How to Terminate an Employee Based on Loss of Trust and Confidence

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This article talks about the process of terminating or firing an employee based on loss of trust and confidence.

Article 297 of the Labor Code allows the termination of an employee for willful breach of the trust reposed in him by the employer.

Trust is a very important word that takes years to build but only seconds to destroy. Some believe that trust, once lost, can never be regained. In fact, the Philippine Labor Code allows the termination of an employee based on loss of trust and confidence. Article 297 (c) of the Labor Code provides that an employer may terminate an employment for willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.


Elements to justify dismissal based on loss of trust and confidence

The requisites for dismissing an employee based on loss of trust and confidence are:

(1) the employee concerned must be holding a position of trust and confidence; and

(2) there must be an act that would justify the loss of trust and confidence [SM Development Corporation vs. Ang, G.R. No. 220434, 22 July 2019]. 

Anent the first requisite, 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 applies where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer’s property.  However, 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 [Caoile v. NLRC, G.R. No. 115491, 24 November 1998].

There are two (2) types of positions in which trust and confidence are reposed by the employer, namely, managerial employees and fiduciary rank-and-file employees [Bravo vs. Urios College, G.R. No. 198066, 07 June 2017]. The following positions have been held to involve trust and confidence [culled from Paulino Ungos, Jr., Labor Law 2: The Law on Labor Relations (2020 ed.) p. 537 – 538]:

(1) Cashier

(2) Bank Teller

(3) Financial Controller

(4) Finance Director

(5) Warehouseman

(6) Hotel Manager

(7) Miners

(8) District Sales Supervisor

(9) Sales Supervisor

(10) Salesman

(11) Route Salesman

With regard to the second requisite, 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 [Abel v. Philex Mining Corporation, G.R. No. 178976, 31 July 2009]. Hence, in the case of managerial employees, there must be 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 [Etcuban vs. Sulpicio Lines, G.R. No. 148410, 17 January 2005].

Thus, in order to be a valid cause for dismissal, loss of confidence should not be (a) simulated, (b) used as a subterfuge for causes which are improper, illegal or unjustified, (c) arbitrarily asserted in the face of overwhelming evidence to the contrary, and (d) a mere afterthought to justify earlier action taken in bad faith [Wah Yuen Restaurant vs. Jayona, G.R. No. 159448, 16 December 2005].

Procedure for termination of employment based on loss of trust and confidence

The law requires the observance of the following procedure s in order for the employer not to be held liable for illegal dismissal:

a) A written notice served on the employee specifying the grounds for termination, and giving said employee reasonable opportunity or five (5) days within which to explain his side;

b) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented against him; and

c) A written notice of termination served on the employee, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee’s last known address.

It must be borne in mind that failure to observe the process and requirements enunciated above will classify the termination as illegal or unjust dismissal. An employee unjustly dismissed shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

That is how to terminate employment based on loss of trust and confidence.

About Nicolas and De Vega Law Offices

If you want to learn how to terminate an employee based on other causes or need help in labor matters, we can help you. Nicolas and De Vega Law Offices is a full-service law firm in the Philippines.  You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at [email protected]. Visit our website  .

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