Loss of trust and confidence

Summary

⦁ To be valid, the just cause of loss of trust and confidence should comply with prescribed standards.

1. Concept

[T]he language of Article 282(c) of the Labor Code states that the loss of trust and confidence must be based on willful breach of the trust reposed in the employee by his employer. Such 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. (Cruz, Jr. v. CA, G.R. No. 148544, 12 July 2006)

Generally, employers are given wide latitude in terminating the services of employees who perform functions which by their nature require the employer’s full trust and confidence. It is well established 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. It has been held that when an employee has been guilty of breach of trust or his employer has ample reason to distrust him, a labor tribunal cannot deny the employer the authority to dismiss him. (University of the Immaculate Conception v. Office of the Secretary of Labor and Employment, G.R. Nos. 178085-178086, 14 September 2015)

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. The betrayal of this trust is the essence of the offense for which an employee is penalized. (Casco v. NLRC, G.R. No. 200571, February 19, 2018)

2. Standards for loss of trust and confidence

Jurisprudential requisites:

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

2) There must be an act that would justify the loss of trust and confidence; and

3) Such loss of trust relates to the employee’s performance of duties. (Cruz, Jr. v. CA, supra.)

DOLE Standards:

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. (Section 5.2[e], Rule I-A, DOLE D.O. 147-15)

a. Act, omission or concealment

[I[n order to constitute a just cause for dismissal, the act complained of must be work-related and shows that the employee concerned is unfit to continue working for the employer. (Cruz, Jr. v. CA, supra.)

Loss of trust and confidence, be it a principal or an analogous ground for dismissal, is not justified if it exists in vacuum. As a just cause, it requires an underlying act, deed or conduct from which a reasonable belief of untrustworthiness might be inferred. Without it, dismissals undertaken on such mere belief are arbitrary and will be outlawed. (PDMC v. Gomez, G.R. Nos. 220526-27, 29 July 2019)

b. Justifies the loss of trust and confidence

The second condition that must be satisfied is the presence of some basis for the loss of trust and confidence. This means that “the employer must establish the existence of an act justifying the loss of trust and confidence.” Otherwise, employees will be left at the mercy of their employers. (Bravo v. Urios College, G.R. No. 198066, 07 June 2017)

Different rules apply in determining whether loss of trust and confidence may validly be used as a justification in termination cases.1âwphi1 Managerial employees are treated differently than fiduciary rank-and-file employees. (Ibid.)

1) Managerial employees

In terminating managerial employees based on loss of trust and confidence, proof beyond reasonable doubt is not required, but the mere existence of a basis for believing that such employee has breached the trust of his employer suffices… (Casco v. NLRC, supra.)

[A]s 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. 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 by his position. (Caoile v. NLRC, G.R. No. 115491, 24 September 1998)

Although a less stringent degree of proof is required in termination cases involving managerial employees, employers may not invoke the ground of loss of trust and confidence arbitrarily. The prerogative of employers in dismissing a managerial employee “must be exercised without abuse of discretion.” (Bravo v. Urios College, supra.)

Thus, unlike fiduciary rank-and-file employees such as auditors, cashiers and others routinely handling significant amounts of money or property,32 a managerial employee against whom an allegation of loss of trust is made may be validly dismissed on a mere belief that he has breached the employer’s trust and confidence. However, such belief must nevertheless have an objective basis, such as an underlying act on the part of the employee concerned – either a misconduct or a participation therein – that causes the employer’s trust and confidence in him to wane. (PDMC v. Gomez, supra.)

SM Development Corporation v. Ang, G.R. No. 220434, 22 July 2019

⦁ Set against these parameters, the Court holds that [the Complainant] was validly dismissed based on loss of trust and confidence. [The Complainant] was not an ordinary company employee. His position as one of [the Company’s] Project Director is clearly a position of responsibility demanding an extensive amount of trust from [the Company]. The entire project account depended on the accuracy of the classifications made by him. It was reasonable for the [the Company] to trust that [the Complainant] had basis for his calculations and specifications. The preparation of the project is a complex matter requiring attention to details. Not only does these projects involve the company’s finances, it also affects the welfare of all the other employees and clients as well.

⦁ [The Complainant’s] failure to properly manage these projects clearly is an act inimical to the company’s interests sufficient to erode [the Company’s] trust and confidence in him. He ought to know that his job requires that he keep the trust and confidence bestowed on him by his employer untarnished. He failed to perform what he had represented or what was expected of him, thus, [the Company] had a valid reason in losing confidence in him which justified his termination.

⦁ The right of an employer to freely select or discharge his employees is subject to the regulation by the State in the exercise of its paramount police power. However, 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 Complainant’s] lack of previous record of inefficiency, infractions or violations of company rules for almost six years of service cannot serve as justification to reduce the severity of the penalty. There is really no premium for a clean record of almost six years to speak of, for a belated discovery of the misdeed does not serve to sanitize the intervening period from its commission up to its eventual discovery.

Bravo v. Urios College, G.R. No. 198066, 07 June 2017

⦁ Set against these parameters, this Court holds that [the Complainant] was validly dismissed based on loss of trust and confidence. [The Complainant] was not an ordinary rank-and-file employee. His position of responsibility on delicate financial matters entailed a substantial amount of trust from respondent. The entire payroll account depended on the accuracy of the classifications made by the Comptroller. It was reasonable for the employer to trust that he had basis for his computations especially with respect to his own compensation. The preparation of the payroll is a sensitive matter requiring attention to detail. Not only does the payroll involve the company’s finances, it also affects the welfare of all other employees who rely on their monthly salaries.

⦁ [The Complainant’s] act in assigning to himself a higher salary rate without proper authorization is a clear breach of the trust and confidence reposed in him. In addition, there was no reason for the Comptroller’s Office to undertake the preparation of its own summary table because this was a function that exclusively pertained to the Human Resources Department. [The Complainant] offered no explanation about the Comptroller’s Office’s deviation from company procedure and the discrepancies in the computation of other employees’ salaries. [The Complainant’s] position made him accountable in ensuring that the Comptroller’s Office observed the company’s established procedures. It was reasonable that he should be held liable by respondent on the basis of command responsibility.

2) Fiduciary rank-and-file employees

[I]n a plethora of cases, [the] 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. (Casco v. NLRC, supra.)

[W]ith 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. (Caoile v. NLRC, supra.)

c. Position of trust and confidence

As a rule, loss of confidence may only be invoked by the employer against an employee occupying a position of responsibility, trust and confidence. (University of the Immaculate Conception v. Office of the Secretary of Labor and Employment, G.R. Nos. 178085-178086, 14 September 2015)

[L]oss of confidence as a just cause for termination or employment is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted with confidence with respect to delicate matters, such as the handling or care and protection of the property and assets of the employer. The betrayal of this trust is the essence of the offense for which an employee is penalized. (Cruz, Jr. v. CA, supra.)

There are two (2) types of positions in which trust and confidence are reposed by the employer, namely:

1) Managerial employees; and

2) Fiduciary rank-and-file employees. (Bravo v. Urios College, supra.)

[L]oss of confidence should ideally apply only:

1) To cases involving employees occupying positions of trust and confidence [first class]; or

2) To those situations where the employee is routinely charged with the care and custody of the employer’s money or property [second class]. (University of the Immaculate Conception v. Office of the Secretary of Labor and Employment, supra.)

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… [T]o 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… (Ibid.)

1) Managerial employees

Managerial employees are considered to occupy positions of trust and confidence because they are “entrusted with confidential and delicate matters.” (Bravo v. Urios College, supra.)

2) Fiduciary rank-and-file employees

[F]iduciary rank-and-file employees refer to those employees, who, “in the normal and routine exercise of their functions, regularly handle significant amounts of [the employer’s] money or property.” (Bravo v. Urios College, supra.)

Examples of fiduciary rank-and-file employees are “cashiers, auditors, property custodians,” selling tellers, and sales managers. It must be emphasized, however, that the nature and scope of work and not the job title or designation determine whether an employee holds a position of trust and confidence. (Ibid.)

San Miguel Corporation v. Gomez, G.R. No. 200815, 24 August 2020

[Background]

[The employee who was charged with custody of mail matter. The Company is engaged in the business of manufacturing fermented beverages.]

⦁ C2K is a corporation engaged in courier and delivery services, which entered into business with [the Company] sometime in January 2001 as the latter’s courier. For the first three months, the relationship between C2K and [the Company] went smoothly until C2K encountered difficulty in collecting its service fee from [the Company]. Eventually, it was found out that C2K’s former manager, [D. Tamayo], formed another courier services group, Starnec, which had been using fake C2K receipts and collecting the fees pertaining to C2K. C2K claimed that it was through [the Complainant’s] intervention that Tamayo’s group was able to transact business with [the Company].

⦁ C2K brought the matter to the attention of [the Company], which conducted an investigation. In line with this, [the Company] requested C2K’s President, [E. Figuracion], to execute an affidavit narrating their claim. In the said affidavit, Figuracion mentioned that [the Complainant] had been collecting 25% commission from the total payment received by C2K. An audit was conducted where it was discovered that [the Complainant] was allegedly involved in anomalies which caused tremendous losses to [the Company].

⦁ [The Company] conducted an administrative investigation and hearing where [the Complainant] was able to present her evidence and witnesses to disprove the charges against her. After the investigation, [the Complainant] was found guilty of committing fraud against [the Company] and of receiving bribes through commissions in connection with the performance of her function. On December 20, 2002, [the Company] issued a Notice of Termination of Services to [the Complainant] prompting her to file a case for illegal dismissal…

[Resolution]

⦁ The Court finds that [the Complainant] indeed occupied a position of trust and confidence, as defined by law and jurisprudence, since she was entrusted with [the Company’s] property, in particular its mail matter which included weighing and determining volumes of documents to be shipped. Thus, she was routinely charged with custody of [the Company’s] mail matter.

⦁ In addition, We find that [the Company] likewise substantially proved the second requisite (i.e. there must be an act that would justify the loss of trust and confidence). In Cadavas v. Court of Appeals, We have emphasized that “[l]oss of trust and confidence to be a valid cause for dismissal must be based on a willful breach of trust and founded on clearly  established facts. Such 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.”

⦁ In this case, We find that [the Complainant] willfully, intentionally, knowingly, purposely, and without justifiable excuse disregarded [the Company]’s rules and regulations in the workplace.

⦁ This Court notes that it was through [the Complainant’s] intervention that Starnec Tamayo’s group) was able to transact business with [the Company], wherein Starnec used fake receipts and collected the fees pertaining to C2K. [The Complainant], as the used factor in [the Company]’s Mailing Department, should have known or noticed said fake receipts since she had previously transacted with C2K.

⦁ Moreover, We give credence to the claim of C2K’s President, Figuration, in his affidavit44 that [the Complainant] had been collecting 25% commission from the total payment received by C2K. This was corroborated by [the Company’s] audit findings where it was discovered that [the Complainant’s] anomalies caused and tremendous losses to [the Company]. Furthermore, [the Company] conducted its investigation which resulted in [the Complainant] being found guilty of committing fraud against [the Company] and of receiving bribes through commissions in connection with the performance of her function.

⦁ In view of the foregoing, this Court finds that [the Complainant] was validly terminated on the ground of loss of trust and confidence.

d. Not simulated

Moreover, it must be based on substantial evidence and not on the employer’s whims or caprices or suspicions other wise, the employee would eternally remain at the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the dismissal of an employee was arbitrary. (Cruz, Jr. v. CA, supra.)

To constitute a valid ground for dismissal, it is sufficient that there be some reasonable basis, supported by substantial evidence, for such loss of confidence. (University of the Immaculate Conception v. Office of the Secretary of Labor and Employment, supra.)

e. Not a subterfuge for causes which are improper, illegal, or unjustified

The loss of confidence must be genuine and cannot be used as a subterfuge for causes which are illegal, improper and unjust. “Loss of confidence as a ground for dismissal has never been intended to afford an occasion for abuse by the employer of its prerogative, as it can easily be subject to abuse because of its subjective nature.” (Ibid.)

f. Genuine and not a mere afterthought

[E]mployers may not arbitrarily dismiss their employees by simply invoking Article 297 282(c). The loss of confidence must be genuine and cannot be used as a “subterfuge for causes which are improper, illegal or unjustified.” (San Miguel Corporation v. Gomez, G.R. No. 200815, 24 August 2020)

References

⦁ 1987 Philippine Constitution

⦁ Book VI, Presidential Decree No. 442, a.k.a. Labor Code of the Philippines

⦁ DOLE Department Order No. 147, Series of 2015

—

/Updated: January 5, 2023