Loss of Trust: A Valid Ground for Employee Dismissal?

G.R. No. 119527, July 03, 1996

Imagine working diligently for a company for nearly two decades, only to be dismissed because of a perceived breach of trust. This scenario highlights a critical area of labor law: the extent to which an employer can terminate an employee based on loss of trust and confidence. The case of Evelyn J. Garcia vs. National Labor Relations Commission delves into this issue, exploring the boundaries of employer rights and employee protection in the Philippines.

Evelyn Garcia, a school cashier with 19 years of service at Holy Trinity Academy, was dismissed due to alleged loss of confidence, gross negligence, and dishonesty. The school cited irregularities in her handling of funds. Garcia contested her dismissal, claiming it was too harsh for a single mistake. The Supreme Court’s decision in this case clarifies the circumstances under which an employer can validly terminate an employee for breach of trust and the importance of adhering to due process.

Understanding Breach of Trust in Philippine Labor Law

Philippine labor law recognizes that employers have the right to terminate employees for just causes. One such cause is “fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.” This is often referred to as ‘loss of trust and confidence’. However, not every instance of perceived wrongdoing justifies dismissal. The breach of trust must be related to the performance of the employee’s duties and must be of such a nature as to justify the employer’s loss of confidence.

The Labor Code of the Philippines, specifically Article 297 [formerly Article 282], outlines the just causes for termination:

“An employer may terminate an employment for any of the following causes:
(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.”

For managerial employees, the degree of trust and confidence is higher, and therefore, the grounds for termination based on loss of trust are broader. However, for rank-and-file employees, the breach of trust must be related to acts of dishonesty or fraud.

For example, imagine a warehouse worker responsible for inventory management. If the employer discovers the worker has been secretly selling items from the warehouse for personal gain, this would constitute a valid ground for dismissal based on breach of trust. However, a minor accounting error, without evidence of dishonesty, may not be sufficient.

The Case of Evelyn Garcia: Facts and Legal Proceedings

Evelyn Garcia’s case unfolded as follows:

• Garcia worked as a school cashier for Holy Trinity Academy for 19 years.
• An incident occurred on June 15, 1993, involving a discrepancy in a bank deposit, with P50,000.00 missing.
• The school administration also found other irregularities, including delayed deposits and issues with official receipts.
• Garcia was suspended for 90 days and subsequently dismissed on October 5, 1993.
• She filed a complaint for illegal dismissal.
• The Labor Arbiter initially ruled in her favor, awarding separation pay.
• The National Labor Relations Commission (NLRC) reversed the Labor Arbiter’s decision, finding her dismissal valid but ordering the school to pay indemnity for failure to observe due process.

The Supreme Court ultimately affirmed the NLRC’s decision with a modification, stating:

“Bearing in mind that the position of cashier is a highly sensitive position, requiring as it does the attributes of absolute trust and honesty because of the temptations attendant to the daily handling of money, petitioner’s acts could not help but sow mistrust and loss of confidence on the part of respondent employer. The Court agrees with the Commission that the resulting breach of trust constitutes a valid cause for the dismissal of petitioner.”

However, the Court also emphasized the importance of due process:

“The Court likewise concludes that due process was not observed by the school in terminating the services of petitioner… In short, there was never an opportunity for petitioner to defend herself against the charges hurled against her.”

Practical Implications for Employers and Employees

This case underscores the importance of trust in the employer-employee relationship, particularly in positions involving handling of finances. Employers are justified in terminating employees who breach this trust through acts of dishonesty or gross negligence. However, employers must also adhere to due process requirements, including providing the employee with an opportunity to be heard and defend themselves against the charges.

Key Lessons:

• Trust is Paramount: Positions involving handling of finances require a high degree of trust and honesty.
• Due Process is Essential: Employers must follow proper procedures when terminating an employee, including providing notice and an opportunity to be heard.
• Documentation is Key: Employers should maintain accurate records of any irregularities or incidents that lead to a loss of trust.
• Proportionality: The severity of the penalty (dismissal) should be proportionate to the offense committed. Minor infractions may not warrant termination.

Frequently Asked Questions (FAQs)

Q: What constitutes a valid ground for dismissal based on loss of trust and confidence?

A: The breach of trust must be related to the employee’s duties and must be of such a nature as to justify the employer’s loss of confidence. For rank-and-file employees, it generally involves acts of dishonesty or fraud.

Q: What is due process in the context of employee termination?

A: Due process requires that the employee be given notice of the charges against them and an opportunity to be heard and defend themselves.

Q: Can an employer immediately dismiss an employee suspected of dishonesty?

A: No. The employer must conduct a thorough investigation and provide the employee with an opportunity to explain their side of the story before making a decision to terminate.

Q: What happens if an employer dismisses an employee without due process?

A: Even if the dismissal is for a valid cause, the employer may be required to pay indemnity to the employee for failing to observe due process.

Q: Is a single mistake enough to justify dismissal based on loss of trust?

A: It depends on the nature and severity of the mistake. A minor, unintentional error may not be sufficient, but a deliberate act of dishonesty or gross negligence could be.

Q: What should an employee do if they believe they have been unfairly dismissed?

A: The employee should consult with a labor lawyer and file a complaint with the National Labor Relations Commission (NLRC) within a specified timeframe.

Q: How does this ruling affect future cases of employee dismissal?

A: This ruling reinforces the importance of both trust and due process in the employer-employee relationship and serves as a guide for future cases involving termination based on loss of trust and confidence.

ASG Law specializes in labor law in the Philippines. Contact us or email hello@asglawpartners.com to schedule a consultation.