Termination: Fraud or Willful Breach


There are two basic requirements for a lawful dismissal “a just cause or authorized cause as prescribed by law, and observance of due process.” The former comprises the substantive requirement, and the latter constitutes the procedural requirement for a valid dismissal.

The Philippine Labor Code, in Article 283, enumerates the just (as differentiated from authorized) causes for termination. One of them is fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative. This includes such acts as competing with the employer, making clandestine profits, accepting bribes, as well as other acts that result in loss of trust and confidence on the part of the employer. There is no question that fraud committed by an employee against his employer is a just cause for dismissal, but loss of trust (and confidence) of the employer in his employee requires further elaboration.

It has been held that the basic premise for loss of confidence as a just cause for dismissal is that the employee concerned holds a position of trust and confidence, otherwise it is not a valid ground (Quezon Electric Corp. vs. NLRC, 172 SCRA 88).

In another case, the observation was made that interpretation of the term “trust and confidence” should be restricted to managerial employees (Marina Port Services vs. NLRC, 193 SCRA 420). This seems to be the later trend. However, there are decisions that have considered this cause as it applies to rank-and-file and to managerial employees, leading to a distinction between the two.

Thus the rule has been laid that in rank-and-file employees, loss of trust and confidence requires proof of involvement in the events in question, and that mere-uncorroborated assertions and accusations of the employer will not suffice (Midtown Ramada vs. NEWHRAIN, 159 SCRA 212).

But with respect to managerial employees proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, or if the employer has reasonable ground to believe or to entertain the moral conviction that the employee concerned is responsible for the misconduct, and that the nature of his participation therein renders him unworthy of the trust and confidence demanded by his position (Sajonas vs. NLRC, 183 SCRA 667; Citytrust Finance Corp. vs. NLRC, 157 SCRA 87; Tabacalera Insurance Corp. vs. NLRC, 152 SCRA 667; Ricker vs. Ople, 155 SCRA 85; Villadolid vs. Inciong, 121 SCRA 205; Reynolds Phils., Inc. vs. Eslava, June 27, 1985).

Mere existence of a basis for believing that the employee has breached the trust of his employer is sufficient, and does not require proof beyond reasonable doubt (Kwikway Engineering Works vs. NLRC, 195 SCRA536). In any event, loss of confidence as a ground for dismissal should not be simulated nor used as a subterfuge. It may not be asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith (General Bank vs. Court of Appeals; April 9, 1985).

Where dismissal for loss of confidence is based on suspected theft of company property on the part of the employee, it remains a valid cause for dismissal even if the employee is subsequently acquitted (Dole Phil. vs. NLRC, July 25, 1983) or his case is dropped by the fiscal for insufficient evidence.

The employee concerned cannot successfully seek reinstatement. Conviction in a criminal case is not indispensable to warrant dismissal in these cases. The fact that the complaint is dropped by the fiscal is not binding on a labor tribunal. It is sufficient that the employer have a basis for believing that the employee breached the trust and confidence reposed in him (Sea-Land vs. NLRC, May 24, 1985). Theft is not a basis for loss of confidence, nor is it a just cause for dismissal if the property involved is of negligible value, and the worker concerned is a long-service employee (PAL vs. PALEA; Stanford Microsystems vs. NLRC, January 28, 1988).

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