The Supreme Court has affirmed that employers cannot dismiss employees based on unsubstantiated claims of loss of trust and confidence. The Court emphasized the importance of proving actual and willful breach of duty with substantial evidence. This ruling underscores the protection of employees’ rights against arbitrary dismissals, ensuring that employers act in good faith and observe due process in disciplinary actions.

Signing Authority or Honest Mistake? Examining the Boundaries of Trust in Employment

This case revolves around Laarne C. Bensing’s dismissal from Leo’s Restaurant and Bar Cafe Mountain Suite Business Apartelle. Bensing was terminated for allegedly signing a contract with Pepsi without authorization and failing to account for Pepsi donations. The central legal question is whether the employer had sufficient and valid cause to terminate Bensing’s employment based on loss of trust and confidence.

An employer has the right to dismiss an employee for just causes, including willful breach of trust and confidence. However, to temper such right to dismiss, the employer bears the burden to demonstrate that the dismissal is for a just cause. The determination of just cause must be made with fairness, in good faith, and after observing due process. According to the Supreme Court in Torres v. Rural Bank of San Juan, Inc., 706 Phil. 355, 369 (2013),

To dismiss an employee on the ground of loss of trust and confidence, two requisites must concur: (a) the concerned employee must be holding a position of trust; and, (b) the loss of trust must be based on willful breach of trust based on clearly established facts.

The Court emphasized that loss of trust and confidence should not be used as a subterfuge for improper, illegal, or unjustified causes. It must be genuine and not a mere afterthought to justify earlier actions taken in bad faith, as highlighted in General Bank & Trust Co. v. Court of Appeals, 220 Phil. 243,252 (1985). In Bensing’s case, the Supreme Court found that while she held a position of trust as Administrative Officer/HR Head, the employer failed to prove their loss of trust was based on clearly established facts.

The employer’s primary contention was that Bensing signed the contract with Pepsi without proper authorization. However, Bensing explained that she had been verbally authorized by Leo Y. Lua, the Manager, to sign the agreement. This was corroborated by Jovenal Ablanque, Pepsi’s Sales Manager, who confirmed that Leo had agreed to the contract and authorized Bensing to sign it on behalf of the Restobar. Thus, the Court determined that signing the Pepsi contract was not a sufficient basis for the employer to lose trust in Bensing.

The Labor Arbiter (LA) initially ruled that Bensing was validly dismissed but granted her separation pay, acknowledging that she had acted in good faith when entering the Pepsi contract. The National Labor Relations Commission (NLRC) initially found the dismissal illegal but later reversed its decision, which the Court of Appeals (CA) then overturned, reinstating the NLRC’s original finding of illegal dismissal. The Supreme Court agreed with the CA, emphasizing that even if Bensing had no explicit order to sign the agreement, she acted within her authority as the person in charge of all operational, administrative, and functional matters of the establishments. The Court observed that there was no evidence of malice or fraudulent intent on Bensing’s part, and the Restobar did not suffer any damage from the Pepsi contract.

Another charge against Bensing was that she failed to account for a certain number of Pepsi products donated to the Restobar. However, Pepsi clarified that it had only donated 10 cases of products on the opening night and an additional 20 cases later. Pepsi admitted its lapses and apologized for any confusion, requesting that the employer disregard the inadvertent entries in the documents provided. Given this clarification, the Court found that the allegation of unaccounted donations was untenable.

The employer also accused Bensing of dishonesty for allegedly charging 50% of her personal food orders to the Restobar’s account. The Court noted that this accusation was not specified in the Notice of Termination and that the expenses were eventually deducted from Bensing’s salary. Therefore, the Court deemed this charge unsubstantiated.

Based on the evidence presented, the Court concluded that the employer’s loss of trust and confidence was merely simulated and arbitrarily asserted despite sufficient evidence to the contrary. Because the employer failed to show that Bensing actually and willfully breached their trust, the Court upheld the CA’s ruling that Bensing was dismissed without any valid cause.

The Supreme Court affirmed the grant of moral and exemplary damages and attorney’s fees in favor of Bensing. Moral damages are awarded when an employer acts in bad faith or fraud or in a manner oppressive to labor. The Court found that the employer acted in bad faith by dismissing Bensing despite being aware of the Pepsi contract and Bensing’s explanation. The Court deemed that the dismissal was predetermined, warranting the award of damages. Exemplary damages were awarded to deter employers from committing similar acts, and attorney’s fees were granted since Bensing was compelled to file the case to protect her interests.

FAQs

What was the key issue in this case?	The key issue was whether the employer had sufficient and valid cause to terminate the employee based on loss of trust and confidence due to allegations of unauthorized contract signing and unaccounted donations.
What is required to dismiss an employee for loss of trust and confidence?	To dismiss an employee for loss of trust and confidence, the employee must hold a position of trust, and the loss of trust must be based on a willful breach of trust supported by clearly established facts.
What evidence did the employer present to justify the dismissal?	The employer presented evidence that the employee signed a contract without authorization and failed to account for donated items. However, the employee provided explanations and corroborating evidence that the employer failed to sufficiently refute.
How did the Court assess the employer’s claims of loss of trust?	The Court assessed the employer’s claims by examining whether the alleged actions constituted a willful breach of duty, were supported by substantial evidence, and were not merely based on suspicion or caprice.
What was the employee’s defense against the allegations?	The employee defended herself by explaining that she had verbal authorization to sign the contract and that the donations were properly accounted for, supported by third-party testimony and documentation.
What damages were awarded to the employee?	The employee was awarded backwages, separation pay, moral and exemplary damages, 13th-month pay differential, and attorney’s fees due to the illegal dismissal.
What role did good faith play in the Court’s decision?	The Court considered the employee’s good faith in signing the contract, noting that there was no evidence of malicious intent or personal benefit. This supported the conclusion that there was no willful breach of trust.
What clarification did Pepsi provide in the case?	Pepsi clarified that they had donated a specific number of items and apologized for any confusion, thereby undermining the employer’s claim that the employee failed to account for the donations.
What constitutes bad faith on the part of the employer?	Bad faith on the part of the employer includes acting with a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity, such as pre-determining a dismissal before allowing the employee to explain.
What is the significance of procedural due process in employment termination?	Procedural due process requires employers to provide employees with notice and an opportunity to be heard before termination. Failure to observe due process can lead to a finding of illegal dismissal, even if there is a valid cause.

This case reinforces the importance of employers acting in good faith and with due process when terminating employees for loss of trust and confidence. The ruling serves as a reminder that mere allegations are insufficient; employers must provide substantial evidence of willful breach of duty to justify dismissal.

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: LEO’S RESTAURANT AND BAR CAFÉ MOUNTAIN SUITE BUSINESS APARTELLE VS. LAARNE C. BENSING, G.R. No. 208535, October 19, 2016