The Supreme Court affirmed that an employee’s dismissal was valid due to breach of trust, arising from his involvement in the pilferage of company property. This decision emphasizes that even rank-and-file employees can be terminated for loss of confidence if they are entrusted with the care of company assets and their actions demonstrate a betrayal of that trust. The ruling underscores the importance of employee integrity and the employer’s right to protect its assets from internal misconduct. This case serves as a reminder of the serious consequences of employee dishonesty and the employer’s prerogative to maintain a trustworthy workforce.

The Foreman’s Fall: When Familiarity Breeds Breach of Trust

Narciso T. Matis, a foreman at Manila Electric Company (Meralco), contested his dismissal, arguing it was illegal and lacked just cause. The controversy stemmed from an incident on May 25, 2006, where a non-Meralco employee, Norberto Llanes, was observed pilfering electrical supplies from Meralco trucks while Matis and his crew were present. Meralco terminated Matis’s employment, citing serious misconduct, fraud, or willful breach of trust. The central legal question was whether Meralco had sufficient grounds to dismiss Matis based on his alleged complicity or gross negligence in the pilferage incident, thereby justifying the termination of his employment.

The Labor Arbiter (LA) initially deemed the dismissal too harsh, suggesting suspension instead, but the National Labor Relations Commission (NLRC) reversed this decision, finding Matis’s dismissal valid. The Court of Appeals (CA) affirmed the NLRC’s ruling, emphasizing the evidence of Matis’s suspicious leniency and the significant quantity of materials stolen. Before reaching the Supreme Court, Matis insisted that Meralco failed to prove his illegal dismissal based on gross negligence constituting a breach of trust, stating that the single incident on May 25, 2006, did not warrant termination.

In examining the concept of gross negligence, the Supreme Court clarified that it connotes a lack of care in performing one’s duties, indicating a thoughtless disregard for consequences. Fraud and willful neglect imply bad faith in failing to perform one’s job to the employer’s detriment. While Matis argued that the incident was isolated, the Court pointed out that Llanes, the pilferer, had been seen during Meralco operations previously, and Matis’s familiarity with Llanes suggested complicity rather than mere negligence.

Even assuming Matis was merely negligent, the Court argued that his inaction could be considered a single act of negligence, insufficient to warrant dismissal based solely on that ground. However, the Court then shifted its focus to Article 282 (c) of the Labor Code, which allows termination for fraud or willful breach of trust. This provision is particularly relevant when an employee holds a position of trust and is expected to demonstrate greater fidelity to their duties. The essence of the offense is the betrayal of that trust, and the Court emphasized that this ground for dismissal should not be used arbitrarily by employers.

A breach of trust is considered willful if it is done intentionally, knowingly, and purposely, without justifiable excuse. Matis contended that he could not be removed on the ground of breach of trust because he was not a managerial employee or directly responsible for handling company funds or property. The Supreme Court rejected this argument, clarifying that loss of confidence applies not only to managerial employees but also to those who are routinely charged with the care and custody of the employer’s money or property, including rank-and-file employees like cashiers or property custodians.

The Court highlighted that Matis, as a foreman earning a substantial monthly salary, was routinely entrusted with the care and custody of Meralco’s properties, given that the vehicles used in repair and maintenance carried essential equipment and supplies. The Supreme Court then cited the guidelines established in Apo Cement Corp. v. Baptisma, outlining the requirements for validly dismissing an employee based on loss of trust and confidence. These guidelines state that loss of confidence should not be simulated, used as a subterfuge, arbitrarily asserted, or a mere afterthought, and it must be based on clearly established facts.

The court emphasized that contrary to Matis’s claim of being preoccupied with the replacement of the rotting post, he admitted to lingering to look after the truck. The crew’s familiarity with Llanes, the culprit, and his casual boarding of the trucks, despite being a non-employee, further substantiated the breach of trust. Matis was observed conversing with Llanes inside the truck, during which Llanes pilfered Meralco properties. Matis’s complicity was evident through his familiarity with Llanes, inaction during the theft, and failure to report the incident.

In Meralco v. Gala, a similar case involving the same incident, the Supreme Court stated that the Meralco crew likely allowed or even asked Llanes to be present during their operations to serve as a conduit for pilfered company supplies. The Court quoted the Gala case, stating:

The established fact that Llanes, a non-Meralco employee, was often seen during company operations, conversing with the foremen, for reason or reasons connected with the ongoing company operations, gives rise to the question: what was he doing there? Apparently, he had been visiting Meralco worksites, at least in the Valenzuela Sector, not simply to socialize, but to do something else. As testified to by witnesses, he was picking up unused supplies and materials that were not returned to the company. From these factual premises, it is not hard to conclude that this activity was for the mutual pecuniary benefit of himself and the crew who tolerated the practice. For one working at the scene who had seen or who had shown familiarity with Llanes (a non-Meralco employee), not to have known the reason for his presence is to disregard the obvious, or at least the very suspicious.

The Court stressed that proof beyond a reasonable doubt is not necessary to justify loss of confidence, as long as the employer has reasonable grounds to believe the employee is responsible for the misconduct. Meralco established, through substantial evidence, that Matis’s involvement in the incident rendered him unworthy of the trust reposed in him as a foreman.

Referencing Vergara v. NLRC, the Court noted that the filing of a complaint by the public prosecutor is sufficient grounds for dismissal based on loss of trust and confidence. The evidence supporting the criminal charge, which is deemed sufficient to show prima facie guilt after a preliminary investigation, constitutes just cause for termination. The Assistant City Prosecutor of Valenzuela City had recommended the filing of information for qualified theft against Matis and the others.

Even an employee’s acquittal in a criminal case does not preclude a determination of guilt regarding acts detrimental to the employer’s interest, resulting in loss of trust and confidence. In this case, the trial court acquitted Matis due to insufficient evidence to warrant conviction beyond a reasonable doubt. While the evidence did not meet the standard for criminal cases, it substantially proved Matis’s dishonest act, justifying his dismissal from employment. Length of service is generally considered when determining the penalty for an erring employee. However, in cases of breach of trust, the length of service is taken against the employee, reflecting a regrettable lack of loyalty. Unlike other just causes, trust in an employee, once lost, is difficult to regain.

Matis’s involvement in the pilferage of Meralco’s properties resulted in the company’s loss of confidence in him. Given his familiarity with Llanes, disregard for company rules, and passivity during the theft, Matis’s length of service exacerbated his disloyalty. Fairness dictated that Matis, having breached the confidence reposed in him, should not continue his employment with Meralco.

FAQs

What was the key issue in this case?	The key issue was whether Manila Electric Company (Meralco) had sufficient grounds to dismiss Narciso T. Matis, a foreman, based on his alleged complicity or gross negligence in a pilferage incident. The court examined if his actions constituted a breach of trust, justifying termination.
What is the legal basis for dismissing an employee due to loss of trust and confidence?	Article 282(c) of the Labor Code allows an employer to terminate employment for fraud or willful breach of trust by the employee. This applies to employees in positions of trust or those responsible for the employer’s money or property.
Does loss of trust and confidence apply only to managerial employees?	No, loss of trust and confidence can apply to both managerial and rank-and-file employees. It extends to employees routinely charged with the care and custody of the employer’s money or property.
What is the difference between gross negligence and breach of trust?	Gross negligence involves a lack of care in performing duties, whereas breach of trust involves a betrayal of the confidence reposed in an employee by the employer. Breach of trust often implies intentional or knowing misconduct.
What criteria must be met for an employer to validly dismiss an employee based on loss of trust and confidence?	The loss of confidence must not be simulated, used as a subterfuge, arbitrarily asserted, or a mere afterthought. It must be based on clearly established facts sufficient to warrant the employee’s separation from work.
Can an employee be dismissed for loss of trust and confidence even if acquitted in a related criminal case?	Yes, an acquittal in a criminal case does not automatically preclude a determination that the employee is guilty of acts detrimental to the employer’s interest. The standards of proof differ between criminal and labor cases.
How does length of service affect a dismissal for breach of trust?	In cases of breach of trust, the length of service is often taken against the employee. It reflects a regrettable lack of loyalty, which should have been strengthened over time, rather than betrayed.
What evidence did the court consider in this case?	The court considered the testimonies of witnesses, video evidence of the pilferage, the employee’s familiarity with the culprit, and the circumstances surrounding the incident. It also considered the recommendation to file criminal charges against the employee.

This case reinforces the principle that employees in positions of trust, whether managerial or rank-and-file, must uphold their duty of fidelity to their employers. The decision underscores the employer’s right to protect its assets and maintain a trustworthy workforce, even if it means terminating long-serving employees who breach that trust.

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: Narciso T. Matis vs. Manila Electric Company, G.R. No. 206629, September 14, 2016