Francesco C. Britanico is a Philippine attorney talks about new rules and reforms which newly come up in Philippines. He keeps the firms and employers well informed about the newly sanctioned laws in labor law.
So, you’ve reason to believe that one of your cashiers in your Philippine office seems to have stolen some of her revolving fund.
As an HR, you are considering termination.
But can you terminate? Under what grounds and how do you do it?
This article answers those questions and gives a summary of the important points that you need to consider for termination due to fraud or willful breach.
With this and in consultation with your company lawyer, you should have a pretty good idea of how to correct apply the law.
Let’s go through a bit of a crash course on the law.
This section introduces the pertinent part of the Philippine Labor Code that you’ll need.
It also shows the criteria the court considers when evaluating this type of case.
Art 296 (formerly 282) of the Labor Code allows the termination of an employee for loss of confidence.
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
Loss of confidence has been defined by jurisprudence and occurs when:
The employee concerned must be holding a position of trust and confidence and
There must be an act that would justify the loss of trust and confidence.
You’ll find that the Supreme Court has elaborated on the first requirement before [G.R. 118506, Apr 18, 1997] and that this has continued to be cited.
It stated that there are 2 classes of employees:
Employees who occupy positions of trust and confidence are 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;
Employees who are routinely charged with the care and custody of their employer’s money or property are 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 Court has also discussed what kind of act falls under the second requirement.
1. It must be related to his duties
For breach of trust and confidence to become a valid ground for the dismissal of an employee, the cause of loss of trust and confidence must be related to the performance of the employee’s duties. [G.R. No. 169564, Apr 6, 2011]
2. Willful breach of trust and founded on clearly established facts
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. 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. [G.R. 198620, Nov 2014]
You should note that in cases such as this, the Court specifically doesn’t allow separation pay.
Well-settled is the rule that separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Inasmuch as the reason for which the petitioner was validly separated involves his integrity, which is especially required for the position of the purser, he is not worthy of compassion as to deserve at least separation pay for his length of service. [G.R. 148410, Jan 17, 2005]
Now that you’ve got a bird’s eye view of what the law considers, let’s look at each in a bit more detail.
Employees Holding Positions of Trust and Confidence
You might be wondering who are employees who hold a position of trust and confidence.
I’ve listed them above but for easy reference:
Employees who occupy positions of trust and confidence are managerial employees
Employees who are routinely charged with the care and custody of their employer’s money or property.
Just to illustrate employees who hold a position of trust and confidence, let’s take see the jurisprudence.
A recent case which comes to mind is P.J. Lhuillier vs. Velayo. [G.R. No. 198620, Nov 12, 2014].
Here, the Supreme Court found the dismissal of Ms. Velayo valid and pointed out that her “misconduct must be viewed in light of the strictly fiduciary nature of her position.”
She was a cashier who hid an overage of Php 540 pesos and correspondingly covered it up.
The Court of Appeals and the National Labor Relations Committee said that this was a simple error.
The Supreme Court disagreed.
In holding a position requiring full trust and confidence, the respondent gave up some of the rigid guarantees available to ordinary employees. She insisted that her misconduct was just an “innocent mistake,” and maybe it was, had it been committed by other employees.
Another good example for you would be Philippine Plaza Holdings vs. Ma. Flora M. Episcope [G.R. 192826, Feb 27, 2013].
Ma. Flora M. Episcope was a waitress at Westin Hotel and was responsible for bringing discount cards to the cashier and presenting the discounted bill to the guests.
Instead of presenting the discounted bill to the guests, she gave them the original bill and pocketed the discount.
The Supreme Court supported her dismissal.
“Being therefore involved in the handling of company funds, Episcope is undeniably considered an employee occupying a position of trust and confidence and as such, was expected to act with utmost honesty and fidelity.”
The Court has defined several positions as being one of trust and confidence, including warehousemen, salesmen, bank tellers, data custodians and cashiers among others.
You might be wondering why the law goes into some detail about positions of trust and confidence.
Well, you cannot dismiss for loss of trust and confidence if the position doesn’t have any function that requires trust.
In addition, there is a higher standard of behavior expected of management personnel.
Since more is expected of them, you’ll find the law holds them to a higher standard.
…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. But as regards a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal [G.R. 208321, Jul 30, 2014]
This doesn’t mean that you just fire based on belief however.
You’ll still need reasonable grounds to believe that there has been a breach of confidence.
Related to his Duties
The Supreme Court also has stated that the dismissal must be in connection with the employee’s duties.
In an early case, you can see that the Supreme Court found that the bank teller was wrongly held liable for trust and guarantees. [G.R. 167716, Mar 23, 2006]
This was actually the bank branch manager’s duty and so the company was found guilty of illegal dismissal.
You also clearly see it in the more recent case of Lima Land vs. Cuevas [G.R. 169523, Jun 16, 2010].
The company stated that she did not exercise due diligence in inquiring about the status of the collections, leading to remittance differences.
The Court said that the irregularities were principally the collection supervisor’s duty and he should be the one actually held accountable.
As such, the court also found it a case of illegal dismissal.
Willful Breach of Trust
You’ll also have to make sure that the act on which the dismissal is based should be willful.
Willful breach is when it is clear that an employee is knowingly and deliberately acting other than he should.
In Alvarez vs. Golden Tri Bloc [G.R. 202158, Sept 25, 2013], a supervisor was dismissed after asking another employee to punch in his timecard for him.
The employee was dismissed for loss of trust.
The Supreme Court agreed with his dismissal because he had been previously disciplined several times for infractions.
In fact, he had been suspended before for asking another employee to punch in his timecard. He’d also been warned that he would be dismissed if he did it again.
He tried to claim that he had never been disciplined in his time with the company. However, the company presented several previous disciplinary actions.
Stating that he had deliberately misled the labor tribunals and that repetition of an offense clearly indicated willfulness, the Court upheld his dismissal.
Contrast this with the case of Sulpicio Lines vs. Gulde [G.R. No. 149930, February 22, 2002].
Gulde was dismissed as the company stated that he had worked with thieves to steal 4 basketballs.
The Supreme Court said that his case was one of illegal dismissal.
It quoted the Court of Appeals:
[I]t can be gleaned that the evidence presented in the case did not clearly prove that petitioner willfully breach his duty. It was not proven the indeed he connived with the thieves.
Willful breach is a very important consideration in this case, and you’ll need to prove it.
Also, you’ll need sufficient evidence for the dismissal to be valid.
There are several levels of evidence but the Court only requires evidence to be “substantial …founded on clearly established facts” [G.R. 149930, Feb 22, 2002] in dismissal cases.
You’ll have to present proof for your reason for dismissal.
The Supreme Court has found illegal dismissal in cases where insufficient evidence was found to support the claim.
For instance, while Marlyn Cuevas was remiss in her duties the court dismissed other allegations for being unsubstantiated [G.R. 169523, Jun 16, 2010].
The company had accused her of irregularities in her approval of reimbursements and that insufficient accounting standards were followed leading to further irregularities in the Petty Cash Fund.
In the words of the Court:
Indeed, the consistent rule is that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively show rationally adequate evidence that the dismissal was for justifiable cause. 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.
So going back to that cashier suspected of stealing from her revolving fund at the beginning of this article, yes you can terminate.
It’s clearly a position of trust and part of her duties to remit the cash to her employer.
You will have to present substantial proof that this was willful.
You will also have to follow due process, but this is a very clear cut case of loss of trust. and confidence.
Sometimes an employee will complain of illegal dismissal while the employer argues that the employee was not dismissed at all, but actually resigned voluntarily.
The employee says that he was put in such an unfair, untenable position from which he was forced to resign so that, under the law, he was actually dismissed. The employer, on the other hand, denies the employee’s claim.
How does the employer prove that there was no illegal dismissal?
When is a resignation not a resignation?
When is an action a valid exercise of management prerogatives?
A situation like this hinges on whether or not there was constructive dismissal.
Constructive dismissal is an involuntary resignation by the employee due to the harsh, hostile, and unfavorable conditions set by the employer and which arises when a clear discrimination, insensibility, or disdain by an employer exists and has become unbearable to the employee.
Was there constructive dismissal?
Constructive dismissal exists where there is a cessation of work, because “continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay” and other benefits.
This means that there is constructive dismissal when an employee, without either due process or valid cause, is being transferred to a lower position from that which he currently holds.
In this situation, the employer must be able to prove that there was no constructive dismissal.
But the employer has a resignation letter signed by the employee.
Is a resignation letter by itself proof enough that an employee voluntarily resigned?
A resignation letter is not proof enough that the employee resigned.
Not necessarily. The employer should not rely on the mere fact of a resignation letter. The Supreme Court has ruled that a resignation letter alone does not suffice in these circumstances.
The fact of filing a resignation letter alone does not shift the burden of proving that the employee’s dismissal was for a just and valid cause from the employer to the employee. In Mora v. Avesco, we ruled that should the employer interpose the defense of resignation, it is still incumbent upon the employer to prove that the employee voluntarily resigned.
Should an employer interpose the defense of resignation in an illegal dismissal case, it is incumbent on the employer to prove not only the overt act of resignation but also the employee’s willing intent to resign, that is, that the act was voluntary.
Are words of gratitude in the employee’s resignation letter definite proof that he resigned voluntarily?
Words of thanks in a resignation letter are not enough to prove voluntary resignation.
Let’s say that the resignation letter signed by the employee also thanks the employer for the opportunity of having worked at the company. The resignation letter reads:
It is with much reluctance and regret that I must ask to be released from my position of Sales Engineer at Avesco Marketing. For the past seven years, I cannot forget how much this company has meant to me.
With this regard, I’m tendering my resignation effective April 25, 2003. Please extend to Mr. Jimmy Tang my appreciation of his kindness during the time I served.
Is this proof positive that he resigned voluntarily?
Again, not necessarily. The totality of the circumstances will be taken into account.
A polite resignation letter is to be expected due to possible professional repercussions.
Polite language in a resignation letter is to be expected in view of its possible professional repercussions in the future. But that an employee was being civil and professional in a resignation letter does not preclude that he was not coerced in the circumstances.
The Supreme Court has rejected mere reliance on the language of a resignation letter in a situation like this:
… While resignation letters containing words of gratitude may indicate that the employees were not coerced into resignation, this fact alone is not conclusive proof that they intelligently, freely and voluntarily resigned. To rule that resignation letters couched in terms of gratitude are, by themselves, conclusive proof that the employees intended to relinquish their posts would open the floodgates to possible abuse. In order to withstand the test of validity, resignations must be made voluntarily and with the intention of relinquishing the office, coupled with an act of relinquishment. Therefore, in order to determine whether the employees truly intended to resign from their respective posts, we cannot merely rely on the tenor of the resignation letters but must take into consideration the totality of circumstances in each particular case.
What does jurisprudence say?
Constructive dismissal includes situations where the employee submitted a courtesy resignation letter because it was demanded of him even when he did not wish to leave his post. These situations are akin to that in ICT Marketing Services, Inc. vs. Sales where the Supreme Court ruled that:
[P]etitioner immediately filed a complaint for illegal dismissal. Resignation, it has been held, is inconsistent with the filing of a complaint. Thus, private respondent corporation’s mere assertion that petitioner voluntarily resigned without offering convincing evidence to prove it, is not sufficient to discharge the burden of proving such an assertion. It is worthy to note that the fact of filing a resignation letter alone does not shift the burden of proof and it is still incumbent upon the employer to prove that the employee voluntarily resigned.
Therefore, we believe and so hold that petitioner was constructively dismissed from employment. Constructive dismissal exists when the resignation on the part of the employee was involuntary due to the harsh, hostile and unfavorable conditions set by the employer. The test for constructive dismissal is whether a reasonable person in the employee’s position would feel compelled to give up his employment under the prevailing circumstances. With the decision of the private respondent corporation to transfer and to thereafter placed [sic] her on floating status, petitioner felt that she was being discriminated and this perception compelled her to resign. It is clear from her resignation letter that the petitioner felt oppressed by the situation created by the private respondent corporation, and this forced her to surrender her position.
The text of the resignation may offer clues to show the circumstances of the resignation.
The text of the resignation letter can, in fact, offer other clues which show that the resignation was effectively imposed by the employer on the employee.
For example, if the resignation letter itself alludes to circumstances supportive of the claim of constructive dismissal, this can be held against the employer.
A probationary employee is provided for in Article 281 of the Labor Code of the Philippines:
Art. 281. Probationary employment. Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.
Probationary employment allows you to assess an employee’s fitness for a job
The Supreme Court has elaborated on what it means to be a probationary employee:
A probationary employee, as understood under Article 282 (now Article 281) of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. A probationary appointment is made to afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient employee. The word probationary, as used to describe the period of employment, implies the purpose of the term or period but not its length.
Being in the nature of a trial period the essence of a probationary period of employment fundamentally lies in the purpose or objective sought to be attained by both the employer and the employee during said period. The length of time is immaterial in determining the correlative rights of both in dealing with each other during said period. While the employer, as stated earlier, observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other, seeks to prove to the employer, that he has the qualifications to meet the reasonable standards for permanent employment.
It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied employment. In that sense, it is within the exercise of the right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently.
What is the correct legal procedure for terminating a probationary employee?
The scenario is of an employee who has not yet been regularized. If, before the end of the probationary period, the employer determines that the employee is not qualified for permanent employment, how is his employment terminated in accordance with legal due process?
You need to discuss with a probationary employee how you will evalute his work for permanent employment.
The process actually begins early in the employment of the probationary employee. It begins with informing the new hire of the standards by which he is to be judged during the probationary period. The Supreme Court discusses this in Mercado vs. AMA Computer College-Paranaque City, Inc., G.R. No. 183572, April 13, 2010, 618 SCRA 218:
Labor, for its part, is given the protection during the probationary period of knowing the company standards the new hires have to meet during the probationary period, and to be judged on the basis of these standards, aside from the usual standards applicable to employees after they achieve permanent status. Under the terms of the Labor Code, these standards should be made known to the [employees] on probationary status at the start of their probationary period, or xxx during which the probationary standards are to be applied. Of critical importance in invoking a failure to meet the probationary standards, is that the [employer] should show as a matter of due process how these standards have been applied. This is effectively the second notice in a dismissal situation that the law requires as a due process guarantee supporting the security of tenure provision, and is in furtherance, too, of the basic rule in employee dismissal that the employer carries the burden of justifying a dismissal. These rules ensure compliance with the limited security of tenure guarantee the law extends to probationary employees.
Whereas a regular employee is typically entitled to the two-notice requirement for his employment to be terminated due to just cause, the process is different in the case of a probationary employee dismissed because of his failure to qualify as a regular employee in accordance with reasonable standards made known to him at the time of engagement.
You can dismiss a probationary employee without notice or hearing because this is a trial period.
In the case of Philippine Daily Inquirer vs. Leon M. Magtibay, Jr., G.R. No. 164532, July 24, 2007, the Supreme Court ruled that such a dismissal
… does not require notice and hearing. Due process of law for this second ground consists of making the reasonable standards expected of the employee during his probationary period known to him at the time of his probationary employment. By the very nature of a probationary employment, the employee knows from the very start that he will be under close observation and his performance of his assigned duties and functions would be under continuous scrutiny by his superiors. It is in apprising him of the standards against which his performance shall be continuously assessed where due process regarding the second ground lies, and not in notice and hearing as in the case of the first ground.
Due process for a probationary employee consists in having informed him of the standards against which his performance will be continuously assessed during the probationary period.
If the work of your probationary employee is found to be unsatisfactory, you’ll need to serve him a written notice.
These work standards should be understood at the time of his engagement and then, if he fails to meet these standards, a written notice is served to the him by the employer within a reasonable time from the effective date of termination.
In all cases of probationary employment, the employer shall make known to the employee the standards under which he will qualify as a regular employee at the time of his engagement. Where no standards are made known to the employee at that time, he shall be deemed a regular employee.
The two notice rule doesn’t apply if a probationary employee is dismissed for poor work quality.
This was upheld in Abott Laboratories vs. Alcaraz, G.R. No. 192571, July 23, 2013:
A different procedure is applied when terminating a probationary employee; the usual two-notice rule does not govern. Section 2, Rule I, Book VI of the Implementing Rules of the Labor Code states that “if the termination is brought about by the x x x failure of an employee to meet the standards of the employer in case of probationary employment, it shall be sufficient that a written notice is served the employee, within a reasonable time from the effective date of termination.”
While affirming that the two-notice rule does not apply to probationary employees who are terminated for failure to meet the employer’s standards, Abott Laboratories also cautions employers to comply with their own internal procedure in evaluating the performance of a probationary employee. These policies are often found in the company handbooks and in office memoranda circulated to the employees. The reason is that company personnel policies create a contractual obligation on the part of both the employee and the employer to abide by the same.
Note that the reason for terminating a probationary employee seems to make a difference to the Court. The two-notice rule does not apply to probationary employees terminated because of failure to meet the reasonable standards made known to them at the time of engagement. However, it still appears to be a requirement for probationary employees terminated because of just cause. It is thus important that the grounds for termination are made clear during the termination, and that documentation be meticulous throughout the process.
 International Catholic Migration Commission v. NLRC, G.R. No. 72222, January 30, 1989, 169 SCRA 606.
 The first written notice should be served on the employee and contain the specific grounds for termination against him, along with a directive that the employee is given at least 5 days to submit his written explanation for why he should not be terminated. The employer should also set a conference or hearing in which the employee will be given the opportunity to explain and present evidence on his behalf.
If termination is found justified after these, the employer should serve a second written notice on employee which shows that all the circumstances involving the charge against have been considered and that the grounds have been established to justify the termination of employment.
 Philippine Daily Inquirer vs. Leon M. Magtibay, Jr., G.R. No. 164532, July 24, 2007
 Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code cited in Aliling vs. Feliciano, G.R. No. 185829, April 25, 2012
 Art. 282. Termination by employer. An employer may terminate an employment for any of the following [just] causes:
Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
Gross and habitual neglect by the employee of his duties;
Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
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 representatives; and
Other causes analogous to the foregoing.
cf Philippine Daily Inquirer vs. Magtibay, ibid, for termination of a probationary employee for just cause.
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