1. Concept

Loss of confidence applies to specific employees only.

The ground of loss of confidence refers to “a condition arising from fraud or willful breach of trust by employee of the trust reposed in him/her by his/her employer or his/her duly authorized representative. There are two (2) classes of positions of trust. The first class consists of managerial employees, or those vested with the power to lay down management policies; and the second class consists of cashiers, auditors, property custodians or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of money or property.” (Section 4 (n), Rule I-A, DOLE D.O. No. 2015-147)

Unlike the other just causes which applies to all kinds of employees, the ground of loss confidence only applies to the following two specific employees which holds position of trust:

1) Managerial employees; and,

2) Fiduciary rank-and-file employees.

The common trait of the classes of employees are that they enjoy and hold a position of trust and confidence. Accordingly, the loss of such trust and confidence could result in a just cause for termination.

•••

CASE STUDY

Mabeza v. Peter Ng/Hotel Supreme

G.R. No. 118506, 18 April 1997

[The employee was dismissed for allegedly stealing supplies from the hotel.]

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of the constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally apply only to cases involving employees occupying positions of trust and confidence or to those situations where the employee is routinely charged with the care and custody of the employer’s money or property. To the first class belong managerial employees, i.e., those vested with the powers or prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions; and to the second class belong cashiers, auditors, property custodians, etc., or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of money or property. Evidently, an ordinary chambermaid who has to sign out for linen and other hotel property from the property custodian each day and who has to account for each and every towel or bedsheet utilized by the hotel’s guests at the end of her shift would not fall under any of these two classes of employees for which loss of confidence, if ably supported by evidence, would normally apply…

x x x

In the case at bar, the suspicious delay in [the employer’s] filing of qualified theft charges against [the employee] long after the latter exposed the hotel’s scheme (to avoid its obligations as employer under the Labor Code) by her act of filing illegal dismissal charges against the [the employer] would hardly warrant serious consideration of loss of confidence as a valid ground for dismissal. Notably, the Solicitor General has himself taken a position opposite the [NLRC] and has observed that:

If [the employee] had really committed the acts charged against her by [the employer] (stealing supplies of respondent hotel), [the employer] should have confronted her before dismissing her on that ground. [The employer] did not do so. In fact, [the employer] Ng did not raise the matter when [the employee] went to see him on May 9, 1991, and handed him her application for leave. It took [the employer] 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against [the employee], in an obvious attempt to build a case against her.

The manipulations of [the employers] should not be countenanced.

Clearly, the efforts to justify [the employee’s] dismissal — on top of the [the employer’s] scheme of inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code — taints with evident bad faith and deliberate malice [the employee’s] summary termination from employment.

•••

In practice, the determination of whether there is a loss of confidence of the above-mentioned employees is very discretionary on the employer. Consequently, next to serious misconduct and willful disobedience, the ground of loss of confidence is often used and cited as a just cause for termination of employment.

The Supreme Court elaborated more on this in the case of Wesleyan University Philippines v. Reyes – particularly on the requirement of proof. Thus:

•••

CASE STUDY

Wesleyan University Philippines v. Reyes

G.R. No. 208321, 30 July 2014

In Lima Land, Inc. v. Cuevas, We discussed the difference between the criteria for determining the validity of invoking loss of trust and confidence as a ground for terminating a managerial employee on the one hand and a rank-and-file employee on the other. In the said case, We held that 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 would not suffice. With respect to a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. The following excerpts from Lima Land are instructive:

As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just cause for termination of employment, is premised on the fact that an employee concerned holds a position where greater trust is placed by management and from whom greater fidelity to duty is correspondingly expected. This includes managerial personnel entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer’s property. The betrayal of this trust is the essence of the offense for which an employee is penalized.

It must be noted, however, that in a plethora of cases, this Court has distinguished the treatment of managerial employees from that of rank-and-file personnel, insofar as the application of the doctrine of loss of trust and confidence is concerned. Thus, 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, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded of his position.

On the other hand, loss of trust and confidence as a ground of dismissal has never been intended to afford an occasion for abuse because of its subjective nature. It should not be used as a subterfuge for causes which are illegal, improper, and unjustified. It must be genuine, not a mere afterthought intended to justify an earlier action taken in bad faith. Let it not be forgotten that what is at stake is the means of livelihood, the name, and the reputation of the employee. To countenance an arbitrary exercise of that prerogative is to negate the employee’s constitutional right to security of tenure. (Emphasis supplied.)

•••

As such, given its inherent nature of being tiled in favor of the employer, labor law places stricter qualifications and standards to be followed for the ground of loss confidence to be valid. At the slightest hint that the employer gravely abused its discretion by claiming that it had “lost confidence” in an employee without any basis, courts tend rule in favor of the employee and holding the employer liable for illegal dismissal.

Evidently, employers should take extra precaution before using this ground for termination. As with any other just cause, there should be sufficient documentation to establish the acts or omissions of the employee to serve as basis for the loss of trust and confidence.

2. Standards

DOLE D.O. 147-15 provides for the standards.

To be a valid ground for termination, the following must be present:

1) There must be an act, omission or concealment;

2) The act, omission or concealment justifies the loss of trust and confidence of the employer to the employee;

3) The employee concerned must be holding a position of trust and confidence;

4) The loss of trust and confidence should not be simulated;

5) It should not be used as a subterfuge for causes which are improper, illegal, or unjustified; and

6) It must be genuine and not a mere afterthought to justify an earlier action taken in bad faith.

The following discusses each requirement.

a. Act, omission, concealment

1st Requisite: There must be an act, omission or concealment

The first requirement refers to a behavior or conduct. An act is the doing of an action, while an omission is the failure to do an action. Meanwhile, concealment is the active withholding and non-disclosure of a material information resulting in the prejudice of the employer.

•••

CASE STUDY

Equitable Banking Corporation v. Sadac

G.R. No. 102467, 13 June 1997

[The employer’s] stated loss of trust and confidence on [the employee who was the Vice President for the Legal Department] was spawned by the complaints leveled against him by the lawyers in his department. The letter-complaint signed by the nine lawyers read:

June 26, 1989

Mr. Manuel x x x

Chairman, Board of Directors

Equitable Banking Corporation

S i r:

With utmost respect, we have taken the liberty of seeking your intercession on the problems besetting the Legal Department.

For a long time, we have kept silent, containing within us the abusive conduct and inefficiency of our department head, [Atty. Sadac], if only to preserve cohesion among us. But we have reached the breaking point where we could endure no more except to speak out. We realize the gravity of our action and its possible repercussions but we only have ourselves to blame if we remained silent.

[Atty. Sadac’s] insults to the lawyers which are totally uncalled for and made even in the presence of clients are simply too much for a fellow lawyer. His outburst of temper on inconsequential matters have now become commonplace in the department. His mismanagement, ineffectiveness as a head and indecisiveness on basic legal questions have adversely affected the smooth operation of the department and the output of the lawyers. He berates rather than inspires, delays rather than facilitates. Each lawyer’s complaint are (sic) attached hereto attached (sic) as Annexes “A”, “A-1” to “A-8”.

At present, we are disgruntled on how he runs the department and our morale is at its ebb. While our only desire is to work under an auspicious environment and under an effective head, we could not do so because of the General Counsel.

We, therefore, respectfully pray for an immediate change in the department leadership in order to pave the way for a more effective system, a new image for the department, and restore professionalism and the dignity of the lawyers.

Please accept our assurances that the interest of the bank is primordial to us as we pledge our total commitment and unflinching loyalty to this institution.

Thank you.

Concededly, a wide latitude of discretion is given an employer in terminating the employment of managerial employees on the ground of breach of trust and confidence. In order to constitute a “just cause” for dismissal, however, the act complained of must be related to the performance of the duties of the employee such as would show him to be thereby unfit to continue working for the employer. Here, the grievances of the lawyers, in main, refer to what are perceived to be certain objectionable character traits of [the employee]. Although [the employers] have charged [the employee] with allegedly mishandling two cases in his long service with the bank, it is quite apparent that [the employee] would not have been asked to resign had it not been for the letter-complaint of his associates in the Legal Department.

•••

It should be noted that “proof beyond reasonable doubt is not required to terminate an employee on the charge of loss of confidence and that it is sufficient that there is some basis for such loss of confidence is not absolute.” While it is the right of an employer to dismiss the employee on the ground of loss of trust and confidence, such right “must not be exercised arbitrarily and without just cause. For loss of trust and confidence to be a valid ground for an employee’s dismissal, it must be substantial and not arbitrary, and must be founded on clearly established facts sufficient to warrant the employee’s separation from work.” (Labor v. Gold City Commercial Complex, Inc., G.R. No. 110388, 14 September 1995)

In Labor v. Gold City Commercial Complex, Inc., the employees were dismissed for dishonesty, among others, for supposedly depriving the employer of Php216,000.00 per year. However, the employers were not able to prove such dishonesty and thus were held liable for illegal dismissal.

•••

CASE STUDY

Labor v. Gold City Commercial Complex, Inc.

G.R. No. 110388, 14 September 1995

Unfortunately for Gold City, the evidence it adduced is insubstantial, inadequate, and unreliable to support a conclusion that the [employees] are even remotely guilty of the acts they are accused of committing. On this matter, we agree with the observations and conclusions of the Office of the Solicitor General which we quote with approval, to wit:

Indeed, an examination of the affidavits would reveal that the alleged offenses complained of and through which [the employer] Gold City sustained losses estimated at P216,000.00 are couched in general terms and do not specifically mention the individual participation of each of the [employees] in the alleged losses. For instance, in the affidavit… of Lee Manuela Suelto, the following will be noted:

(i) allegedly the order slip marked “Mrs. Ima V” was missing but it does [not] mention who is responsible for it;

(ii) allegedly petitioner Visabella or Arnold Veloso did not remit the amount of P60.00 collected by Visabella from a customer but goes on to conclude that both of them pocketed the amount;

(iii) allegedly the amount paid by a customer for several bottles of beer and soft drinks to petitioner Visabella was turned over to Veloso but concludes that both of them pocketed it;

(iv) allegedly petitioner Visabella crumpled and threw away an order slip he made out for four (4) bottles of beer and four (4) soft drinks after receiving payment from the said order but does not indicate if he appropriated the same;

(v) allegedly petitioner Gabut admitted to affiant that he and Arnold Veloso made some money on an order slip for draft beer and the former would give the latter part of the money, if he was inclined to do so since they were at odds at that time. The admission, however, is hearsay and inadmissible against [employee] Gabut.

On the other hand, the affidavits of Mary Grace Verano, Ellen de Guzman and Renato Dalugdog… are pro forma and, except for the different dates of the incidents mentioned therein, invariably show that [the employees], on three separate occasions from June to August, 1991, failed to remit the money collected by them allegedly remitted stubs of entrance tickets which entitled customers to free drinks.

If it is true that [the employees] were cheating their employer in the manner described in the affidavits of private respondents’ witnesses, how come that they, who held the position of confidence as cashiers, tolerated the practice from June 1991 and blew the whistle only after petitioners filed a complaint of underpayment of wages in August 19, 1991? As pointed out by the investigating prosecutor, the affiants should have reported the irregularities a day after each offense.

The same may be said of the affidavit… of Joenel de Mesa and the affidavit of Percy Hangad (Annex “B” of Annex “D”, Petition), both of which substantiate the alleged modus operandi of [the employees]. The alleged offenses happened in June, 1991 and they came with a clean breath of it only on August 20 and 23, 1991. Moreover, establishing the mode by which [the employees] allegedly cheated [the employer] Gold City does not necessarily prove their complicity.

It is [the employer’s] posture that great weight should be given to the affidavit of Joenel de Mesa, a mere customer whose only alleged desire is to protect the public similarly situated with him. However, de Mesa charges only Visabella of using his (Mesa’s) entrance ticket stub deprive private respondents of P60.00. The same could not be imputed to his [co-petitioners/employees].

Although the employer’s evidence is not required to be of such degree as is required in criminal cases, i.e., proof beyond reasonable doubt, such must be substantial. The same must clearly and convincingly establish the facts upon which loss of confidence in the employer may be made to rest…

In the instant case, [the employers] have not clearly and convincingly shown by substantial evidence the individual participation of each of the [employees] in depriving their employer of the estimated amount of P216,000.00 per year…

x x x

In the words of the Labor Arbiter, the alleged commission of acts of dishonesty had no leg to stand on. They are but prevarications in reprisal to the complaint filed by [the employees] with the DOLE.

•••

Proof is thus required.

There should be a basis for the loss of trust and confidence. Without such evidence, the employer could lose to an illegal dismissal case where employees dismissed based on this ground challenge their termination.

b. Justifies loss of trust and confidence

2nd Requisite: The act, omission or concealment justifies the loss of trust and confidence of the employer to the employee.

An act can result in the loss of trust and confidence of the employer. For instance, an operations manager who keeps purchasing from a supplier charging triple the usual price when there are known alternative options to receive kickbacks – committed an act prejudicial to the interest of the company. The employer is thus justified in losing trust and confidence on the manager.

•••

CASE STUDY

Gargoles v. Del Rosario

G.R. No. 158583, 10 September 2014

[An all around-employee working as cashier, sales clerk, photocopier, janitress -was valid dismissed after she falsified reports to enrich herself.]

An act of dishonesty by an employee who has been put in charge of the employer’s money and property amounts to breach of the trust reposed by the employer, and normally leads to loss of confidence in her. Such dishonesty comes within the just and valid causes for the termination of her employment under Article [296] of the Labor Code.

x x x

The dishonesty imputed to the [employee] included the making of double entries in the production reports and thereby enriching herself by pocketing the extra cash generated from the double entries. Contrary to her assertion that there was no substantial evidence to justify her dismissal, the production reports containing the double entries were presented as evidence; and her double entries were confirmed in the affidavit executed by Redelito Caranay, Jr., her co-employee. As such, the finding of the just cause for her dismissal did not emanate from mere speculation, suspicion or assumption.

•••

Similarly, the omission to do or perform a responsibility can likewise be a just cause for termination. For example, an human resource manager who repeatedly fails to remit the government contributions (e.g. SSS, Phihealth, Pag-IBIG) of the employees and thus exposing the Company to liabilities – is guilty of omission. In such a situation, it is reasonable for the employer to lose trust and confidence on the said manager.

Meanwhile, concealment could also be the basis for loss of trust and confidence. By way of example, a cashier (a fiduciary rank-and-file) who lost amounts of money and chose not to inform the Company about it. Such a concealment prejudices the employer and thus serves as a justification for loss of trust and confidence.

c. Position of trust and confidence

3rd Requisite: The employee concerned must be holding a position of trust and confidence.

Again, employers are reminded that the ground of loss of trust and confidence has limited application. This just cause applies only to: managerial employees and fiduciary rank-and-file employees. They hold positions of trust and thus confidence reposed on them by the employer is high.

“There are two classes of corporate positions of trust: on the one hand are the managerial employees whose primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision thereof, and other officers or members of the managerial staff; on the other hand are the fiduciary rank-and-file employees, such as cashiers, auditors, property custodians, or those who, in the normal exercise of their functions, regularly handle significant amounts of money or property. These employees, though rank-and-file, are routinely charged with the care and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence.” (P.J. Lhuillier, Inc. v. Velayo, G.R. No. 198620, 12 November 2014; Italics supplied.)

Managerial employees are those who are vested “with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or to effectively recommend such managerial action.” (Article 219 [m], Labor Code)

They thus refer to “those whose primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision thereof, and to other officers or members of the managerial staff. Officers and members of the managerial staff perform work directly related to management policies of their employer and customarily and regularly exercise discretion and independent judgment.” (Wesleyan University Philippines v. Reyes, supra.)

•••

CASE STUDY

Reyes-Rayel v. Philippine Luen Thai Holdings Corporation

G.R. No. 174893, 11 July 2012

[The employee – Corporate Human Resource Director was dismissed for lack of working knowledge of labor laws in addition to other violations.]

Jurisprudence provides that an employer has a distinct prerogative and wider latitude of discretion in dismissing a managerial personnel who performs functions which by their nature require the employer’s full trust and confidence. As distinguished from a rank and file personnel, mere existence of a basis for believing that a managerial employee has breached the trust of the employer justifies dismissal…

[The employee] was L&T’s [Corporate Human Resource] Director for Manufacturing. As such, she was directly responsible for managing her own departmental staff. It is therefore without question that the CHR Director for Manufacturing is a managerial position saddled with great responsibility. Because of this, [the employee] must enjoy the full trust and confidence of her superiors. Not only that, she ought to know that she is “bound by more exacting work ethics” and should live up to this high standard of responsibility. However, [the employee] delivered dismal performance and displayed poor work attitude which constitute sufficient reasons for an employer to terminate an employee on the ground of loss of trust and confidence. [The employers] also impute upon [the employee’s] gross negligence and incompetence which are likewise justifiable grounds for dismissal. The burden of proving that the termination was for a valid cause lies on the employer. Here, respondents were able to overcome this burden as the evidence presented clearly support the validity of [the employee’s] dismissal.

First, records show that [the employee] indeed unreasonably failed to effectively communicate with her immediate superior. There was an apparent neglect in her obligation to maintain constant communication with Sauceda in order to ensure that her work is up to par. This is evident from the various emails showing that she failed to update Sauceda on the progress of her important assignments on several occasions. While [the employee] explained in her written reply to the Prerequisite Notice that such failure to communicate was due to the company’s computer system breakdown, [the employers] however were able to negate this as they have shown that the computer virus which affected the company’s system only damaged some email addresses of certain employees which did not include that of Sauceda’s. On the other hand, [the employee] failed to present any concrete proof that the said computer virus also damaged Sauceda’s email account as to effectively disrupt their regular communication. Moreover, we agree with [the employer’s] stance that petitioner could still reach Sauceda through other means of communication and should not completely rely on the web.

Second, the affidavits of [the employee’s] co-workers revealed her negative attitude and unprofessional behavior towards them and the company. In her affidavit, Agnes Suzette Pasustento, L&T’s Manager for the Corporate Communications Department, attested to petitioner’s “badmouthing” of Sauceda in one of their meetings abroad and of discussing with her about filing a labor case against the company. Also, in the affidavits of Rizza S. Esplana (Sauceda’s Executive Assistant), Cynthia Yñiguez (Corporate Human Resources Manager of an affiliate of L&T), and Ana Wilma Arreza (Human Resources and Administration Division Manager of an affiliate of L&T), they narrated several instances which demonstrated petitioner’s notoriously bad temper. They all described her to have an “irrational” behavior and “superior and condescending” attitude in the workplace. Unfortunately for petitioner, these sworn statements which notably remain uncontroverted and unrefuted, militate against her innocence and strengthen the adverse averments against her. It is well to state that as a CHR Director tasked to efficiently manage the company’s human resource team and practically being considered the “face” of the Human Resource, [the employee] should exhibit utmost concern for her employer’s interest. She should likewise establish not only credibility but also respect from co-workers which can only be attained if she demonstrates maturity and professionalism in the discharge of her duties. She is also expected to act as a role model who displays uprightness both in her own behavior and in her dealings with others.

The third and most important is [the employee’s] display of inefficiency and ineptitude in her job as a CHR Director. In the affidavit of Ornida B. Calma, Chief Accountant of L&T’s affiliate company, [the employee], on two occasions, gave wrong information regarding issues on leave and holiday pay which generated confusion among employees in the computation of salaries and wages. Due to the nature of her functions, petitioner is expected to have strong working knowledge of labor laws and regulations to help shed light on issues and questions regarding the same instead of complicating them. [The employee] obviously failed in this respect.

No wonder she received a less than par performance in her performance evaluation conducted in June 2001, contrary to her assertion that an 80.2% rating illustrates good and dependable work performance. As can be gleaned in the performance appraisal form, [the employee] received deficient marks and low ratings on areas of problem solving and decision making, interpersonal relationships, planning and organization, project management and integrity notwithstanding an overall passing grade. As aptly remarked by the CA, these low marks revealed the “degree of [the employee’s] work handicap” and should have served as a notice for her to improve on her job. However, she appeared complacent and remained lax in her duties and this naturally resulted to respondents’ loss of confidence in her managerial abilities.

Taking all these circumstances collectively, the Court is convinced that [the employers] have sufficient and valid reasons in terminating the services of [the employee] as her continued employment would be patently inimical to respondents’ interest. An employer “has the right to regulate, according to its discretion and best judgment, all aspects of employment, including work assignment, working methods, processes to be followed, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers.” “[S]o long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements,” the exercise of this management prerogative must be upheld. (Emphasis supplied.)

•••

In International Harvester Macleod, Inc. v. Joson, the managerial employee questioned his being part of the redundancy and alleged that the termination of his services was a “clever scheme” by the employer to eliminate his position. In upholoding his dismissal, the Supreme Court reminded the employee of his position as a managerial employe, viz:

“This issue has been squarely settled by the Supreme Court in the case of Bordoc v. People’s Bank and Trust Co. … where it was held that as the employee occupied a managerial position, his stay therein depended on his retention of the trust and confidence of the management and where there was any need for his services. ‘Although some vindictive motivation might have impelled the abolition of his position, yet, it is undeniable that the bank’s board of directors possessed the power to remove him and to determine whether the interest of the bank justified the existence of his department.’” (International Harvester Macleod, Inc. v. Joson, G.R. No. 73287, 18 May 1987)

Fiduciary rank-and-file employees “consists of cashiers, auditors, property custodians, etc., or those who, in the normal exercise of their functions, regularly handle significant amounts of money or property. These employees, though rank-and-file, are routinely charged with the care and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence.” (Ibid.)

•••

CASE STUDY

P.J. Lhuillier, Inc. v. Velayo

G.R. No. 198620, 12 November 2014

[The employee-cashier failed to record in the books a Php540.00 “Pera Padala” transaction in a pawnshop branch.]

… [the employee] is not just charged with a misdeed, but with loss of trust and confidence under Article [297](c) of the Labor Code, a cause premised on the fact that the employee holds a position whose functions may only be performed by someone who enjoys the trust and confidence of management. Needless to say, such an employee bears a greater burden of trustworthiness than ordinary workers, and the betrayal of the trust reposed is the essence of the loss of trust and confidence which is a ground for the employee’s dismissal.

[The employee’s] misconduct must be viewed in light of the strictly fiduciary nature of her position.

… On October 29, 2007, a customer sent P500.00 through its branch in Capistrano, Cagayan de Oro City, and paid a remittance fee of P40.00. Inexplicably, however, no corresponding entry was made to recognize the cash receipt of P540.00 in the computerized accounting system (operating system) of the PJLI. [The employee] claimed that she tried very hard but could not trace the source of her unexplained cash surplus of P540.00, but a branch audit conducted sometime in December 2007 showed that it came from a “Pera Padala” customer.

To be sure, no significant financial injury was sustained by the PJLI in the loss of a mere P540.00 in cash, which, according to the [the employee] she sincerely wanted to account for except that she was pre-empted by fear of what her branch manager might do once she learned of it…

x x x

The [employee] was first hired by the [employer] as an accounting clerk on June 13, 2003… On October 29, 2007, the date of the subject incident, she performed the function of vault custodian and cashier in the [the employer’s] Branch 4 pawnshop in Capistrano, Cagayan de Oro City. In addition to her custodial duties, it was [the employee] who electronically posted the day’s transactions in the books of accounts of the branch, a function that is essentially separate from that of cashier or custodian. It is plain to see then that when both functions are assigned to one person to perform, a very risky situation of conflicting interests is created whereby the cashier can purloin the money in her custody and effectively cover her tracks, at least temporarily, by simply not recording in the books the cash receipt she misappropriated. This is commonly referred to as lapping of accounts. Only a most trusted clerk would be allowed to perform the two functions, and the respondent enjoyed this trust.

x x x

Mere substantial evidence is sufficient to establish loss of trust and confidence

[The employee’s] actuations were willful and deliberate. A cashier who, through carelessness, lost a document evidencing a cash receipt, and then willfuly chose not to record the excess cash as miscellaneous income and instead took it home and spent it on herself, and later repeatedly denied or concealed the cash overage when confronted, deserves to be dismissed.

Article 282 of the Labor Code allows an employer to dismiss an employee for willful breach of trust or loss of confidence. It has been held that a special and unique employment relationship exists between a corporation and its cashier. Truly, more than most key positions, that of a cashier calls for utmost trust and confidence, and it is the breach of this trust that results in an employer’s loss of confidence in the employee. In San Miguel Corporation v. NLRC… the Court held:

As a rule, this Court leans over backwards to help workers and employees continue in their employment. We have mitigated penalties imposed by management on erring employees and ordered employers to reinstate workers who have been punished enough through suspension. However, breach of trust and confidence and acts of dishonesty and infidelity in the handling of funds and properties are an entirely different matter.

It has been held that in dismissing a cashier on the ground of loss of confidence, it is sufficient that there is some basis for the same or that the employer has a reasonable ground to believe that the employee is responsible for the misconduct, thus making him unworthy of the trust and confidence reposed in him. Therefore, if there is sufficient evidence to show that the employer has ample reason to distrust the employee, the labor tribunal cannot justly deny the employer the authority to dismiss him…

x x x

Furthermore, it must also be stressed that only substantial evidence is required in order to support a finding that an employer’s trust and confidence accorded to its employee had been breached.

x x x

In holding a position requiring full trust and confidence, [the employee] gave up some of the rigid guarantees available to ordinary employees. She insisted that her misconduct was just an “innocent mistake,” and maybe it was, had it been committed by other employees. But surely not as to [the employee] who precisely because of the special trust and confidence given her by her employer must be penalized with a more severe sanction.

A cashier’s inability to safeguard and account for missing cash is sufficient cause to dismiss her.

x x x

It would be most unfair to require an employer to continue employing as its cashiera person whom it reasonably believes is no longer capable of giving full and whole hearted trustworthiness in the stewardship of company funds.

•••

In San Miguel Corporation v. Saquing, the employee – a Route Salesman – was validly dismissed after being caught in the act by a customer stealing beer bottles with content by mixing it with emptied ones. It was held that the dismissal for loss of trust and confidence was valid. “[The employee] represents [the employer] in his dealings with the public. When charges of theft of customer’s properties and misconduct on the job are imputed on the sales agent, and these charges are supported with evidence, they constitute sufficient reasons for termination of employment. Well established in our jurisprudence is the right of an employer to dismiss an employee whose continuance in the service is inimical to the employer’s interest.” (San Miguel Corporation v. Saquing, G.R. No. 70177, 25 June 1986)

d. Not simulated

4th Requisite: The loss of trust and confidence should not be simulated.

To simulate is to manufacture or fabricate a basis – whether it be an act, omission, or concealment – and that is the one incorrectly pointed out as the reason for the loss of trust and confidence. The basis is usually a simple ground which is often not related to the just cause of loss of trust and confidence. However, this is sometimes spun off to qualify it to the said just cause. This is the simulation or fabrication that is prohibited.

Labor Law requires that the loss of trust and confidence to be genuine to serve as the basis for the dismissal.

“While loss of trust and confidence should be genuine, it does not require proof beyond reasonable doubt, it being sufficient that there is some basis to believe that the employee concerned is responsible for the misconduct and that the nature of the employee’s participation therein rendered him unworthy of trust and confidence demanded by his position.” (P.J. Lhuillier, Inc. v. Velayo, G.R. No. 198620, 12 November 2014; Italics supplied)

Without a basis, the loss of trust and confidence could be considered as simulated and thus result in an illegal dismissal.

•••

CASE STUDY

Asia Pacific Chartering (Phils.) Inc. v. Farolan

G.R. No. 151370, 04 December 2002

[The employee – a Sales Manager – was dismissed for loss of confidence, among others.]

… 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.

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, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.

[The employee’s] detailed REPORT dated September 8, 1993, quoted above, relative to SAS profit and loss for 1993… contains an explanation of what brought about the decline in sales revenues. And it contains too a number of recommended measures on improvement of sales for the remainder of 1993 and for 1994.

… this Court finds [the employee’s] explanation in her Report behind the decline in sales revenues as due to market forces beyond [the employee’s] control plausible. In any event, there is no showing that the decline is reflective of any willfull breach of duties by [the employee].

The two letters sent by SAS to [the employee] in 1994 in fact negate willful breach of her duties by respondent. The first (received on May 21, 1994) congratulated her and Zozobrado for exceeding “[sales] result in April” 1994. [The employer’s] argument that respondent could not invoke these letters in her favor as they were intended for Zozobrado fails. The letters were addressed to [the employee] and Zozobrado. The second letter (received on July 18, 1994) which was addressed to [the employee], while noting that the sales for June 1994 did not reach the target in “C/class”, noted that in “M/class” she “managed very well”. And it went on to state that “[t]he pre-bookings eff. 14 July looks (sic) very good and encouraging and with 2 weeks to go July should not be a problem.” In fact, it requested [the employee] to “send… regards to all the girls and tell them to keep up the good work.”

While [the employer] attributes the improvement of sales in 1994 to Zozobrado, the fact remains that [the employee] was still the Sales Manager up to July 1994, in charge of those “sales meetings” during which pertinent market strategies were developed and utilized to increase sales.

In another vein, [the employer] attributes loss of confidence to respondent’s alleged “gross inefficiency and incompetence,” it citing, as earlier stated, the cases of Grand Motor Parts Corp…. and Buiser et al…

The Grand Motors case, however, involved a probationary employee-manager who failed to, among other things, submit required monthly reports and violated company policy, clearly mirroring his insubordination and disrespect to express instructions of management.

While this Court, in the Buiser case… held that “[f]ailure to observe prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency” may be just cause for dismissal, [the employer] has neither shown what standards of work or reasonable work assignments were prescribed which [the employee] failed to observe nor that if she did fail to observe any such, it was due to inefficiency.

Finally and at all events, given respondent’s previous work experience [citing her resume] … this Court is not prepared to find for [the employer]. It bears noting that there is no showing that [the employee] represented herself as possessed of the highest degree of skill and care known in the trade. And it is not disputed that [the employee] was approached by [the employer’s] then Sales Manager Murray, and offered the position of Sales Manager. She thus could not just be unceremoniously discharged for “loss of confidence” arising from alleged incompetency.

“While an employee may be dismissed because of inefficiency, neglect or carelessness, the law implies a situation or undertaking by an employee in entering into a contract of employment that he is competent to perform the work undertaken and is possessed of the requisite skill and knowledge to enable him to do so, and that he will do the work of the employer in a careful manner. If he is not qualified to do the work which he undertakes, if he is incompetent, unskillful or inefficient, or if he executes his work in a negligent manner or is otherwise guilty of neglect of duty, he may lawfully be discharged before the expiration of his term of employment.”

In fine, this Court finds that [the employee] had been illegally dismissed and is accordingly entitled to reinstatement to her former position without loss of seniority rights and payment of backwages.

•••

To reiterate, there should be some basis for the ground of loss of trust and confidence. The ground does not require proof beyond reasonable doubt as in criminal cases. “It is enough that there be ‘some basis’ for such loss of confidence or that ‘the employer has reasonable grounds to believe, if not to entertain the moral conviction that the employee concerned is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position’ from the employer.” (Tabaclera Insurance Co. v. Simborio, G.R. No. 72555, 31 July 1987)

The difference with this requirement from the next one (subterfuge) is that the event had already happened. Meanwhile, the essence of subterfuge is that the employer designed a ploy or scheme against the employee for causes that are improper, illegal, or unjustified. Expectedly, when the employee refused to perform, the employer conveniently invoked the loss of trust and confidence to justify termination of employment.

e. Not a subterfuge

5th Requisite: It should not be used as a subterfuge for causes which are improper, illegal, or unjustified.

As mentioned earlier, this requirement is centered on the employer creating a ploy or scheme for reasons/causes that are improper, illegal, or unjustified. For example, if the employer used deceit to designed a situation that could result in an event that could serve as the basis for loss of trust and confidence, then that could be considered as having been done as a subterfuge. Otherwise stated, the situation was precisely orchestrated by the employer for the purpose of creating a basis for the loss of trust and confidence.

•••

CASE STUDY

Tabaclera Insuranc Co. v. Simborio

G.R. No. 72555, 31 July 1987

The findings of facts of the Labor Arbiter are as follows:

… As [a] supervisors, the [employee] is indeed duty bound to maintain an impeccable record of attendance and punctuality not only to boost the morale of his peers and subordinates but also for him to attend to important business matters that may arise during the first hours of each work day. In fact, his being found to have been reporting late for work for no less than seventy-five (75) times during a two-year period does not speak well of his commitment to his functions and responsibilities as a supervisor, especially considering the lame excuses he used to justify his frequent tardiness, e.g., “flat tires, personal matters, car repairs, etc.”

In the same breath, [the employee’s] reaction to the memorandum of the Personnel Manager which asked him to refrain from entering and hanging his clothes in the Ladies’ Room clearly constitutes conduct unbecoming of a managerial employee, for instead of displaying a certain degree of decorum and respect he responded with uncalled for outburst and language not expected of him by reason of his position.

Moreover, as a Credit and Collection Supervisor whose functions require constant rapport with the customers of the respondent company, he was expected to use at all times tact and diplomacy when dealing with the customers. But contrary to this expectation, complaints were received from regular clients that he was conducting his transactions with the latter in a very unprofessional and offensive manner, thereby forcing the [employers] thru their Assistant Manager to write letters of apology to said complaining clients inasmuch as said unprofessional behavior is causing grave prejudice to the business operations and interests of the [employers]. This has been aggravated when he shouted at a client and even went to the extent of challenging the latter to a fist-fight.

x x x

… any supposed connection between the requests of [the employee] for salary increase and for affiliation in the union with the replies and action of the [the employers] thereon from which such premeditated plan was inferred. On the contrary, [the employee] failed to refute the charges brought by the [the employer] against him which are based on documentary evidence. Instead, he confined himself to bare denials and counter charges of trumped-up investigation which are not supported by the records… More than that, he was found to have adopted deceptive claims and measures which would tend to becloud the issues of this case….

Thus, the Labor Arbiter correctly found the following:

Regarding complainant’s claim that his dismissal was in retaliation against his having filed a petition with the National Capital Region, [Department] of Labor and Employment, seeking for a declaration that supervisors are non-managerial employees qualified for membership in the rank-and-file union existing in the respondent company, it appears that the filing of said petition on June 21, 1983, the very same day complainant was placed under preventive suspension, was more of an anticipation of whatever action the respondents may take against him so that, as convincingly theorized by the respondents, any subsequent termination action taken against him would be viewed as a retaliatory measure. This fact could be viewed from his deceptive claim that he was joined in said petition by four (4) other co-supervisors and yet, the latter had executed individual affidavits declaring that the filing of the petition was without their consent and that they have no intention to sue the respondents.

x x x

In the case at bar, [the employee] occupied the position of Credit and Collection Supervisor, classified under Sec. 5 of the company’s Collective Bargaining Agreement… as managerial/supervisory personnel. In addition to his regular functions as such, he also had the power to recommend the hiring and appointment of his subordinates, as well as the power to recommend any promotion and/or increase… Otherwise stated, he is “one in whom [the employer] Company has given its complete trust and confidence… The Company, therefore, was justified in expecting that his actuations should be above suspicion”…

Moreover, while there is no question that the right of an employer to freely select or discharge his employees, is subject to regulation by the State basically in the exercise of its paramount police power… there is also an equally established principle that an employer cannot be compelled to continue in employment an employee guilty of acts inimical to the interest of the employer and justifying loss of confidence in him

The records reveal that [the employee] has the knack for saying harsh and rough words both to his superiors and to the company’s clients. When his attention was called by the Assistant Manager of petitioner Company concerning his entering the Ladies’ Room to hang up his clothes, he replied in this wise:

What forced me to enter the ladies Room to hang-up my clothes is the very inhuman acts committed against me by somebody in this office who had, on two instances, thrown my clothes inside the men’s room. (Pasalamat siya hindi ko nahuli sa acto); Finally, if you are thinking that I’m up to doing something bad against our ladies in this office, rest-assured that this will not happen, for, as you are well aware, all of them do not meet my standard and none of them for that matter, will get my sympathy nor tempt me to commit a wrong.

With this frame of mind, it can hardly be doubted that he has breached the trust and confidence reposed in him by his employer resulting in acts inimical to the interests of the company….

•••

f. Genuine, not an afterthought

6th Requisite: It must be genuine and not a mere afterthought to justify an earlier action taken in bad faith.

In many labor cases, the employer usually claims that that the employee was dismissed due to loss of trust and confidence after having already terminated employment. Otherwise stated, at the time that the employee was dismissed it was not due to loss of trust and confidence (perhaps for other grounds). When the employer realizes that the other ground was not sufficient to warrant termination during the proceedings of the labor case, the ground of loss of confidence is instead invoked thinking perhaps it will be valid. This is, however, an afterthought.

When a ground is thought of or added later, then it is a case of an afterthought to justify the earlier action of termination which was done in bad faith. Accordingly, the employer ends up not complying with this requisite and might be held liable for illegal dismissal.