LOSS OF TRUST AND CONFIDENCE AS A JUST CAUSE FOR TERMINATION — CMS LAW 6/17/23, 7:03 PM

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LOSS OF TRUST AND CONFIDENCE AS A JUST

CAUSE FOR TERMINATION
OCTOBER 19, · PHILIPPINE LAW (/NEWS-PUBLICATIONS/TAG/PHILIPPINE+LAW), LABOR (/NEWS-PUBLICATIONS/TAG/LABOR), DISMISSAL

2020 (/NEWS-PUBLICATIONS/TAG/DISMISSAL)

Article 297 [282] of the Labor Code provides that an employer

may terminate the services of its employee for “fraud or willful
breach by the employee of the trust reposed in him by his
employer or duly authorized representative.” But what is
willful breach of trust really? Can this ground be used against
any employee? Or are there strict requisites that employers
must comply with?

In the recent case of San Miguel Corporation v. Gomez (G.R.

No. 200815, 24 August 2020), the Supreme Court reiterated the
principles involved in termination cases for breach of trust. In
that case, San Miguel Corporation (SMC), a company engaged
in the business of manufacturing fermented beverages,
particularly beer, dismissed Gomez, a coordinator in its
mailing department, for receiving commissions from SMC’s
courier service provider C2K and allowing another courier
service provider to use fake C2k receipts to collect the fees. This
caused tremendous losses to SMC. After an administrative
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LOSS OF TRUST AND CONFIDENCE AS A JUST CAUSE FOR TERMINATION — CMS LAW 6/17/23, 7:03 PM

caused tremendous losses to SMC. After an administrative

investigation and hearing, Gomez was found guilty and her
employment was terminated. She questioned her dismissal.

In ruling in favor of SMC, the Supreme Court held that as a

rule, employers have the discretion to manage its own affairs,
which includes the imposition of disciplinary measures on its
employees. Thus, employers are generally given wide latitude
in terminating the services of employees who perform
functions which by their nature require the employer 's full
trust and confidence.

Nonetheless, employers may not arbitrarily dismiss their

employees by simply invoking Article 297 [282](c). The loss of
confidence must be genuine and cannot be used as a
subterfuge for causes which are improper, illegal or
unjustified. Loss of confidence as a ground for dismissal has
never been intended to afford an occasion for abuse by the
employer of its prerogative, as it can easily be subject to abuse
because of its subjective nature.

Guidelines When Loss of Confidence Constitutes a Valid

Ground for Dismissal

The language of Article 297 [282](c) of the Labor Code states

that the loss of trust and confidence must be based on willful
breach of the trust reposed in the employee by his employer.
Such breach is willful if it is done intentionally, knowingly, and
purposely, without justifiable excuse, as distinguished from an
act done carelessly, thoughtlessly,
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LOSS OF TRUST AND CONFIDENCE AS A JUST CAUSE FOR TERMINATION — CMS LAW 6/17/23, 7:03 PM

act done carelessly, thoughtlessly,

heedlessly or inadvertently. Moreover, it must be based on

substantial evidence and not on the employer's whims or
caprices or suspicions otherwise, the employee would eternally
remain at the mercy of the employer. Loss of confidence must
not be indiscriminately used as a shield by the employer against
a claim that the dismissal of an employee was arbitrary. And, in
order to constitute a just cause for dismissal, the act
complained of must be work-related and shows that the
employee concerned is unfit to continue working for the
employer. In addition, loss of confidence as a just cause for
termination of employment is premised on the fact that the
employee concerned holds a position of responsibility, trust
and confidence or that the employee concerned is entrusted
with confidence with respect to delicate matters, such as the
handling or care and protection of the property and assets of
the employer. The betrayal of this trust is the essence of the
offense for which an employee is penalized.

Requisites

The requisites for dismissal on the ground of loss of trust and

confidence are: 1) the employee concerned must be holding a
position of trust and confidence; (2) there must be an act that

would justify the loss of trust and confidence; and (3) such loss
of trust relates to the employee's performance of duties.

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LOSS OF TRUST AND CONFIDENCE AS A JUST CAUSE FOR TERMINATION — CMS LAW 6/17/23, 7:03 PM

Position of Trust and Confidence

Loss of confidence should ideally apply only to cases involving

employees occupying positions of trust and confidence or to
those situations where the employee is routinely charged with
the care and custody of the employer's money or property. To
the first class belong managerial employees, i.e., those vested
with the powers

or prerogatives to lay down management policies and/or to

hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees or effectively recommend such
managerial actions; and to the second class belong cashiers,
auditors, property custodians, etc., or those who, in the normal
and routine exercise of their functions, regularly handle
significant amounts of money or property.

The Supreme Court held that Gomez indeed occupied a

position of trust and confidence since she was entrusted with
SMC’s property, in particular its mail matter which included
weighing and determining volumes of documents to be
shipped. Thus, she was routinely charged with custody of
SMC’s mail matter.

Gomez was also to have found to have acted willfully,

intentionally, knowingly, purposely, and without justifiable
excuse disregarded SMC's rules and regulations in the
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LOSS OF TRUST AND CONFIDENCE AS A JUST CAUSE FOR TERMINATION — CMS LAW 6/17/23, 7:03 PM

excuse disregarded SMC's rules and regulations in the

workplace. The High Court noted Gomez’s act of intervening
in the transaction involving the fake receipts, as well as
collecting a 25% commission from the total payment received
by C2K.

In termination cases, the employer bears the burden of proving

that the employee’s dismissal was for a valid and authorized
cause. Consequently, the failure of the employer to prove that
the dismissal was valid, would mean that the dismissal was
unjustified, and thus illegal.

In this case, SMC was able to fully discharge its burden.

The foregoing article is for general informational and

educational purposes only. It should not be treated and is not to
be considered as legal advice or opinion. The views expressed in
this article are those only of the author.

Eric M. Menchavez, Jr. is a Partner at Cokaliong Menchavez &

Senining-Judilla Law Offices (CMS LAW), Cebu.

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