Loss of trust and confidence
May an employer terminate an employee on the ground of loss of trust and confidence?
Yes. Article 282 of the Labor Code provides that an employer may terminate an employment for fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.
What are the requisites for dismissal on the ground of loss of trust and confidence?
● Certain guidelines must be observed for the employer to terminate an employee for loss of trust and confidence. Loss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith.
● Certain guidelines must be observed for the employer to terminate an employee for loss of trust and confidence. Loss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith.
- The employee concerned must be one holding a position of trust and confidence.
- There must be an act that would justify the loss of trust and confidence. (Wesleyan University vs. Reyes, G.R. No. 208321, July 30, 2014)
● Loss of trust and confidence as a ground for dismissal of employees covers employees occupying a position of trust who are proven to have breached the trust and confidence reposed on them. Apropos is Cruz v. Court of Appeals which explains the basis and quantum of evidence of loss of trust and confidence, viz:
- 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.
- Moreover, it must be based on substantial evidence and not on the employers whims or caprices or suspicions otherwise, 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.
- And, in 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.
- In addition, loss of confidence as a just cause for termination of 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. (Qurico Lopez v. Alturas Group of Companies, G.R. No. 191008, April 11, 2011)
Who are the employees holding a position of trust and confidence?
There are two classes of positions of trust: managerial employees and fiduciary rank-and-file employees.
1. Managerial employees are defined as those vested with the powers or prerogatives to lay down management policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions. They 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.
2. The second class or fiduciary rank-and-file employees consist 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. (Wesleyan University vs. Reyes)
What is 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?
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.
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. (Wesleyan University vs. Reyes)
Is an employee who has been dismissed for loss of confidence entitled to separation pay or to any financial assistance?
● An employee who has been dismissed for any of the just causes enumerated under Article 282 of the Labor Code, including breach of trust, is not entitled to separation pay.
However, this Court also provides exceptions to the rule based on "social justice" or on "equitable grounds" following the ruling in Philippine Long Distance Telephone Co. v. NLRC, stating that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.43
The PLDT case further elucidates why an erring employee could not benefit under the cloak of social justice in the award of separation pay, we quote:
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character.
Indeed, as found below, Moya’s length of service should be taken against him. The pronouncement in Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan is instructive on the matter:
x x x Length of service is not a bargaining chip that can simply be stacked against the employer. After all, an employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and dedicated service. If an employer had treated his employee well, has accorded him fairness and adequate compensation as determined by law, it is only fair to expect a long-time employee to return such fairness with at least some respect and honesty. Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair employer. (Moya vs. Solid Rubber Industries, G.R. No. 184011, September 18, 2013)
●The award of financial assistance shall not be given to validly terminated employees, whose offenses are iniquitous or reflective of some depravity in their moral character. When the employee commits an act of dishonesty, depravity, or iniquity, the grant of financial assistance is misplaced compassion. It is tantamount not only to condoning a patently illegal or dishonest act, but an endorsement thereof. It will be an insult to all the laborers who, despite their economic difficulties, strive to maintain good values and moral conduct.
Although long years of service might generally be considered for the award of separation benefits or some form of financial assistance to mitigate the effects of termination, this case is not the appropriate instance for generosity x x x. The fact that private respondent served petitioner for more than twenty years with no negative record prior to his dismissal, in our view of this case, does not call for such award of benefits, since his violation reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employees length of service is to be regarded as justification for moderating the penalty of dismissal, such gesture will actually become a prize for disloyalty, distorting the meaning of social justice and undermining the efforts of labor to clean its ranks of undesirables.
Indeed, length of service and a previously clean employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant employee.
The fact that [the employer] did not suffer pecuniary damage will not obliterate respondents betrayal of trust and confidence reposed by petitioner. Neither would his length of service justify his dishonesty or mitigate his liability. His length of service even aggravates his offense. He should have been more loyal to petitioner company from which he derived his family bread and butter for seventeen years.
Certainly, a dishonest employee cannot be rewarded with separation pay or any financial benefit after his culpability is established in two decisions by competent labor tribunals, which decisions appear to be well-supported by evidence. To hold otherwise, even in the name of compassion, would be to send a wrong signal not only that crime pays but also that one can enrich himself at the expense of another in the name of social justice. And courts as well as quasi-judicial entities will be overrun by petitioners mouthing dubious pleas for misplaced social justice. Indeed, before there can be an occasion for compassion and mercy, there must first be justice for all. Otherwise, employees will be encouraged to steal and misappropriate in the expectation that eventually, in the name of social justice and compassion, they will not be penalized but instead financially rewarded. Verily, a contrary holding will merely encourage lawlessness, dishonesty, and duplicity. These are not the values that society cherishes; these are the habits that it abhors. (Reno Foods, Inc. vs NLM-Katipunan, G.R. No. 164016, March 15, 2010)
● Well-settled is the rule that separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Inasmuch as reason for which the petitioner was validly separated involves his integrity, which is especially required for the position of purser, he is not worthy of compassion as to deserve at least separation pay for his length of service. (Ectuban vs. Sulpicio Lines, G.R. No. 148410. January 17, 2005)
Is an employee who has been dismissed for loss of confidence entitled to separation pay or to any financial assistance?
● An employee who has been dismissed for any of the just causes enumerated under Article 282 of the Labor Code, including breach of trust, is not entitled to separation pay.
However, this Court also provides exceptions to the rule based on "social justice" or on "equitable grounds" following the ruling in Philippine Long Distance Telephone Co. v. NLRC, stating that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.43
The PLDT case further elucidates why an erring employee could not benefit under the cloak of social justice in the award of separation pay, we quote:
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character.
Indeed, as found below, Moya’s length of service should be taken against him. The pronouncement in Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan is instructive on the matter:
x x x Length of service is not a bargaining chip that can simply be stacked against the employer. After all, an employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and dedicated service. If an employer had treated his employee well, has accorded him fairness and adequate compensation as determined by law, it is only fair to expect a long-time employee to return such fairness with at least some respect and honesty. Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair employer. (Moya vs. Solid Rubber Industries, G.R. No. 184011, September 18, 2013)
●The award of financial assistance shall not be given to validly terminated employees, whose offenses are iniquitous or reflective of some depravity in their moral character. When the employee commits an act of dishonesty, depravity, or iniquity, the grant of financial assistance is misplaced compassion. It is tantamount not only to condoning a patently illegal or dishonest act, but an endorsement thereof. It will be an insult to all the laborers who, despite their economic difficulties, strive to maintain good values and moral conduct.
Although long years of service might generally be considered for the award of separation benefits or some form of financial assistance to mitigate the effects of termination, this case is not the appropriate instance for generosity x x x. The fact that private respondent served petitioner for more than twenty years with no negative record prior to his dismissal, in our view of this case, does not call for such award of benefits, since his violation reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employees length of service is to be regarded as justification for moderating the penalty of dismissal, such gesture will actually become a prize for disloyalty, distorting the meaning of social justice and undermining the efforts of labor to clean its ranks of undesirables.
Indeed, length of service and a previously clean employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant employee.
The fact that [the employer] did not suffer pecuniary damage will not obliterate respondents betrayal of trust and confidence reposed by petitioner. Neither would his length of service justify his dishonesty or mitigate his liability. His length of service even aggravates his offense. He should have been more loyal to petitioner company from which he derived his family bread and butter for seventeen years.
Certainly, a dishonest employee cannot be rewarded with separation pay or any financial benefit after his culpability is established in two decisions by competent labor tribunals, which decisions appear to be well-supported by evidence. To hold otherwise, even in the name of compassion, would be to send a wrong signal not only that crime pays but also that one can enrich himself at the expense of another in the name of social justice. And courts as well as quasi-judicial entities will be overrun by petitioners mouthing dubious pleas for misplaced social justice. Indeed, before there can be an occasion for compassion and mercy, there must first be justice for all. Otherwise, employees will be encouraged to steal and misappropriate in the expectation that eventually, in the name of social justice and compassion, they will not be penalized but instead financially rewarded. Verily, a contrary holding will merely encourage lawlessness, dishonesty, and duplicity. These are not the values that society cherishes; these are the habits that it abhors. (Reno Foods, Inc. vs NLM-Katipunan, G.R. No. 164016, March 15, 2010)
● Well-settled is the rule that separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Inasmuch as reason for which the petitioner was validly separated involves his integrity, which is especially required for the position of purser, he is not worthy of compassion as to deserve at least separation pay for his length of service. (Ectuban vs. Sulpicio Lines, G.R. No. 148410. January 17, 2005)
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