Friday, June 28, 2013

Dismissal must be based on willful breach of trust

A bank manager was promoted to the position of vice president of Allied Business Ventures Department of the bank after just five years.

When one of the bank’s branch managers resigned, the VP was asked to sign the branch manager’s standard employment clearance pertaining to the latter’s accountabilities with the bank. The VP, however, issued a clearance only for the branch manager’s paid cash advances and salary loan, after being shown receipts by the bank’s cashier.

Seven months later, the VP was informed that the resigned bank manager was involved in a questionable transaction involving P11 million for which the bank was being sued. Because the clearance issued by the VP effectively barred the bank from going after the bank manager, the bank terminated the services of the VP for loss of trust and confidence as was demanded by his position.

Aggrieved, the VP filed a complaint for illegal dismissal. He insisted that there was a plot to oust him from his position, which was why they blamed him for clearing all of the bank manager’s financial clearances even though he only cleared the latter for paid cash advances and salary loan. The reasoning that there was loss of trust and confidence was a mere afterthought given the gap between the issuance of the clearance and the bank firing him, he said.

The Labor Arbiter ruled in favor of the VP holding that the act of issuing the clearance was not a valid and justifiable ground for the bank to lose trust and confidence in him.

The Labor Arbiter was affirmed by the National Labor Relations Commission (NLRC).

The Court of Appeals however held that the VP was dismissed for just cause as “he failed to exercise prudence in clearing [the bank manager] of his accountabilities given that the same were yet to be audited.”
On appeal, the Supreme Court (SC) affirmed the Labor Arbiter and the NLRC, and found that the VP was illegally dismissed. First, it explained the rules on a dismissal based on willful breach of loss and confidence -

As provided in Article 282 of the Labor Code, an employer has the right to dismiss an employee by reason of willful breach of the trust and confidence reposed in him. To temper the exercise of such prerogative, the law imposes the burden of proof upon the employer to show that the dismissal of the employee is for just cause failing which would mean that the dismissal is not justified.

The law mandates that before validity can be accorded to a dismissal premised on loss of trust and confidence, two requisites must concur, viz: (1) the employee concerned must be holding a position of trust; and (2) the loss of trust must be based on willful breach of trust founded on clearly established facts.
Although the VP held a position of trust, the SC ruled that the act of issuing the clearance could not be considered a willful breach of that trust -

The Court has repeatedly emphasized that the act that breached the trust must be willful such that it was done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.

The conditions under which the clearance was issued exclude any finding of deliberate or conscious effort on the part of the petitioner to prejudice his employer. Also, the petitioner did not commit an irregular or prohibited act. He did not falsify or misrepresent any company record as it was officially confirmed by [the cashier] (Torres v. Rural Bank of San Juan, G.R. No. 184520, 13 March 2013, J. Reyes).

source:  Manila Times' Column Benchpress

Tuesday, June 18, 2013

When loss of confidence is valid ground for dismissal

An alleged Certified Public Accountant (CPA) has been working as a chief accountant in a credit corporation for three years. It was only after this time that the credit corporation found out that she was not a CPA and misrepresented herself as one in her application and personal data sheet. She was also supposedly helping pirate employees of the credit corporation for a rival corporation. After confronting her, the credit corporation deemed it best to let her go that same day. When she tried to collect her belongings the very next day, she was no longer allowed to enter the premises.

The accountant filed a case for illegal dismissal with the National Labor Relations Commission (NLRC), where the Labor Arbiter ruled that she had been illegally dismissed and that her dismissal was done in violation of due process requirements. On appeal, the NLRC found that there was no illegal dismissal as the parties entered into a compromise agreement where the accountant would voluntarily resign in exchange for separation benefits. This decision was affirmed by the Court of Appeals.

The Supreme Court (SC) overturned the CA, holding that there was nothing in the records to prove that the accountant had voluntarily resigned from her position in the company. It further ruled that there was no illegal dismissal despite the company’s failure to follow the two-notice rule.

Article 282 of the Labor Code 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.
The Court made a distinction between managerial and rank and file employees when it comes to the termination of employees based on breach of trust. For managerial employees, the mere existence that there is basis to believe that such employee has breached the trust of the employer would suffice his dismissal. For rank and file employees, proof of involvement in the alleged events in question is necessary. The accountant, being a managerial employee, was validly terminated for loss of confidence -

In securing this position, she fraudaulently misrepresented her personal qualifications by stating in her Personal Information Sheet that she was a CPA… [t]his deceitful action alone was sufficient basis for respondent’s loss of confidence in her as a managerial employee.


The SC, however, explained that in labor cases, the existence of just cause is not enough to comply with procedural due process.

In the case of termination by the employer, it is not enough that there exists a just cause therefor, as procedural due process dictates compliance with the two-notice rule in effecting a dismissal: (a) the employer must inform the employee of the specific acts or omissions for which his dismissal is sought, and (b) the employer must inform him of the decision to terminate employment after affording the latter the opportunity to be heard.

Despite the existence of a just cause for termination, the accountant was dismissed from service in violation of procedural due process, because she did not receive any notice of her termination and was fired on the spot. Nevertheless, the failure to comply with procedural due process does not render a dismissal for valid cause illegal. Instead, the employees remedy is to be granted damages.

It is evident that although there was a just cause in terminating the services of Mendoza, respondents were amiss in complying with the two-notice requirement. Following prevailing jurisprudence on the matter, if the dismissal is based on just cause, then the non-compliance with non-procedural due process should not render the termination from employement illegal or ineffectual. Instead, the employer must indemnify the employee in the form of nominal damages (Mendoza v. HMS Credit Corporation, G.R. No. 187232, 17 April 2013, C.J. Sereno).

source:  Manila Times' Column by Benchpress