The Supreme Court held that an employer may validly terminate an employee based on loss of trust and confidence when there is a reasonable basis to believe that the employee has breached the trust reposed in them. This ruling clarifies that while employees are protected by security of tenure, managerial employees hold a higher degree of responsibility, and a substantiated breach of trust can justify dismissal. The decision emphasizes the importance of honesty and transparency in an employee’s duties, particularly in positions involving financial transactions and the handling of company resources.

Dubious Deals or Due Diligence? Examining Dismissal for Managerial Misconduct

The case of Philippine Journalists, Inc. v. National Labor Relations Commission and Eduardo S. Rivera, G.R. No. 187120, decided on February 15, 2010, revolves around the dismissal of Eduardo S. Rivera, the purchasing manager of Philippine Journalists, Inc. (PJI). Rivera was terminated for loss of confidence due to alleged irregularities in the purchase of paper materials for a Women’s Journal project. The central question before the Supreme Court was whether PJI had substantial evidence to justify Rivera’s dismissal based on this ground. The Court ultimately sided with PJI, finding that Rivera’s actions demonstrated a pattern of concealment and dishonesty that warranted the termination of his employment.

The dispute began when PJI questioned the cost of paper materials Rivera purchased for a calendar insertion project, specifically 68,000 sheets of coated paper at P6.50 per sheet, totaling P445,250.00. PJI received a “reliable quotation” suggesting the price should have been P3.40 per sheet. While Rivera denied any wrongdoing and presented a letter from the supplier denying the P3.40 quotation, further investigation revealed discrepancies that led PJI to doubt Rivera’s integrity. In the course of the investigation, PJI discovered that Rivera had made misrepresentations regarding the canvassing of prices, potentially to favor a specific supplier and inflate the purchase cost. A key piece of evidence was the canvass sheet, which indicated quotations from both NAPPCO and LAMCO at P6.50 per sheet. However, LAMCO later provided a quotation to PJI at significantly lower prices of P4.68 and P4.26 per sheet, raising questions about the accuracy of Rivera’s initial canvass.

Another significant point was the testimony of Jean Alvarado, Rivera’s assistant, who stated that Rivera instructed her to prepare the canvass sheet but did not disclose that he had included LAMCO in the canvass. Alvarado also claimed that Rivera was the one who filled in the LAMCO pricing, suggesting that the quotation may have been fabricated to create the appearance of comparative pricing. Moreover, NAPPCO had verbally quoted a price of P5.80 per sheet for cash on delivery (COD) terms, but Rivera never relayed this information to PJI. Instead, he proceeded with a purchase at P6.50 per sheet, even though the purchase order indicated COD terms. This discrepancy further fueled suspicions of dishonesty and a lack of transparency on Rivera’s part.

The Supreme Court emphasized that as a purchasing manager, Rivera held a position of trust and confidence, requiring him to act in the best interests of the company. Citing the principle of **loss of trust and confidence** as a valid ground for termination, the Court underscored that this ground is particularly applicable to managerial employees who are entrusted with significant responsibilities. The Court stated that:

For loss of trust and confidence to be a ground for dismissal, the law requires only that there be at least some basis to justify the dismissal.

The Court highlighted several acts by Rivera that indicated a breach of this trust, including his failure to conduct a thorough canvass of prices, his misrepresentations regarding the LAMCO quotation, and his failure to disclose the lower COD price offered by NAPPCO. These actions, taken together, convinced the Court that PJI had sufficient reason to lose confidence in Rivera’s ability to perform his duties honestly and effectively. One critical factor in the Court’s decision was Rivera’s failure to provide a satisfactory explanation for the discrepancies in the canvass sheet and the lack of transparency in his dealings with suppliers. While Rivera argued that he was merely trying to expedite the purchase due to the project’s urgent nature, the Court found that his actions went beyond simple expedience and indicated a deliberate attempt to mislead the company.

The Court also noted that the waste paper material resulting from trimming the paper to the required size was not disclosed to PJI, further demonstrating a lack of transparency. The Court acknowledged that while Rivera had been with the company for 25 years, this did not excuse his failure to protect the company’s interests. The Court underscored that the principle of security of tenure does not shield employees from the consequences of their dishonest or unethical behavior. In its analysis, the Supreme Court distinguished its findings from those of the National Labor Relations Commission (NLRC) and the Court of Appeals (CA), both of which had ruled in favor of Rivera. The NLRC had argued that Alvarado’s statements could not prejudice Rivera, while the CA had found that the dismissal was not supported by substantial evidence.

The Supreme Court disagreed, emphasizing that the totality of the evidence, including Alvarado’s statements, the LAMCO quotation, and Rivera’s own admissions, provided a sufficient basis for the dismissal. The Court further clarified the standard of evidence required in administrative proceedings, stating that:

In legal terms, this is the quantum of proof required in administrative proceedings.

In labor cases involving managerial employees, a higher degree of diligence and honesty is expected. As such, even if the evidence against the employee is not overwhelming, the mere existence of a reasonable basis to believe that the employee has breached the trust reposed in them can be sufficient to justify dismissal. The Supreme Court’s decision in Philippine Journalists, Inc. v. NLRC and Eduardo S. Rivera serves as a reminder to employees, particularly those in managerial positions, of the importance of maintaining the trust and confidence of their employers. It also provides guidance to employers on the factors to consider when determining whether to terminate an employee for loss of trust and confidence. It emphasizes that while employees are protected by security of tenure, this protection is not absolute and can be overridden by evidence of dishonesty or unethical conduct that undermines the employer-employee relationship.

FAQs

What was the key issue in this case?	The key issue was whether Philippine Journalists, Inc. (PJI) had substantial evidence to justify the dismissal of its purchasing manager, Eduardo S. Rivera, for loss of trust and confidence.
On what grounds was Rivera dismissed?	Rivera was dismissed for allegedly committing irregularities in the purchase of paper materials, including misrepresenting price canvassing and failing to disclose crucial information to the company.
What did the Labor Arbiter initially rule?	The Labor Arbiter initially ruled that Rivera’s dismissal was for cause, finding that he had committed acts of dishonesty or fraud against his employer.
How did the National Labor Relations Commission (NLRC) rule on appeal?	The NLRC reversed the Labor Arbiter’s decision, ruling that Rivera’s dismissal was illegal and awarding him backwages and separation pay.
What was the Court of Appeals’ decision?	The Court of Appeals affirmed the NLRC’s ruling, stating that the dismissal of Rivera based on loss of confidence was not clearly established and supported by substantial evidence.
What was the Supreme Court’s final ruling?	The Supreme Court reversed the Court of Appeals’ decision, ruling that PJI had sufficient reason to terminate Rivera’s employment for loss of trust and confidence.
What is the significance of “loss of trust and confidence” in this case?	Loss of trust and confidence is a valid ground for dismissing an employee, particularly those in managerial positions where a higher degree of responsibility and honesty is expected.
What evidence did the Supreme Court rely on in its decision?	The Supreme Court relied on evidence such as discrepancies in price canvassing, misrepresentations regarding quotations, and failure to disclose information, which indicated a pattern of dishonesty and concealment.

This case illustrates the delicate balance between an employee’s right to security of tenure and an employer’s right to protect its interests. The Supreme Court’s decision underscores the importance of honesty, transparency, and diligence in the workplace, particularly for employees in positions of trust and responsibility.

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: Philippine Journalists, Inc. v. NLRC and Eduardo S. Rivera, G.R. No. 187120, February 15, 2010