Termination of employment due to loss of trust and confidence

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Published — February 1, 2018

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Related Topic: How to Dismiss an Erring Employee the Right Way

Loss of trust and confidence is among the just causes for termination of employment. Under Article 297(c) of the Labor Code, the grounds by which employment may be terminated are provided for, and among which is when there is a willful breach of the employee of the trust reposed in him by the employer or his duly authorized representative. Settled is the rule that breach of trust must be willful, i.e. when it is done intentionally and knowingly without any justifiable excuse, as distinguished from an act done carelessly, thoughtlessly or inadvertently [See: G.R. No. 181852].

This ground for dismissing employees, however, is prone to abuse, considering that trust and confidence is a state of mind that any employer may easily claim to have been lost even by reason of the most trivial matters. Therefore, in order for employers not to abuse this ground for termination of employment, certain standards have to be complied with. When termination based on this ground does not comply with said standards, loss of trust and confidence cannot be validly considered, and the employer may be held liable for illegal dismissal, which would certainly be costly on the part of the employer.

When is there loss of trust and confidence?

There is loss of trust and confidence when (1) the employee is holding a position of trust and confidence; and (2) there is an act that would justify the loss of trust and confidence [G.R. No. 198620].

D.O. No. 147-15 issued by the Department of Labor and Employment (“DOLE”) also sets additional standards that need to be met before loss of trust and confidence may be legally recognized as a just cause for termination, which are:

1. There must be an act, omission or concealment on the part of the employee concerned.
2. The act, omission or concealment justifies the loss of trust and confidence of the employer to the employee.
3. The employee concerned must be holding a position of trust and confidence.
4. The loss of trust and confidence should not be simulated.
5. It must be genuine and not a mere afterthought to justify an earlier action taken in bad faith.

Law and jurisprudence have long recognized the right of employers to dismiss employees by reason of loss of trust and confidence. More so, in the case of supervisors, managers, or personnel occupying positions of responsibility, loss of trust justifies termination. 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. 149433].

Managerial or rank-and-file?

There is a distinction on the treatment of managerial employees from that of rank-and-file personnel insofar as the application of the doctrine of loss of trust and confidence is concerned [Ibid].

Thus, 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 [Ibid].

Hence, in the case of managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such 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 [Ibid].

Due process requirement

Since loss of trust and confidence is among the just causes of termination of employment, two-notice rule in dismissing employees must be observed.

• The first written notice, which should contain the specific grounds for termination (loss of trust and confidence), a detailed narration of the facts and circumstances that serves as basis for the charge against the employee, and a directive that the employee is given the opportunity to submit a written explanation within a reasonable period, or 5 calendar days from receipt of the notice to give the employee an opportunity to study the accusation, consult or be represented by a lawyer or union officer, gather data or evidence on his behalf, and decide on his defenses against the complaint.
• As for the second written notice, after determining that termination of employment is justified, the employer shall serve the employee a written notice of termination indicating that all the circumstances involving the charge of loss of trust and confidence against the employee have been considered, and that loss of trust and confidence have been established to justify separation from employment.

Dismissal of an employee who breaches the employer’s trust is to the best interest not only of the management but also of labor. As a measure of self-protection against acts inimical to its interest, a company has the right to dismiss its erring employees. An employer cannot be compelled to continue employing someone who is guilty of acts inimical to the employer’s interest justifying loss of confidence in him [G.R. No. 190436].

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding employment disciplinary procedures, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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