The Supreme Court held that an employee’s act of encashing personal checks using company resources, and being in a position of financial trust constitutes a valid cause for termination due to a breach of trust. This breach justifies the employer’s loss of confidence. The Court emphasized that employees holding positions of trust must act with utmost prudence and caution, especially when handling company finances, and that the employer followed due process in the termination.

When Personal Finances Clash with Professional Integrity: The Case of Carmelita Santos

This case revolves around Carmelita V. Santos, the Finance Director of San Miguel Corporation’s (SMC) Beer Division for Luzon Operations. The central issue is whether Santos’s act of encashing personal checks at SMC sales offices, some of which were initially dishonored, constitutes a valid ground for dismissal. This situation raises questions about an employee’s duty to uphold their employer’s trust, especially in positions involving financial responsibility, and whether an employer can terminate employment based on a loss of trust and confidence. The ruling elucidates the responsibilities of employees in positions of trust and the rights of employers to safeguard their financial interests.

The facts reveal that Santos, despite a company policy prohibiting the encashment of personal checks, repeatedly did so. On several occasions, her checks were returned due to insufficient funds. SMC conducted an audit investigation, and subsequently, an administrative panel was formed to investigate the matter. Despite being given opportunities to explain her actions, Santos refused to participate in the hearings. The panel found her actions to be irregular and detrimental to the company, leading to her termination.

The Labor Arbiter initially dismissed Santos’s complaint for illegal dismissal, but the National Labor Relations Commission (NLRC) reversed this decision, stating that SMC had condoned the practice of encashing personal checks. Additionally, they contended that SMC violated Santos’s due process rights by retroactively including her prior encashments. The Court of Appeals, however, overturned the NLRC decision, siding with SMC and ruling that Santos’s dismissal was valid. The core legal principle at play is whether an employee’s actions, specifically the breach of company policy and the misuse of company resources, justify termination based on loss of trust and confidence.

The Supreme Court aligned with the Court of Appeals. Under the Labor Code, a valid dismissal requires a just cause as outlined in Article 282, and adherence to due process. Article 282(c) specifically allows for termination in cases of “willful breach by the employee of the trust reposed in him by his employer.” The Court emphasized that substantial evidence is necessary to prove the loss of confidence. It must be well-founded and the employee must occupy a position of trust. The Court stated:

“As Finance Director, she is in charge of the custody, handling, care and protection of respondent’s funds. The encashment of her personal checks and her private use of such funds, albeit for short periods of time, are contrary to the fiduciary nature of her duties.”

The Court rejected Santos’s argument that her position was merely advisory and not one of trust. Her role as Finance Director entailed significant financial responsibility, giving her functional control over finance officers and cashiers within the Luzon Operations Area. The repeated encashment of personal checks, coupled with instances of insufficient funds, constituted a clear abuse of her position and a breach of the trust placed in her. This contrasted the finding of the NLRC which was of the opinion that the Company had allowed this prior to the incident and were estopped from raising it now as cause for dismissal.

Santos also claimed she was “singled out” for resisting the advances of a superior. However, the Court stated that these claims were unsubstantiated. Moreover, it upheld that even a prolonged practice of others encashing personal checks could not excuse Santos’s violations. Due process was also observed because Santos was given a written notice, was informed of the charges against her, and was afforded the opportunity to defend herself during the administrative investigation. Even if she did not participate in the later part of the proceedings the notice and opportunity to defend were still present.

The case highlights the importance of trust in employer-employee relationships, particularly in positions involving financial oversight. An employee’s actions must reflect the responsibility entrusted to them, and any breach of trust can have serious consequences, including termination. The decision emphasizes the employer’s right to protect their financial interests and maintain a workplace built on integrity and accountability. The Court ultimately affirmed that SMC’s decision to terminate Santos’s employment was justified. They upheld the importance of upholding trust in financial roles within a company.

FAQs

What was the key issue in this case?	The key issue was whether Carmelita Santos’s act of encashing personal checks, some of which bounced, at San Miguel Corporation’s sales offices constituted a valid ground for dismissal based on a breach of trust.
What was San Miguel Corporation’s (SMC) reason for dismissing Carmelita Santos?	SMC dismissed Santos for abuse of her position as Finance Director, engaging in highly irregular transactions, and employer’s loss of trust and confidence, due to her repeated encashment of personal checks at company sales offices, violating company policy.
Did the Supreme Court find that SMC followed due process in dismissing Santos?	Yes, the Supreme Court found that SMC provided Santos with the necessary notices and opportunities to be heard, satisfying the requirements of due process, despite her eventual non-participation in the investigation.
What is the legal basis for dismissing an employee based on loss of trust and confidence?	Article 282(c) of the Labor Code allows for termination of employment for “willful breach by the employee of the trust reposed in him by his employer,” provided there is substantial evidence and the employee holds a position of trust.
What kind of employee holds a position of trust and confidence?	Employees in positions of trust are those entrusted with the custody, handling, care, and protection of the employer’s funds or properties, such as Finance Directors or those with functional control over financial operations.
Was the NLRC decision upheld?	No, the Supreme Court overturned the NLRC’s decision, reinstating the Labor Arbiter’s original decision that dismissed Santos’s complaint for illegal dismissal for lack of merit.
Can prolonged practice of violating company policy excuse an employee’s misconduct?	No, the Supreme Court stated that the prolonged practice of encashing personal checks by other employees does not excuse or justify an individual employee’s violation of company policy.
What should employees in positions of financial responsibility do?	Employees should exercise utmost prudence and caution, especially when handling company finances, and must adhere to company policies to maintain the trust and confidence placed in them by their employer.

This case serves as a strong reminder of the responsibilities that come with positions of trust within a company. Employees must act with integrity and adhere to company policies, and employers have the right to protect their interests by terminating those who breach that trust. A well crafted and updated employee code of conduct can also protect companies against this occurrence in the future.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: CARMELITA V. SANTOS VS. SAN MIGUEL CORPORATION, G.R. No. 149416, March 14, 2003