Understanding Dismissal Based on Loss of Trust and Confidence

Philippine Savings Bank vs. National Labor Relations Commission and Victoria T. Centeno, G.R. No. 111173, September 04, 1996

Imagine being fired from your job because your employer no longer trusts you. In the Philippines, this is a valid ground for dismissal, especially for employees handling sensitive responsibilities. But what does ‘loss of trust and confidence’ really mean, and how can you ensure your rights are protected? This article breaks down a landmark Supreme Court case, Philippine Savings Bank vs. National Labor Relations Commission and Victoria T. Centeno, to shed light on this complex issue.

This case explores the boundaries of an employer’s right to dismiss an employee based on loss of trust and confidence. It clarifies the importance of due process and the need for substantial evidence to justify such a dismissal. Understanding these nuances is crucial for both employers and employees to navigate labor disputes fairly and legally.

The Legal Landscape of Loss of Trust and Confidence

In the Philippines, employers can legally terminate an employee for just cause, as outlined in Article 297 (formerly Article 282) of the Labor Code. One of these just causes is ‘fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.’ This is commonly referred to as ‘loss of trust and confidence.’

However, this ground for dismissal is not a free pass for employers. The Supreme Court has consistently held that loss of trust and confidence, as a just cause for termination, must be based on substantial evidence and must be related to the performance of the employee’s duties. The loss of trust should not be feigned or used as a subterfuge for causes which are improper, illegal, or unjustified. It must be genuine and not a mere afterthought to justify an earlier decision to dismiss.

For example, consider a hypothetical situation: A cashier in a grocery store is suspected of stealing small amounts of money over several months. The store owner, after reviewing security footage and conducting an internal investigation, discovers a pattern of suspicious behavior. If the store owner can present this evidence to the cashier and provide an opportunity to explain, and the explanation is unsatisfactory, the store owner may have grounds to dismiss the cashier for loss of trust and confidence.

Key legal provisions that govern termination for loss of trust and confidence include:

• Article 297 (c) of the Labor Code: “Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.”
• Two-Notice Rule: Employers must provide two written notices to the employee: (1) a notice of the intent to dismiss, stating the grounds for dismissal; and (2) a notice of the decision to dismiss, after considering the employee’s response.

The PSBank Case: A Detailed Look

Victoria T. Centeno, an assistant cashier at Philippine Savings Bank (PSBank), faced accusations of falsifying deposit slips and causing a P15,000 shortage. The bank, after an internal investigation, placed her under preventive suspension and eventually dismissed her for loss of trust and confidence.

Centeno argued that her dismissal was illegal, claiming she was not given due process and that the accusations were baseless. The Labor Arbiter initially ruled in her favor, finding the bank guilty of illegal dismissal. The National Labor Relations Commission (NLRC) affirmed this decision, albeit with modifications regarding damages and backwages.

PSBank elevated the case to the Supreme Court, arguing that Centeno was validly dismissed for loss of trust and confidence and that she had been afforded due process.

Here’s a breakdown of the key events:

• November 16, 1984: Centeno, acting branch cashier, deposited P356,400 in Metrobank but the cash proof and batch sheets indicated P371,400.
• December 18, 1984: A discrepancy was discovered between the recorded deposit and the actual deposit.
• January 7, 1985: Centeno received a memorandum requiring her to explain the discrepancy and was preventively suspended.
• February 4, 1985: Centeno was dismissed for misappropriating the P15,000 shortage.

The Supreme Court, however, disagreed with the NLRC’s finding that Centeno was denied due process. The Court stated:

“The law requires that the employer must furnish the worker sought to be dismissed with two (2) written notices before termination may be validly effected: first, a notice apprising the employee of the particular acts or omission for which his dismissal is sought and, second, a subsequent notice informing the employee of the decision to dismiss him.”

The Court found that Centeno received both required notices. However, the Court ultimately sided with Centeno, stating:

“But the employer must clearly and convincingly establish the facts and incidents upon which its loss of confidence in the employee may be fairly made to rest, otherwise, the dismissal will be rendered illegal.”

The Court found that PSBank failed to provide substantial evidence to support its claim that Centeno falsified the deposit slip or misappropriated the funds. The allegedly falsified deposit slip was missing, and the bank’s evidence was largely circumstantial. The Court also noted that the shortage occurred on the day the regular cashier returned to work, raising doubts about Centeno’s sole responsibility.

Practical Implications of the Ruling

The PSBank case underscores the importance of due process and the need for substantial evidence when dismissing an employee for loss of trust and confidence. Employers must conduct thorough investigations, provide clear and specific reasons for dismissal, and offer employees a fair opportunity to respond. They cannot rely on mere suspicion or circumstantial evidence.

For employees, this case highlights the importance of understanding their rights and seeking legal counsel if they believe they have been unjustly dismissed. It also emphasizes the need to respond to employer inquiries and present their side of the story.

Key Lessons

• Substantial Evidence is Key: Employers must have concrete proof to support claims of dishonesty or breach of trust.
• Due Process Matters: Employees are entitled to notice and an opportunity to be heard before dismissal.
• Context is Crucial: The circumstances surrounding the alleged misconduct must be carefully considered.

Frequently Asked Questions

Q: What is ‘loss of trust and confidence’ as a ground for dismissal?

A: It refers to the employer’s loss of faith in an employee who holds a position of trust, such as a cashier or manager, due to actions that suggest dishonesty or a breach of their responsibilities.

Q: What evidence is needed to prove loss of trust and confidence?

A: Employers need substantial evidence, such as documents, witness testimonies, or audit reports, to demonstrate that the employee committed an act that justifies the loss of trust.

Q: What is the ‘two-notice rule’ in termination cases?

A: It requires employers to provide two written notices to the employee: one informing them of the intent to dismiss and the grounds for dismissal, and another informing them of the final decision after considering their response.

Q: Can an employee be dismissed based on suspicion alone?

A: No, suspicion alone is not sufficient. Employers must have concrete evidence to support their claims.

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

A: They should seek legal counsel immediately to understand their rights and explore options for challenging the dismissal.

Q: How long does an employee have to file a case for illegal dismissal?

A: An employee generally has three (3) years from the date of dismissal to file a complaint for illegal dismissal with the National Labor Relations Commission (NLRC).

Q: Does preventive suspension affect an illegal dismissal case?

A: Preventive suspension can be a factor, especially if it’s unduly long or appears to be a form of punishment before a proper investigation.

Q: What remedies are available to an illegally dismissed employee?

A: Remedies can include reinstatement to their former position, backwages (compensation for lost earnings), and potentially damages.

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