Loss of trust and confidence is a just cause for dismissal under Article 282(c) [now 297] of the Labor Code, which provides that an employer may terminate an employment for fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative. [Distribution & Control Products, Inc. vs. Santos, July 10, 2017, G.R. No. 212616]

However, according to the Supreme Court (SC), in order for the employer to properly invoke this ground, the employer must satisfy two conditions.

First, the employer must show that the employee concerned holds a position of trust and confidence. Jurisprudence provides for two classes of positions of trust.

The first class consists of managerial employees, or those who, by the nature of their position, are entrusted with confidential and delicate matters and from whom greater fidelity to duty is correspondingly expected. The second class includes cashiers, auditors, property custodians, or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of the employer’s money or property.

Second, the employer must establish the existence of an act justifying the loss of trust and confidence. To be a valid cause for dismissal, the act that betrays the employer’s trust must be real, i.e., founded on clearly established facts, and the employee’s breach of the trust must be willful, i.e., it was done intentionally, knowingly and purposely, without justifiable excuse.

Moreover, with respect to rank-and-file personnel, loss of trust and confidence, as ground for valid dismissal, requires proof of involvement in the alleged events in question, and that mere uncorroborated assertions and accusations by the employer will not be sufficient.

Stated differently, proof beyond reasonable doubt is not needed to justify the loss as long as the

employer has reasonable ground to believe that the employee is responsible for the misconduct and his participation therein renders him unworthy of the trust and confidence demanded of his position.

Nonetheless, the right of an employer to dismiss employees on the ground of loss of trust and confidence, however, must not be exercised arbitrarily and without just cause. Unsupported by sufficient proof, loss of confidence is without basis and may not be successfully invoked as a ground for dismissal. 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 and the loss must be founded on clearly established facts sufficient to warrant the employee’s separation from work.

Thus, when the breach of trust or loss of confidence alleged is not borne by clearly established facts, as in this case, such dismissal on the cited grounds cannot be allowed.

For instance, in a charge of theft of company property, the company should be able to discharge the burden of proving that their termination of employee’s employment was for a just and valid cause. This is a question of fact and it is settled that findings of fact of quasi-judicial agencies are accorded great respect, even finality.

Where the company failed to present substantial evidence to support their allegations that the employee had, in any way, participated in the theft of the company’s stolen items and that after his preventive suspension he no longer reported for work. In other words, if the company is not able to establish the existence of an act justifying their alleged loss of trust and confidence in employee, the dismissal can be held illegal.

See here the procedure to observe when the employee refuses to receive employer’s notice.

In addition, the company should send another copy by registered mail and keep the registry receipt for future reference.

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In the case of a managerial employee who is faced with investigation for willful breach of trust, he gives up the guarantee considering the rule that an employee who is reposed with trust and confidence can be easily dismissed for willful breach of such trust given the proven circumstances and substantial evidence.

While the rule in the case of Villanueva vs. National Labor Relations Commission (Rolia Villanueva vs. National Labor Relations Commission, G.R. No. 129413, July 27, 1998.) espouses that a rank and file employee who ascends to managerial position sheds off certain guaranties of his lower position, he must still be accorded the rights in relation to his security of tenure.

Thus, the right of the management to dismiss must be balanced against the managerial employee’s right to security of tenure which is not one of the guaranties he gives up.

Although the standards for their dismissal are less stringent, the loss of trust and confidence must be substantial and founded on clearly established facts sufficient to warrant the managerial employee’s separation from the company. Substantial evidence is of critical importance and the burden rests on the employer to prove from the company.

Due to its subjective nature, it can easily be concocted by an abusive employer and used as a subterfuge for causes which are improper, illegal or unjustified. In the termination of managerial employees based

on loss of trust and confidence, the employer’s evidence must clearly and convincingly establish the facts and incidents upon which the loss of confidence may fairly be made to rest.

One of the nightmares of a manager is to be held responsible for acts which he never committed or which he was not part of. But things like that happen due to his command responsibility.

His liability in such instance boils down to his neglect of duty. Thus, on the principle of respondeat superior or command responsibility alone, managerial employees may be held liable for negligence in the performance of their managerial duties, unless they can positively show that they were not involved. Their position requires a high degree of responsibility that necessarily includes unearthing of fraudulent and irregular activities.

In a case where a manager for the Healthcare Division was charged for her failure to report the anomalous transaction within her division involving fictitious invoices, her dismissal was upheld on account of command responsibility. Her duties, among others, were to detect fraudulent activities and irregularities within her Division and thereafter report the same to management.

Her position demands that she manage, control and take responsibility over activities in her department. It requires a high degree of responsibility that necessarily includes unearthing of fraudulent and irregular activities. This, she

failed to do. Her ‘bare, unsubstantiated and uncorroborated denial’ of her participation in the anomalies does not prove her innocence nor disprove her alleged guilt. On the contrary, such denial or failure to rebut the serious accusations hurled against her militate against her innocence and strengthened the adverse averments of the company.

The ordinary rule is that one who has knowledge peculiarly within his control, and refuses to divulge it, cannot complain if the court puts the most unfavorable construction upon his silence, and infers that a disclosure would have shown the fact to be as claimed by the opposing party.

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There must be some evidence to substantiate the claim and form a legal basis for loss of confidence. The employer cannot exercise arbitrarily and without just cause the right to dismiss an employee for loss of trust and confidence.

While it is true that loss of trust and confidence is a just cause for termination, it must not be simulated or concocted but must be supported by substantial evidence.

The evidence must be substantial and must establish clearly and convincingly the facts on which the loss of confidence rests and not on the employer’s arbitrariness, whims, caprices and suspicion. Substantial evidence is of critical importance and the burden rests on the employer to prove it.

The loss of trust and confidence must have some basis. Proof beyond reasonable doubt is not required. Thus, it is sufficient that there is reasonable ground to believe if not to entertain the moral conviction that the concerned employee is responsible for the misconduct and the nature of his participation therein rendered him absolutely unworthy of trust and confidence demanded by his position. (See the cases of Central Pangasinan Electric Cooperative, Inc. vs. Macaraeg, G.R. No. 145800, January 22, 2003, Sagales vs. Rustan’s Commercial Corp., supra; Uniwide Sales Warehouse Club vs. NLRC, G.R.

No. 154503, February 29, 2008, Norsk Hydro (Phils.), Inc., et al. vs. B. S. Rosales, et al., G.R. No. 162871, January 31, 2007 and Alcazaren vs. Univet Agricultural Products, Inc., G.R. No. 149628, November 22, 2005.)

Applying such rule, the dismissal of a managerial employee who sent e-mails to her company’s client informing the latter of her employer’s inefficient operations and poor services was justified. Her act exposed the company’s shortcomings which act is prejudicial to her employer’s business. She was expected to exercise her judgment and discretion with utmost care and concern for her employer’s business.

It is thus a settled rule that the mere existence of a basis for believing that a managerial employee has breached the trust of the employer justifies dismissal.

Simple allegation alone, without proven facts to back it up, could not and did not suffice as a basis for a finding of willful breach of trust. There was failure to prove the existence of a valid cause for the dismissal of respondent.

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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 to work for the employer.

Also, the act complained of should have arisen from the performance of the employee’s duties.

Thus, an accounting clerk of a bank whose duty in- volves opening of savings, current and/or time deposits and the payment of withdrawals cannot be dismissed for acts related to bank guarantees, which is the responsibility of the branch manager and the management personnel of the company’s head office.

In order to constitute as just cause for dismissal, loss of confidence should relate to acts inimical to the interests of the employer. Breach must be related to the performance of the employee’s function.

The position itself should require trustworthiness from an employee for breach of trust to prosper as a valid ground for dismissal. It must be a position reposed with trust and confidence.

Loss of confidence applies to: (1) employees occupying positions of trust and confidence, the managerial employees; and (2) employees who are routinely charged with the care and custody of the employer’s money or property which may include rank-and-file employees.

Examples of rank-and-file employees who may be dismissed for loss of confidence are cashiers, auditors, property custodians, or those who, in the normal routine exercise of their functions, regularly handle significant amounts of money or property.

The law defines position of trust and confidence as one where a person is entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employer’s property.

As held in the case of Eats-Cetera Food Services vs. Myrna B. Letran And Mary Grace Espadero, a position of trust and confidence has been defined as one where a person is entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employer’s property and/or funds.

One such position is that of a cashier. A cashier is a highly sensitive position which requires absolute trust and honesty on the part of the employee.

It pertains to an employee where greater trust is placed by management and from whom greater fidelity to duty is correspondingly expected. The betrayal of this trust is the essence of the offense for which an employee is penalized.

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Notice to Explain: Contents and Requirements

The Revised Penal Code generally defines theft as an act committed by any person who, with intent to gain but without violence against or intimidation of persons nor force upon things, shall take personal property of another without the latter’s consent .

An employee was held to be validly dismissed for the loss and unauthorized sale of the company’s electric copper wire cable upon findings that he sold the same and shared the proceeds with his three co-employees .

Whenever an employee steals something from the company, the employer may institute at least two actions: An administrative case threatening dismissal from service and a criminal case.

If that is the course taken by the employer, an interesting question is whether conviction of an employee in a criminal case is required for the dismissal of the employee from service on the ground of theft.

The ruling in this case is no. As discussed, the proof required in administrative proceeding is different from that of the criminal one. The former requires only substantial evidence while the latter proof beyond reasonable doubt.

Therefore, the administrative case is independent of the criminal action. The erring employee may be acquitted but likewise dismissed due to substantial evidence proving the offense.

Hence, in the case where the city prosecutor dismissed the complaint for theft due to insufficiency of evidence, the employee cannot claim that there was no valid cause for her termination on the ground of theft because there was no probable cause.

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The conclusion that there was a valid ground for dismissal was supported by substantial evidence consisting of affidavits of NBI’s witnesses and the company’s own investigative findings.