The Supreme Court has ruled that an employer can terminate an employee for serious misconduct if proven with substantial evidence and due process is observed. However, even with a valid dismissal, an employee is still entitled to receive earned monetary benefits under the law and collective bargaining agreements, unless forfeiture is explicitly allowed by company rules or CBA provisions. This means employers must provide clear grounds for dismissal and cannot arbitrarily withhold rightfully earned compensation.

Dishonest Conduct and Dismissal: When Can a University Terminate an Employee for Fraudulent Actions?

In this case, Estrella S. Bañez, a curriculum evaluator at De La Salle University (DLS U), faced allegations of conspiring with another employee, Virginia Cantillas, to collect fees from graduate students without proper remittance. The University received reports of anomalies involving temporary receipts issued by Cantillas, with Bañez allegedly directing students to make payments to her. An administrative investigation ensued, during which both employees were preventively suspended. Bañez and the Union filed complaints for unfair labor practice and illegal suspension, which later included illegal dismissal after their employment was terminated. This led to a legal battle concerning the validity of Bañez’s dismissal and her entitlement to benefits.

The central issue before the Supreme Court was whether Bañez was illegally dismissed. The Court underscored that for a dismissal to be valid, it must be based on just causes outlined in Article 282 of the Labor Code and adhere to procedural due process. Article 282 of the Labor Code specifies the just causes for termination:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.

The Court found substantial evidence indicating Bañez’s involvement in fraudulent acts against the University. This evidence included testimonies from the University’s Internal Auditor and graduate students, pointing to unauthorized collections and unremitted fees. Cynthia Lim, the University’s Internal Auditor, testified about the provisional receipts issued by Cantillas without corresponding official receipts.

Additionally, Sr. Ma Teresa S. Cantos testified that Bañez directed her to pay fees to Cantillas, who issued temporary receipts for graduation ceremonies in September 1996. Rehbi J. Baraca, a student, recounted being instructed by Cantillas to pay thesis defense fees, with only a portion covered by an official receipt. Washington Lee Alto testified to overpaying fees to Cantillas and demanding a refund. Lourdes S. Bangcoy stated that Bañez directed her to pay fees to Cantillas, which were not covered by official receipts, leading to her exclusion from exam lists. This cumulative evidence supported the finding of a conspiracy between Bañez and Cantillas.

Bañez argued that she had no knowledge of or involvement in the fraudulent transactions, citing a counter-affidavit from Cantillas who claimed University officials had framed her. However, the Court deemed Cantillas’s counter-affidavit unreliable, particularly given its contradiction with her earlier statements. The court gave weight to the fact that this affidavit surfaced five months after the administrative investigation had commenced and contradicted her earlier declarations in her September 17, 1996 letter.

Moreover, the Court upheld the University’s decision to suspend Bañez and Cantillas during the administrative investigation. Preventive suspension is deemed appropriate when an employee’s continued presence poses a threat to the employer’s interests or the safety of co-workers. This measure aligns with established legal principles as noted in Manila Doctors Hospital v. National Labor Relations Commission:

Where the continued employment of an employee poses a serious and imminent threat to the life and property of the employer or his co-employees, preventive suspension is proper.

In cases of termination, the employer bears the responsibility of proving the lawfulness of the dismissal. The University successfully demonstrated serious misconduct on Bañez’s part. The Supreme Court, citing Ha Yuan Restaurant v. National Labor Relations Commission, defined misconduct as:

improper or wrongful conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment.

The Court determined that Bañez’s actions met the criteria for serious misconduct, given that she had accepted fees from students in violation of University regulations. The Court emphasized that direct evidence of conspiracy is not required; it can be inferred from the actions of the individuals involved. As in Sim, Jr. v. Court of Appeals, the Court acknowledged that conspiracy could be deduced from their acts before, during, and after the commission of their fraudulent scheme.

Regarding due process, the Court found that Bañez had been given sufficient opportunities to address the charges against her. The University had scheduled three administrative investigations, and despite Bañez’s request for the second setting, she failed to attend any of them. As the Supreme Court emphasized in Nueva Ecjia Electric Cooperative (Neeco II) v. National Labor Relations Commission:

the essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one’s side. A formal or trial type hearing is not at all times and in all instances essential to due process, the requirements of which are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy.

The Supreme Court, however, modified the Court of Appeals’ ruling regarding Bañez’s monetary claims. Despite the validity of her dismissal, the Court affirmed that Bañez was entitled to receive benefits under the law and the CBA, including 13th month pay, salary increases, cash conversion of unused leave, and longevity pay. It emphasized that the employer bears the burden of proving that these benefits have been paid. The Court stated that the University could not forfeit Bañez’s benefits as a consequence of her termination, as there was no specific University rule or CBA provision allowing such forfeiture, distinguishing this case from San Miguel Corporation v. National Labor Relations Commission. Thus, the University was directed to release all monetary benefits due to Bañez as of her termination date.

FAQs

What was the key issue in this case?	The central issue was whether Estrella Bañez’s dismissal from De La Salle University was legal, considering allegations of her involvement in fraudulent activities, and whether she was entitled to benefits despite her termination.
What constitutes serious misconduct in the context of labor law?	Serious misconduct involves improper or wrongful conduct that violates established rules, is willful, and indicates wrongful intent, making an employee unfit to continue working for the employer. This includes actions like fraud or breach of trust.
Can an employer forfeit an employee’s benefits as a consequence of termination?	No, an employer cannot automatically forfeit an employee’s benefits upon termination unless there is a specific company rule or CBA provision that explicitly allows for such forfeiture as a penalty. Without such provisions, employees are still entitled to their earned benefits.
What is the role of due process in employee dismissal cases?	Due process requires that an employee be given a fair opportunity to be heard and defend themselves against accusations before being terminated. This typically involves providing notice of the charges and allowing the employee to present their side of the story.
What type of evidence is needed to prove employee misconduct?	Substantial evidence is required to prove employee misconduct, which may include testimonies from witnesses, documents, and other relevant information that support the allegations against the employee. Direct evidence of conspiracy is not always necessary; it can be inferred from the actions of the individuals involved.
What is preventive suspension and when is it appropriate?	Preventive suspension is the temporary suspension of an employee during an investigation, and it is appropriate when the employee’s continued presence poses a serious and imminent threat to the employer’s interests, property, or the safety of co-workers.
What benefits are employees typically entitled to upon termination?	Employees are typically entitled to benefits such as proportional 13th month pay, salary increases, converted vacation and sick leave credits, and longevity pay, as mandated by law or collective bargaining agreements (CBAs), unless the CBA or company policy states otherwise.
What is the employer’s burden of proof in termination cases?	In termination cases, the employer has the burden of proving that the employee was lawfully dismissed, meaning that there was a just cause for the termination and that the employee was afforded due process.

The ruling in Bañez v. De La Salle University clarifies the balance between an employer’s right to discipline and terminate employees for misconduct and an employee’s entitlement to earned benefits. It reinforces the necessity of adhering to due process and providing substantial evidence when terminating employees, while also protecting employees’ rights to receive legally and contractually mandated benefits.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Bañez v. De La Salle University, G.R. No. 167177, September 27, 2006