Law on Employer's Loss of Confidence in Employee

The doctrine of loss of confidence requires the concurrence of the following: (1) loss of confidence should not be simulated; (2) it should not be used as a subterfuge for causes which are improper, illegal, or unjustified; (3) it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; (4) it must be genuine, not a mere afterthought to justify an earlier action taken in bad faith; and (5) the employee involved holds a position of trust and confidence.

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. He must be invested with confidence on delicate matters, such as the custody, handling, care, and protection of the employer's property and/or funds. In order to constitute a just cause for dismissal, the act complained of must be "work-related" such as would show the employee concerned to be unfit to continue working for the employer. (G.R. No. 179702)

As a rule, employers are allowed a wide latitude of discretion in terminating the employment of managerial personnel or those who, while not of similar rank, perform functions which by their nature require the employers' full trust and confidence. Proof beyond reasonable doubt is not required. It is sufficient that there is some basis for loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded by his position.

This must be distinguished from the case of ordinary rank-and-file employees, whose termination on the basis of these same grounds requires a higher proof of involvement in the events in question; mere uncorroborated assertions and accusations by the employer will not suffice. (G.R. No. 179702)

Under Article 282 (c) of the Labor Code, loss of trust and confidence is one of the just causes for dismissing an employee. It is an established principle that loss of confidence must be premised on the fact that the employee concerned holds a position of trust and confidence. This situation obtains where a person is entrusted with confidence on delicate matters, such as care and protection, handling or custody of the employer's property. But, in order to constitute a just cause for dismissal, the act complained of must be "work-related" such as would show the employee concerned to be unfit to continue working for the employer. Besides, for loss of confidence to be a valid ground for dismissal, such loss of confidence must arise from particular proven facts. (G.R. No. 169712)

Law and jurisprudence have long recognized the right of employers to dismiss employees by reason of loss of trust and confidence. As provided for in the Labor Code, "Art. 282. An employer may terminate an employment for any of the following causes: . . . (c) Fraud or willful breach of the trust reposed in him by his employer or his duly authorized representative. . . ." In the case of supervisors or personnel occupying positions of responsibility, this Court has repeatedly held that loss of trust and confidence justifies termination. Obviously, as a just cause provided by law, this ground for terminating employment, springs from the voluntary or willful act of the employee, or "by reason of some blameworthy act or omission on the part of the employee".

Loss of confidence as a just cause for termination of employment is premised from the fact that an employee concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer's property. But, in order to constitute a just cause for dismissal, the act complained of must be "work-related" such as would show the employee concerned to be unfit to continue working for the employer. (G.R. No. 115491)
The rule is settled that if the employee is guilty of breach of trust or that his employer has justifiable reason to distrust him, the labor tribunal cannot justly deny the freedom and authority to dismiss his employee. The basic premise for dismissal on the ground of loss of confidence is that the employee concerned holds a position of trust and confidence. It is the breach of this trust that results in the employer's loss of confidence in the employee.

Under Art. 282 of the Labor Code, as amended, loss of confidence would be the result of "fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative," a just cause for termination. It cannot be gainsaid that the breach of trust must be related to the performance of the employee's functions. (G.R. No. 122277)

It has oft been held that loss of confidence should not be used "as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith." Be it remembered that at stake here are the sole means of livelihood, the name and the reputation of the employee. Thus, petitioner must prove an actual breach of duty founded on clearly established facts sufficient to warrant his loss of employment. (G.R. No. 56283)

Petitioner’s acceptance of commissions and rebates from a customer, without the knowledge and consent of the employer and without said rebates and commissions being reported and turned over to the latter, are acts which can clearly be considered as a willful breach of trust and confidence reposed by the employer upon him. Settled is the rule that an employer cannot be compelled to retain an employee who is guilty of acts inimical to the interests of the employer. A company has the right to dismiss its employees if only as a measure of self-protection. This is all the more true in the case of supervisors or personnel occupying positions of responsibility. (G.R. No. 148544, July 12, 2006)

Loss of trust and confidence must be based on willful breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice; it must be willful. Such breach is willful if it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. More specifically the loss of trust must be founded on clearly established facts. (G.R. No. 162871)

It is clear that Article 282 (c) of the Labor Code allows an employer to terminate the services of an employee for loss of trust and confidence. The right of employers to dismiss employees by reason of loss of trust and confidence is well established in jurisprudence.

The first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one holding a position of trust and confidence. Verily, We must first determine if respondent holds such a position.

There are two (2) classes of positions of trust. The first class consists of managerial employees. They are defined as those vested with the powers or prerogatives to lay down management policies and to hire, transfer suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions. The second class consists of cashiers, auditors, property custodians, etc. They are defined as those who in the normal and routine exercise of their functions, regularly handle significant amounts of money or property.

In this case, respondent was employed as district manager for Cagayan de Oro-North Mindanao and its immediate vicinities. It is not the job title but the actual work that the employee performs. He was employed to handle pharmaceutical products for distribution to medical practitioners and sale to drug outlets. As a result of his handling of large amounts of petitioner's samples, respondent is, by law, an employee with a position of trust, falling under the second class.

The second requisite is that there must be an act that would justify the loss of trust and confidence. Loss of trust and confidence to be a valid cause for dismissal must be based on a willful breach of trust and founded on clearly established facts. The basis for the dismissal must be clearly and convincingly established but proof beyond reasonable doubt is not necessary.

Respondent's act of stapling a thank you note from his father warrants the loss of petitioner's trust and confidence. As the supervisor of fellow medical representatives, he had the duty to set a good example to his colleagues. A higher standard of confidence was reposed in him.

There is no doubt that respondent willfully breached the trust and confidence reposed in him by not asking for permission before using company property for his own or another's benefit, as required in the Company Standards of Business Conduct. Moreover, when respondent failed to turn over the samples left in his care and stapled the political "thank you" note with the intention of distributing them to his father's supporters, he had, in effect appropriated company property for personal gain and benefit. (G.R. No. 167449)

To begin with, there is no denying that loss of trust and confidence is a valid ground for termination of employment. Thus, the basic requisite for dismissal on the ground of loss of confidence is that the employee concerned holds a position of trust and confidence or is routinely charged with the care and custody of the employer's money or property. Moreover, the breach must be related to the performance of the employee's function. Also, it must be shown that the employee is a managerial employee, since the term "trust and confidence" is restricted to said class of employees. (G.R. No. 129413)

Proof beyond reasonable doubt of their misconduct is not required, it being sufficient that there is some basis for the same or that the employer has reasonable ground to believe that they are responsible for the misconduct and their participation therein rendered them unworthy of the trust and confidence demanded of their position.(G.R. No. 145800)

In case of a constructive dismissal, the employer has the burden of proving that the transfer and demotion of an employee are for valid and legitimate grounds such as genuine business necessity . Particularly, for a transfer not to be considered a constructive dismissal, the employer must be able to show that such transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or diminution of his salaries, privileges and other benefits. Failure of the employer to overcome this burden of proof, the employee's demotion shall no doubt be tantamount to unlawful constructive illegal constructive dismissal. (G.R. No. 118045)

There is a constructive dismissal when the reassignment of an employee involves a demotion in rank or a diminution in pay. (G.R. No. 110930)

The employer has the prerogative to transfer an employee when the interest of the business so requires. When the transfer is not unreasonable, discriminatory, or attended by a demotion in rank or a diminution in pay, such transfer cannot be deemed a constructive dismissal. Furthermore, sanctions must be imposed upon an employer for failure to observe the requirements of due process in effecting a lawful dismissal. (G.R. No. 128290)

Constructive dismissal is defined as a "quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay." On the other hand, abandonment of work means a clear, deliberate and unjustified refusal of an employee to resume his employment and a clear intention to sever the employer-employee relationship. Abandonment is incompatible with constructive dismissal. (G.R. No. 127421)

The transfer of an employee ordinarily lies within the ambit of management prerogatives. However, a transfer amounts to constructive dismissal when the transfer is unreasonable, inconvenient, or prejudicial to the employee, and it involves a demotion in rank or diminution of salaries, benefits and other privileges. In the case at bench, nowhere in the record does it show that that the transfer of private respondent was anything but done in good faith, without grave abuse of discretion, and in the best interest of the business enterprise. (G.R. No. 112752)

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