The Supreme Court held that an employee’s willful breach of trust, demonstrated by falsifying records and misrepresenting facts to a supervisor, is a valid cause for termination, even if the employee did not personally misappropriate funds. This ruling emphasizes the importance of honesty and integrity in positions of trust, where employees handle significant amounts of money or property, and clarifies the extent to which employers can rely on breaches of trust as grounds for dismissal.

Cash Count Conundrum: Did a Waiter’s Actions Warrant Dismissal?

The case revolves around Edwin Jara, a captain waiter at The Peninsula Manila, who was terminated for dishonesty after an incident involving a discrepancy between cash on hand and transaction receipts. Jara discovered an overage of P6,500.00 but, instead of promptly reporting it, he manipulated the sales records to make the cash count tally, and then misrepresented the situation to his supervisor. The central legal question is whether these actions constitute a willful breach of trust that justifies termination under Article 297 (formerly Article 282) of the Labor Code.

Article 297 of the Labor Code outlines the just causes for terminating employment. Specifically, subsection (c) addresses fraud or willful breach of the trust reposed in the employee by the employer. The Supreme Court has consistently held that for this provision to apply, two key requirements must be met. First, the employee must hold a position of trust and confidence. Second, there must be an act that justifies the loss of that trust and confidence.

Jara argued that as a rank-and-file employee, he did not hold a position of trust and confidence, thus his dismissal was illegal. The Court, however, disagreed, distinguishing between two classes of positions of trust. Managerial employees constitute the first class, vested with powers to formulate management policies and execute personnel actions. The second class includes employees like cashiers, auditors, and property custodians, who routinely handle significant amounts of money or property.

The Court emphasized that Jara, as a captain waiter responsible for balancing sales transactions and cash, falls squarely within the second category. Indeed, the very nature of his duties implies a level of trust from the management. As the Supreme Court noted in Hormillosa v. Coca-Cola Bottlers Phils., Inc.:

“Employees who are routinely charged with the care and custody of the employer’s money or property are considered occupying positions of trust and confidence.”

Having established that Jara held a position of trust, the Court then turned to the question of whether his actions justified the loss of that trust. The Court found that Jara’s actions were indeed a willful breach of trust based on established facts. His decision to alter the sales records and misrepresent the situation to his supervisor demonstrated a clear intent to deceive. Moreover, his failure to promptly report the overage further undermined his claim of good faith. As the Court stated:

“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.”

The willfulness of Jara’s actions was a critical factor in the Court’s decision. “Willful” in this context means that the action was voluntary and intentional. Jara never claimed he was forced to tamper with the records or misrepresent the situation. He acted of his own volition, fully aware of the potential consequences. By manipulating the records and misrepresenting the cash balance, Jara demonstrated a clear disregard for his employer’s trust.

The Court also addressed Jara’s claim that he intended to turn over the money and that a similar incident involving another employee resulted in exculpation. The court, however, distinguished this case because that employee’s supervisor knew of the excess cash and instructed them to keep it safe, unlike Jara’s case. The Court noted that, in that case, “the employee involved in that incident was exculpated by the Court of Appeals because his supervisor had knowledge of the excess cash on hand and was even the one who actually instructed the captain waiter to safekeep the overage in the meantime. In Jara’s case, there was no such instruction. On the contrary, the supervisor himself was completely unaware that Jara did not remit the complete cash sales for the day and had even kept the money in his locker.”

The timing of Jara’s disclosure further weakened his defense. He waited two days before informing the hotel’s internal auditor about the overage. As the Court noted in Bristol Myers Squibb (Phils.) Inc., v. Baban:

“Delay in reporting incidents that affect the employer’s business operations can constitute a breach of trust.”

The Court acknowledged the subjective nature of loss of confidence as a ground for dismissal and cautioned against its abuse. However, when the breach of trust is clearly supported by the evidence, as in this case, the employer’s right to dismiss the employee must be upheld. The facts clearly showed that Jara manipulated records, misrepresented facts to his supervisor, and delayed reporting the overage. These actions, taken together, constituted a willful breach of trust that justified his dismissal.

The Supreme Court contrasted the findings of the Labor Arbiter and the Court of Appeals with those of the NLRC. The Labor Arbiter initially ruled that Jara was illegally dismissed, finding that he lacked dishonest intent and his actions were a lapse in judgment. The Court of Appeals affirmed this decision. The NLRC, however, reversed the Labor Arbiter’s ruling, finding that Jara’s dismissal was valid due to his dishonesty and misrepresentation. The Supreme Court ultimately sided with the NLRC, highlighting the importance of deferring to the expertise of labor tribunals when their findings are supported by substantial evidence, as noted in Central Azucarera de Bais and Antonio Steven Chan v. Heirs of Zuelo Apostol.

The Court’s decision underscores the importance of honesty and integrity in the workplace, particularly for employees in positions of trust. While length of service and a previously clean record may be considered, they cannot excuse a willful breach of trust founded on clearly established facts. The ruling serves as a reminder that employers have the right to protect themselves from employees who demonstrate a propensity for dishonesty and misrepresentation, even if those employees have not directly misappropriated funds.

FAQs

What was the key issue in this case?	The key issue was whether Edwin Jara’s actions constituted a willful breach of trust that justified his termination under Article 297 of the Labor Code.
What did Edwin Jara do?	Edwin Jara, a captain waiter, manipulated sales records to conceal a cash overage, misrepresented the situation to his supervisor, and delayed reporting the incident.
What is a position of trust and confidence?	A position of trust and confidence involves employees who handle significant amounts of money or property or those with managerial authority.
What is required for a valid dismissal based on loss of trust?	A valid dismissal based on loss of trust requires that the employee holds a position of trust and that there is an act that justifies the loss of trust.
What does ‘willful’ mean in the context of a breach of trust?	‘Willful’ means that the action was voluntary and intentional, not accidental or coerced.
Why was Jara’s dismissal upheld despite his length of service?	Jara’s dismissal was upheld because his willful breach of trust outweighed his length of service and clean record.
What was the role of the NLRC in this case?	The NLRC reversed the Labor Arbiter’s decision, finding that Jara’s dismissal was valid due to his dishonesty and misrepresentation.
How did the Supreme Court view the Court of Appeals’ decision?	The Supreme Court reversed the Court of Appeals’ decision, siding with the NLRC and emphasizing the importance of honesty and integrity in positions of trust.

This case serves as a significant precedent for employers dealing with issues of employee dishonesty and breach of trust. It underscores the importance of clear policies and procedures regarding financial transactions and reporting, as well as the right of employers to terminate employees who violate those policies and demonstrate a lack of integrity.

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: The Peninsula Manila and Sonja Vodusek v. Edwin A. Jara, G.R. No. 225586, July 29, 2019