In a labor dispute, the Supreme Court affirmed the decision finding an employee’s dismissal illegal due to the employer’s failure to provide substantial evidence of the employee’s involvement in the alleged misconduct. The court emphasized that employers must satisfy stringent requirements to justify a dismissal based on loss of trust and confidence, especially for rank-and-file employees. This ruling underscores the importance of due process and the need for concrete evidence when terminating employees based on breaches of trust.

When Accusations Lack Proof: Examining Trust and Due Process in Employment Termination

This case revolves around Distribution & Control Products, Inc.’s decision to dismiss Jeffrey E. Santos, their company driver, based on alleged loss of trust and confidence. The company suspected Santos of involvement in the theft of electrical products, leading to his preventive suspension and subsequent termination. The core legal question is whether the company adequately proved its loss of trust and followed proper procedure in terminating Santos’s employment.

Philippine law strongly protects employees’ rights to job security. This protection means that employers can only terminate an employee for a just or authorized cause, and they must follow due process. As the Supreme Court reiterated in Brown Madonna Press, Inc. v. Casas:

In determining whether an employee’s dismissal had been legal, the inquiry focuses on whether the dismissal violated his right to substantial and procedural due process. An employee’s right not to be dismissed without just or authorized cause as provided by law, is covered by his right to substantial due process. Compliance with procedure provided in the Labor Code, on the other hand, constitutes the procedural due process right of an employee.

The Court further explained the consequences of violating either aspect of due process. If the dismissal lacks just or authorized cause, it is invalid, and the employee is entitled to reinstatement and backwages. However, if the dismissal is for just cause but lacks proper procedure, the employer must pay nominal damages.

The burden of proof in termination cases rests firmly on the employer. According to the Supreme Court in Agusan Del Norte Electric Cooperative, Inc., et al. v. Cagampang, et al.:

In termination cases, the burden of proof rests upon the employer to show that the dismissal is for just and valid cause; failure to do so would necessarily mean that the dismissal was illegal. The employer’s case succeeds or fails on the strength of its evidence and not on the weakness of the employee’s defense. If doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.

In this case, the company claimed it terminated Santos’s employment due to loss of trust and confidence. Under Article 282(c) of the Labor Code, an employer can terminate employment for “[f]raud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.”

However, the employer must meet specific conditions to invoke this ground successfully. First, the employee must hold a position of trust and confidence. Jurisprudence identifies two classes of such positions: managerial employees and those who handle significant amounts of money or property, like cashiers and property custodians. Second, the employer must prove an act justifying the loss of trust. This act must be real, based on clearly established facts, and willful, meaning it was done intentionally and without justifiable excuse.

For rank-and-file personnel, like Santos, the Supreme Court has emphasized the need for concrete evidence. Loss of trust and confidence requires proof of involvement in the alleged events, and mere accusations are insufficient. While absolute proof is unnecessary, the employer must have reasonable grounds to believe the employee is responsible for the misconduct.

In Santos’s case, the Labor Arbiter (LA), the National Labor Relations Commission (NLRC), and the Court of Appeals (CA) all agreed that the company failed to provide enough evidence to justify the termination. These factual findings are generally given great respect by the Supreme Court, as labor tribunals are best positioned to resolve factual disputes. The company argued that Santos occupied a position of trust, given his role in handling company products. However, the courts found that the company did not present substantial evidence linking Santos to the theft of the missing items.

Beyond the substantive aspect, procedural due process is crucial in termination cases. This requires providing the employee with two written notices: the first informing them of the grounds for dismissal and giving them an opportunity to explain, and the second informing them of the employer’s decision to dismiss. The employee must also have an opportunity to be heard, even if a formal hearing isn’t always required. In Unilever Philippines, Inc. v. Rivera, the Supreme Court outlined the steps for complying with procedural due process:

(1) The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period.

(2) After serving the first notice, the employers should schedule and conduct a hearing or conference wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence presented against them by the management.

(3) After determining that termination of employment is justified, the employers shall serve the employees a written notice of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and (2) grounds have been established to justify the severance of their employment.

Here, the courts found that the company failed to meet these procedural requirements. Santos only received a notice of preventive suspension, which didn’t explain the allegations against him or provide an opportunity to respond. The company argued that Santos abandoned his job, but the courts rejected this claim, finding it unsupported by evidence. In conclusion, the Supreme Court upheld the lower courts’ decisions, emphasizing the need for employers to provide substantial evidence and follow proper procedure when terminating employees based on loss of trust and confidence.

FAQs

What was the key issue in this case?	The key issue was whether the employer had sufficiently proven loss of trust and confidence and followed due process when terminating the employee.
What is required for a valid dismissal based on loss of trust?	The employee must hold a position of trust, and the employer must prove an actual act that justifies the loss of trust, supported by clear evidence.
What are the two notices required for procedural due process?	The first notice informs the employee of the charges against them and provides an opportunity to explain. The second notice informs the employee of the employer’s decision to terminate their employment.
Who has the burden of proof in termination cases?	The burden of proof rests on the employer to demonstrate that the dismissal was for a just and valid cause.
What kind of evidence is needed to prove loss of trust?	The employer needs to present substantial evidence, more than mere suspicion or uncorroborated assertions, linking the employee to the alleged misconduct.
Can an employer dismiss an employee based solely on suspicion?	No, mere suspicion is not enough. The employer must have reasonable grounds, supported by evidence, to believe the employee is responsible for the misconduct.
What happens if an employer fails to follow procedural due process?	Even if there is a valid cause for dismissal, failure to follow procedural due process may require the employer to pay nominal damages to the employee.
What is the effect of a finding of illegal dismissal?	A finding of illegal dismissal typically results in the employee’s reinstatement with backwages, or separation pay if reinstatement is not feasible.

This case serves as a reminder to employers of the stringent requirements for validly terminating an employee based on loss of trust and confidence. It highlights the importance of conducting thorough investigations, gathering substantial evidence, and strictly adhering to procedural due process to avoid liability for illegal 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: DISTRIBUTION & CONTROL PRODUCTS, INC. v. JEFFREY E. SANTOS, G.R. No. 212616, July 10, 2017