and the terms and conditions of her employment, with the
exception of her salary and allowances, were never reduced to writing. Even assuming, however, that Farolan
was a managerial employee, the stated ground (in the letter of termination) for her dismissal, ―loss of
confidence, should have a basis and determination thereof cannot be left entirely to the employer.
CALAMBA MEDICAL CENTER v. NATIONAL LABOR RELATIONS COMMISSION,et al.
571 SCRA 585 (2008), SECOND DIVISION (Carpio Morales, J.)

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.

FACTS:
Petitioner Calamba Medical Center (CMC), engaged the services of medical doctors-spouses Ronaldo
Lanzanas (Dr. Ronaldo) and Merceditha Lanzanas (Dr. Merceditha) as part of its team of resident physicians.
They were given, among others, identification cards and work schedules; and were paid a monthly retainer.
They were likewise enrolled in the Social Security System (SSS). Subsequently, CMC’s medical director issued
a Memorandum to Dr. Ronaldo after a resident physician overheard Dr. Ronaldo and a fellow employee
discussing the low admission in the hospital. After the incident involving her husband, Dr. Merceditha was no
longer given any work assignments.

Afterwards, the rank and file employees union of Calamba Medical Center went on a strike. Dr. Ronaldo and
Dr. Merceditha meanwhile filed a complaint for illegal suspension and illegal dismissal, respectively before the
National Labor Relations Commission Regional Arbitration Board (NLRC-RAB). Consequently, the
Department of Labor and Employment (DOLE) issued a return to work order. Dr. Ronaldo, on the other
hand, received a notice of termination indicating his failure to return for work. Dr. Ronaldo thus amended his
complaint to illegal dismissal. The CMC contends that the doctors-spouses are not employees of the same, so
that they cannot be illegally dismissed.

ISSUES:
Whether or not an employee-employer relationship does not exist between Calamba Medical Center and the
doctors-spouses Lanzanas

HELD:
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.

Where a person who works for another does so more or less at his own pleasure and is not subject to definite
hours or conditions of work, and is compensated according to the result of his efforts and not the amount
thereof, the element of control is absent.

As priorly stated, the spouses-doctors maintained specific work-schedules, as determined by petitioner

through its medical director, which consisted of 24-hour shifts totaling forty-eight hours each week and
which were strictly to be observed under pain of administrative sanctions.

That CMC exercised control over spouses-doctors gains light from the undisputed fact that in the emergency
room, the operating room, or any department or ward for that matter, spouses-doctors’ work is monitored
through its nursing supervisors, charge nurses and orderlies. Without the approval or consent of CMC or its
medical director, no operations can be undertaken in those areas. For control test to apply, it is not essential
for the employer to actually supervise the performance of duties of the employee, it being enough that it has
the right to wield the power. With respect to spouses-doctors sharing in some hospital fees, this scheme does
not sever the employment tie between them and CMC as this merely mirrors additional form or another form
of compensation or incentive similar to what commission-based employees receive as contemplated in Article
97 (f) of the Labor Code.

The spouses-doctors were in fact made subject to petitioner-hospital’s Code of Ethics, the provisions of
which cover administrative and disciplinary measures on negligence of duties, personnel conduct and
behavior, and offenses against persons, property and the hospital’s interest.
More importantly, the CMC itself provided incontrovertible proof of the employment status of respondents,
namely, the identification cards it issued them, the payslips and BIR W-2 (now 2316) Forms which reflect
their status as employees, and the classification as ―salary‖ of their remuneration. Moreover, it enrolled
respondents in the SSS and Medicare (Philhealth) program. It bears noting at this juncture that mandatory
coverage under the SSS Law is premised on the existence of an employer-employee relationship,[35] except in
cases of compulsory coverage of the self-employed. It would be preposterous for an employer to report
certain persons as employees and pay their SSS premiums as well as their wages if they are not its employees.
And if the spouses-doctors were not CMC’s employees, how does it account for its issuance of the earlier-
quoted March 7, 1998 memorandum explicitly stating that respondent is ―employed‖ in it and of the
subsequent termination letter indicating Dr. Ronaldo’s employment status.

Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an employer-
employee relationship exists between the resident physicians and the training hospitals, unless there is a
training agreement between them, and the training program is duly accredited or approved by the appropriate
government agency. In the spouses-doctors’ case, they were not undergoing any specialization training. They
were considered non-training general practitioners, assigned at the emergency rooms and ward sections.