When Employee Actions Outside Work Harm Their Employer: Understanding Misconduct and Breach of Trust

ANTONIO A. ABOC, PETITIONER, VS. METROPOLITAN BANK AND TRUST COMPANY, RESPONDENT. [G.R. No. 170542-43, December 13, 2010]

Imagine an employee secretly diverting clients to a competing business. Can they be fired? This case explores the delicate balance between an employee’s actions and their duty to their employer, specifically addressing what constitutes serious misconduct and breach of trust leading to a valid dismissal.

Antonio Aboc, a bank employee, was dismissed for his involvement in credit unions that competed with his employer, Metrobank. The Supreme Court ultimately sided with Metrobank, upholding Aboc’s dismissal. This case clarifies the scope of an employee’s responsibility to avoid conflicts of interest and maintain the trust placed in them by their employer.

Legal Context: Understanding Just Cause for Termination

Philippine labor law protects employees from arbitrary dismissal. However, employers have the right to terminate employment for “just cause,” as defined in Article 282 of the Labor Code. This includes serious misconduct, willful disobedience, gross neglect of duty, fraud or willful breach of trust, and other analogous causes.

Article 282 of the Labor Code states that an employer may terminate employment for:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.

Serious misconduct generally involves improper or wrong conduct of a grave and aggravated character. It must be related to the employee’s duties and demonstrate a wrongful intent.

Breach of trust, also known as loss of confidence, requires that the employee holds a position of trust and confidence, and that the act complained of is directly related to the performance of their duties. The betrayal of this trust must be willful.

For example, a cashier who repeatedly steals money from the cash register commits both serious misconduct and breach of trust, justifying their dismissal. Similarly, a manager who uses company resources to benefit a competing business betrays the trust placed in them by their employer.

Case Breakdown: Aboc vs. Metrobank

Antonio Aboc worked for Metrobank in Cebu City. He was terminated after the bank discovered his involvement in two credit unions, Cebu North Road Investment (CNRI) and First Fund Access (FFA), which operated within the bank and solicited investments from its clients.

Here’s a timeline of the key events:

• 1988: Aboc begins working at Metrobank.
• 1995-1996: Aboc helps organize CNRI and FFA, credit unions that compete with Metrobank.
• 1997: Aboc actively solicits Metrobank clients to invest in the credit unions.
• January 1998: Metrobank investigates Aboc’s activities.
• February 1998: Aboc is dismissed for serious misconduct and breach of trust.
• October 1998: Aboc files a complaint for illegal dismissal.

The Labor Arbiter initially ruled in favor of Aboc, finding that Metrobank failed to prove just cause for dismissal. However, the National Labor Relations Commission (NLRC) reversed this decision, finding Aboc guilty of serious misconduct and breach of trust. The Court of Appeals affirmed the NLRC’s decision.

The Supreme Court emphasized the conflicting interests, stating:

“Indeed, Aboc’s participation in the lending and investment activities of CNRI and FFA was highly irregular and clearly in conflict with Metrobank’s business. The irregularity of his act was evident from the fact that he deliberately failed to inform Metrobank about the existence of CNRI and FFA.”

The Court also highlighted Aboc’s breach of loyalty:

“Metrobank was paying his salary and other benefits in exchange for his services. Therefore, Aboc’s loyalty should first and foremost be to Metrobank. Ironically, Aboc did not return the favor. He chose his personal interest over that of Metrobank.”

Practical Implications: Protecting Your Business and Career

This case serves as a reminder to both employers and employees about the importance of loyalty and avoiding conflicts of interest. Employers should clearly define what constitutes misconduct and breach of trust in their company policies. Employees must understand their obligations to their employer and avoid actions that could harm the company’s interests.

For example, a company policy could explicitly prohibit employees from engaging in any business activities that directly compete with the company, or from soliciting clients for outside ventures during work hours. Clear policies help prevent misunderstandings and provide a basis for disciplinary action if necessary.

Key Lessons:

• Loyalty Matters: Employees owe a duty of loyalty to their employers, especially those in positions of trust.
• Avoid Conflicts of Interest: Engaging in activities that compete with your employer can be grounds for dismissal.
• Transparency is Key: Disclose any potential conflicts of interest to your employer.
• Company Policies Matter: Employers should have clear policies regarding employee conduct and conflicts of interest.
• Due Process: Employers must follow due process when terminating an employee, including providing notice and an opportunity to be heard.

Frequently Asked Questions

Q: What is considered serious misconduct in the workplace?

A: Serious misconduct involves improper or wrong conduct of a grave and aggravated character. It must be related to the employee’s duties and demonstrate a wrongful intent, such as theft, fraud, or insubordination.

Q: What does it mean to breach the trust of an employer?

A: Breach of trust occurs when an employee in a position of trust and confidence willfully betrays that trust, causing harm to the employer. This could involve misusing company resources, divulging confidential information, or engaging in activities that compete with the employer’s business.

Q: Can I be fired for something I do outside of work?

A: Yes, if your actions outside of work directly harm your employer’s business or reputation, or create a conflict of interest, you could be terminated.

Q: What is due process in termination cases?

A: Due process requires that an employer provide an employee with notice of the charges against them and an opportunity to be heard before termination. This typically involves a written notice and a chance for the employee to explain their side of the story.

Q: What can I do if I believe I was wrongfully dismissed?

A: If you believe you were wrongfully dismissed, you can file a complaint with the National Labor Relations Commission (NLRC). It’s advisable to consult with a labor lawyer to assess your legal options.

Q: How can employers protect themselves from employee misconduct?

A: Employers should have clear company policies regarding employee conduct, conflicts of interest, and confidentiality. They should also conduct thorough investigations of any suspected misconduct and follow due process when terminating employees.

Q: What happens if an employer reinstates an employee in payroll pending appeal, but then wins the appeal?

A: Even if the initial reinstatement order is reversed on appeal, the employer is still obligated to pay the wages of the dismissed employee during the period of appeal until the final reversal by the higher court. This is because the reinstatement order is immediately executory.

Q: Is a formal trial-type hearing always required for due process in termination cases?

A: No, a formal trial-type hearing is not always essential to due process. It is enough that the employee is given a fair and reasonable opportunity to explain their side of the controversy and to present supporting evidence.

ASG Law specializes in labor law and employment disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.