How to fire employee for loss of trust, confidence

Loss of trust and confidence is a just cause for dismissal under Article 282(c) of the Labor Code.[1] Article 282(c) 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." However, 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.[2] Article 212(m) of the Labor Code defines managerial employees as those who are “vested with powers or prerogatives to lay down and execute management polices and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or to effectively recommend such managerial actions.” 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”[3]Second, the employer must establish the existence of an act justifying the loss of trust and confidence.[4] 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,[5] and the employee’s breach of the trust must be willful, i.e., it was done intentionally, knowingly and purposely, without justifiable excuse.[6]

In Lopez v. Keppel Bank Philippines, Inc.,[7] the Supreme Court repeated the guidelines for the application of loss of confidence as follows: (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; and (4) it must be genuine, not a mere afterthought to justify an earlier action taken in bad faith.

[1] Article 282 of the Labor Code reads in full:
Article 282. TERMINATION BY EMPLOYER. – An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.
[2] Baron v. National Labor Relations Commission, G.R. No. 182299, February 22, 2010, at 46.

[3] Lopez v. Keppel Bank Philippines, Inc., G.R. No. 176800, September 5, 2011, 656 SCRA 718, 727.

[4] Philippine Plaza Holdings, Inc. v. Episcope, G.R. No. 192826, February 27, 2013.

[5] See Bristol Myers Squibb (Phils.), Inc. v. Baban, G.R. No. 167449, December 17, 2008, 574 SCRA, 198, 206.

[6] See Baron v. National Labor Relations Commission, G.R. No. 182299, February 22, 2010, at 362.

[7] Baron v. National Labor Relations Commission, G.R. No. 182299, February 22, 2010, at 729; Ancheta v. Destiny Financial Plans, Inc., G.R. No. 179702, February 16, 2010, 612 SCRA 648, 660.

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