An employee’s act of dishonesty, especially when entrusted with handling money or property, constitutes a breach of trust and can lead to termination. The Supreme Court affirmed that such actions fall under the just and valid causes for termination under Article 282 of the Labor Code, emphasizing the employer’s right to protect their business from untrustworthy employees. This ruling underscores the importance of honesty and integrity in the workplace, particularly for those in positions of responsibility. It serves as a reminder that employers have the legal basis to terminate employees who betray the trust placed in them, provided that due process is observed.

Double Entries and Broken Trust: Can Dishonesty Justify Dismissal?

This case revolves around Rosalie L. Gargoles, an employee at Jay-Anne’s One Hour Photo Shop, who was terminated for allegedly tampering with production reports and pocketing the extra cash generated from double entries. The core legal question is whether Gargoles’ actions constituted a breach of trust serious enough to justify her dismissal under the Labor Code, and whether the employer, Reylita S. Del Rosario, followed the proper procedures in terminating her employment.

The petitioner, Rosalie L. Gargoles, worked as an all-around employee at Jay-Anne’s One Hour Photo Shop. Her duties included cashiering, sales, and handling photo printing. In March 1998, she was terminated for dishonesty. Her employer, Reylita S. Del Rosario, alleged that Gargoles manipulated daily printer production reports, resulting in financial losses to the store. Specifically, Del Rosario claimed that Gargoles made double entries, pocketing the cash equivalent of the padded totals, amounting to P11,305.00 over several months. Gargoles filed a complaint for illegal dismissal, seeking reinstatement and backwages, arguing that there was no just cause for her termination and that she was denied due process.

The Labor Arbiter dismissed Gargoles’ complaint, a decision later affirmed by the National Labor Relations Commission (NLRC). The NLRC found sufficient evidence to support the allegations of dishonesty, leading to a breach of trust. Gargoles then appealed to the Court of Appeals (CA), arguing that the NLRC committed grave abuse of discretion. The CA affirmed the NLRC’s decision regarding the existence of just cause but found that Del Rosario had violated Gargoles’ right to due process and awarded her indemnity of P5,000.00. Dissatisfied, Gargoles elevated the case to the Supreme Court, challenging the finding of just cause and arguing that the CA’s decision was based on speculation.

The Supreme Court found the petition lacking merit. Article 282 of the Labor Code outlines the just and valid causes for dismissing an employee. Among these is the fraud or willful breach of trust by the employee. The Court cited the Labor Arbiter’s conclusion, affirmed by the NLRC, that Gargoles’ dishonest acts triggered an erosion of trust. The Court emphasized that the production reports containing the double entries and the affidavit from a co-employee, Redelito Caranay, Jr., provided substantial evidence of the dishonesty.

The Court addressed Gargoles’ argument that she was presumed innocent, stating that while the presumption of innocence exists, it does not excuse an employee from defending themselves against accusations. Once the employer presents evidence of wrongdoing, the employee must rebut it. This is particularly true in cases involving loss of confidence or breach of trust, where the employer only needs to be morally convinced of the employee’s guilt. “After going over the evidence adduced by the respondent in support of its averments and principal defense, this Office finds the same to be reasonably sufficient to arrive at the conclusion that complainant was indeed guilty of the act(s) of dishonesty imputed upon her. Certainly, the aforesaid dishonest act(s) committed by the complainant logically triggered an erosion of the trust reposed upon him [sic] by his [sic] employer and jurisprudence is explicit on the point that when an employee has been guilty of breach of trust or his employer has ample reason to distrust him, a labor tribunal cannot deny the employer the authority to dismiss him.”

Regarding the procedural due process, the CA found that Gargoles was not duly informed of the accusations against her, thus denying her a chance to explain her side. The Supreme Court disagreed, noting that Del Rosario presented a letter dated March 25, 1998, requiring Gargoles to submit an explanation. The Court highlighted Gargoles’ refusal to sign for the letter, indicating a waiver of her right to contest the charges. The respondent sent another letter to the petitioner informing her of the termination of her services but the latter again refused to sign in acknowledgment of the letter. Under the circumstances, the two-notice rule was evidently complied with by the respondent, thereby negating any denial of due process to the petitioner.

The petitioner also argued that the CA should have applied the ruling in *Serrano v. National Labor Relations Commission*, which awarded full backwages for violations of due process, instead of *Wenphil Corporation v. National Labor Relations Commission*, which only mandated indemnity. The Court rejected this argument, citing that *Serrano* had been abandoned in *Agabon v. National Labor Relations Commission*, which restored the doctrine in *Wenphil Corporation* to some extent. Moreover, the Court clarified that both *Wenphil* and *Serrano* apply only when the termination is valid but due process is not followed, which was not the case here, as the dismissal was valid and due process was observed.

In conclusion, the Supreme Court affirmed the CA’s decision but deleted the indemnity of P5,000.00, emphasizing that there was no grave abuse of discretion on the part of the NLRC in upholding the Labor Arbiter’s decision. The Court underscored that the dismissal was for just cause and that the employer had complied with the requirements of due process. “[Grave abuse of discretion] must be grave, which means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation of law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent to lack of jurisdiction.”

FAQs

What was the key issue in this case?	The key issue was whether the employee’s dishonest acts constituted a breach of trust that justified her dismissal, and whether the employer followed proper procedures in the termination.
What is Article 282 of the Labor Code about?	Article 282 of the Labor Code lists the just and valid causes for which an employer can terminate an employee, including serious misconduct and breach of trust.
What evidence did the employer present to prove dishonesty?	The employer presented production reports with double entries and an affidavit from a co-employee confirming the petitioner’s dishonest activities.
What is the presumption of innocence, and how does it apply in this case?	The presumption of innocence means every person is presumed innocent until proven guilty. However, it does not excuse an employee from defending themselves when the employer presents evidence of wrongdoing.
What is the two-notice rule in labor cases?	The two-notice rule requires the employer to provide two written notices to the employee: one informing them of the charges and another informing them of the decision to dismiss.
How did the employee allegedly violate store policy?	The employee allegedly violated store policy by making double entries in production reports, manipulating records, and appropriating cash for personal gain.
What did the Court of Appeals initially rule regarding due process?	The Court of Appeals initially ruled that the employer violated the employee’s right to due process and awarded indemnity, but the Supreme Court reversed this ruling.
Why did the Supreme Court delete the indemnity awarded by the Court of Appeals?	The Supreme Court deleted the indemnity because it found that the employer had complied with the requirements of due process in the termination.

This case serves as a crucial reminder of the importance of trust in the employer-employee relationship. It clarifies the grounds for termination based on breach of trust and underscores the necessity of adhering to due process. Employers must ensure they have sufficient evidence and follow proper procedures to avoid legal repercussions.

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: Rosalie L. Gargoles vs. Reylita S. Del Rosario, G.R. No. 158583, September 10, 2014