Cases: Loss of Confidence

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What is a Labor Law Case or Labor Jurisprudence? A Labor Law Case or Labor Jurisprudence is a decision/resolution on a labor dispute by the Supreme Court of the Philippines. Per Article 8 of the Civil Code, judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines. 

Table of Contents

1. Confidential employees

In Cruz v. Citytrust Banking Corporation, the confidential employee – a Micro Technical Support Officer – was dismissed after receiving unauthorized commissions and rebates by a supplier for purchases made by his employer. Accordingly, the confidential employee lost the trust and confidence reposed upon him by his employer after he receiving unauthorized commissions and rebates from a supplier.



Cruz v. Citytrust Banking Corporation

G.R. No. 148544, 12 July 2006

There is no dispute that [the employee] is a confidential employee. During his cross-examination, he testified that aside from evaluating and recommending the purchase of Micro Computers, he also supervises the maintenance of computer hardware including the installation of computers for Citytrust in all of its branches nationwide. It is clear from the foregoing that the employee is not an ordinary rank-and-file employee. His job entails the observance of proper company procedures relating to the acquisition, installation and maintenance of computers which, undeniably, are vital to the operations of his employer. Moreover, his functions are not limited to a specific unit of Citytrust but extend to all branches of his employer nationwide. Thus, his job involves a high degree of responsibility requiring a substantial amount of trust and confidence on the part of his employer.

…. A company has the right to dismiss its employees if only as a measure of self-protection. This is all the more true in the case of supervisors or personnel occupying positions of responsibility...


As discussed earlier, there are usually two kinds of employees of subject of loss of trust and confidence: managerial employee and fiduciary-rank-and-file employees. With the Citytrust Banking Corporation case, there is a 3rd kind of employee: confidential employees.

2. Some basis via substantial evidence

Labor Law requires “some basis” to be proven by substantial evidence.

In Cruz v. Citytrust Banking Corporation discussed earlier, the employee attempts to avoid liability claiming that the check vouchers do not show his signature.



Cruz v. Citytrust Banking Corporation

G.R. No. 148544, 12 July 2006

It is true that the check vouchers alone are not sufficient to prove his guilt owing to the fact that his signatures do not appear in any of these vouchers. However, aside from the abovementioned check vouchers, there are other pieces of evidence presented by [the employer] which [the employee] failed to refute and which points to the fact that he received commissions or rebates from [the supplier] MECO. The evidence consists of the following: (1) admission made by [the employee] in his letter, dated August 3, 1993, that he received material considerations from MECO since 1992; (2) certification issued by MECO categorically stating that he was paid commissions totaling P105,192.00; (3) testimonies of Leoncio Araullo, Vice President of [the employer]; and Ma. Lourdes Foronda, Assistant Vice President for Staff Services Division of the Human Resources Department of [the employer], that [the employee] admitted having received the amounts of P1,000.00 and P500.00 from Art Cordero, an officer of MECO, claiming that these amounts are for the boys; (4) statements in the affidavit of Florante del Mundo, auditor at the Internal Audit Department of [the employer] that two of the checks issued by MECO in favor of [the employee] were either encashed by the latter’s common-law-wife or deposited in his account. In addition, the Court agrees with the CA that annotations appearing in the check vouchers issued by MECO such as Payment for the Rebate Given to [the employee] Boy Cruz of Citytrust and Payment for the Sales Rebate Given to [the employee] Boy Cruz of Citytrust are confirmations of the fact that the checks were issued and given specifically by MECO to [the employee] in consideration of his office and services. These pieces of evidence, when taken together, would constitute substantial evidence to prove [the employee’s] guilt; and his failure to satisfactorily explain or rebut them only strengthens [the employer’s] case against him.

Thus, [the employee’s] acceptance of commissions and rebates from MECO, without the knowledge and consent of Citytrust and without said rebates and commissions being reported and turned over to the latter, are acts which can clearly be considered as a willful breach of the trust and confidence reposed by [the employer] upon him....


To avoid illegal dismissal, the employer should remember this rule requiring substantial evidence to prove the basis for loss of trust and confidence.

3. Immateriality of intention

The employee’s intention is immaterial.

The P.J. Lhuillier case clarified that the employee’s intention is immaterial when it comes to missing funds, viz:

“… Also, in Cañeda v. Philippine Airlines, Inc., the Court held that it is immaterial what the respondent’s intent was concerning the missing fund, for the undisputed fact is that cash which she held in trust for the company was missing in her custody. At the very least, she was negligent and failed to meet the degree of care and fidelity demanded of her as cashier. Her excuses and failure to give a satisfactory explanation for the missing cash only gave the petitioners sufficient reason to lose confidence in her… (P.J. Lhuillier, Inc. v. Velayo, G.R. No. 198620, 12 November 2014; Italics supplied)

In Cañeda v. Philippine Airlines, Inc., the employee – a Cashier – was dismissed after an audit showed that his Php250,000.00 petty cash was short of Php34,338.69. Thus:

It is therefore immaterial that [the employee], as he claims, did not misappropriate the funds. The fact remains that there was an undisputed shortage in the petty cash fund entrusted to him. At the very least, [the employee] was negligent. Whatever it was, he failed to meet the degree of fidelity demanded of him. His failure to give a satisfactory explanation for the cash shortage gave PAL sufficient reason to lose confidence in him. His accountability for the missing funds was clear. Indeed, it would be most unfair to require an employer to continue employing as its cashier a person whom it reasonably believes is no longer capable of giving full and wholehearted trustworthiness in the stewardship of company funds.” (Cañeda v. Philippine Airlines, Inc., G.R. No. 152232, 26 February 2007)

The employee’s intention is immaterial considering that this ground is viewed from the perspective of the employer who has already lost the trust and confidence.

4. Restitution

The employee may still be dismissed despite repaying the lost amount.

In Santos v. San Miguel Corporation, the employee – a Finance Director – was dismissed after encashing personal checks at a branch sales office of the employer and thereafter diverting them for personal gain.

Indeed, we find substantial ground for [the employer’s] loss of confidence in [the employee]. She does not deny encashing her personal checks at [the employer’s] sales offices and diverting for her own private use [the employer’s] resources. The audit investigation accounted for all the checks she encashed, some of which were dishonored for insufficiency of funds. The Investigating Panel concluded that [the employee] not only encashed her personal checks at [the employer’s] sales offices, but also used company funds to temporarily satisfy her insufficient accounts. This Court has held that misappropriation of company funds, although the shortages had been fully restituted, is a valid ground to terminate the services of an employee of the company for loss of trust and confidence. (Santos v. San Miguel Corporation, G.R. No. 149416, 14 March 2003)

That the theft or misappropriation having been already committed by the employee, the employer cannot reasonably be expected to continue giving trust and confidence. Hence, even if repayment is done, there is no guarantee that the employee will not repeat the same incident again.

5. Criminal case

The result of a criminal case does not affect the employer’s administrative investigation.

In Cañeda v. Philippine Airlines, Inc., the employee – a Cashier – was dismissed and thereafter charged with the criminal case for estafa and falsification for the missing Php34,338.69 petty cash entrusted to him. When the cases were dismissed, the employee claimed that his administrative liability was likewise extinguished.

The dismissal of the criminal complaint by the prosecutor’s office could not have automatically negated loss of confidence as a basis for administrative liability. It was enough that [the employer] had a reasonable ground to believe that [the employee] was responsible for the shortage and that he was unworthy of the trust and confidence in him. This was so because, in holding a position requiring full trust and confidence, he gave up some of the rigid guarantees available to ordinary employees. Infractions which, if committed by others, might be overlooked or condoned may be penalized with a more severe disciplinary action precisely because of the special trust and confidence given the employee. A company’s resort to self-defense, in the form of termination, would then be more easily justified.” (Cañeda v. Philippine Airlines, Inc., G.R. No. 152232, 26 February 2007)

By way of reminder, the above rule applies to other just causes as well. Conviction, acquittal, dropping of a criminal charge do not necessarily invalidate the dismissal of an employee. The main difference is that a criminal case requires a higher degree of proof: beyond reasonable doubt. On the other hand, a labor case simply requires substantial evidence.

6. Failure to reach quota

The failure to reach quota does not amount to a breach of trust.



Norkis Distributors, Inc. v. Buat

G.R. No. 185255, 14 March 2012

[The employee – a Branch Manager – was dismissed for failure to reach his monthly sales quota of motorcycles, among others.]

To our mind, the failure to reach the monthly sales quota cannot be considered an intentional and unjustified act of respondent amounting to a willful breach of trust on his part that would call for his termination based on loss of confidence. This is simply not the willful breach of trust and confidence contemplated in Article [296] (c) of the Labor Code. Indeed, the low sales performance could be attributed to several factors which are beyond respondent’s control. To be a valid ground for an employee’s dismissal, loss of trust and confidence must be based on a willful breach. To repeat, a breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse.


However, this can be a ground for gross inefficiency as an analogous cause to gross and habitual negligence. (See chapter on analogous cause.)

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