Theft as Just Cause for Dismissal: But Due Process Still Matters

In cases of employee misconduct like theft, Philippine law allows for termination. However, employers must still strictly adhere to due process requirements. This case underscores that even with a valid reason for dismissal, procedural lapses can lead to penalties for the employer, highlighting the crucial balance between just cause and due process in labor disputes.

[ G.R. No. 102936, October 16, 1997 ]
LEVY AGAO, ET AL. VS. NLRC AND CATHAY PACIFIC STEEL MELTING CORPORATION

INTRODUCTION

Imagine your business grappling with losses due to employee theft. The frustration is immense, and the need to take action is urgent. But in the Philippines, even when faced with clear misconduct, employers must navigate a legal tightrope, balancing the right to protect their business with the employee’s right to due process. Levy Agao, et al. vs. NLRC and Cathay Pacific Steel Melting Corporation illuminates this delicate balance. Several delivery workers were dismissed for allegedly stealing steel bars. The core legal question: Was their dismissal valid, considering both the accusations of theft and the procedural fairness of their termination?

LEGAL CONTEXT: JUST CAUSE AND DUE PROCESS IN DISMISSAL

Philippine labor law is clear: employers can terminate employees for “just causes.” Article 297 (formerly Article 282) of the Labor Code of the Philippines outlines these grounds, including “fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.” This essentially covers acts of dishonesty like theft, which erode the employer’s trust – a critical element in any employment relationship.

However, the right to terminate is not absolute. The Constitution guarantees due process, meaning fairness in legal proceedings. In termination cases, this translates to two key components: substantive due process and procedural due process. Substantive due process requires a valid or just cause for termination. Procedural due process, on the other hand, mandates that employers follow specific procedures before dismissing an employee. These twin requirements are not interchangeable; both must be present for a dismissal to be considered legal.

The Supreme Court has consistently emphasized procedural due process, outlining the “twin notice rule.” This rule requires employers to issue two notices to the employee: (1) a notice of intent to dismiss, informing the employee of the charges against them and giving them an opportunity to explain, and (2) a notice of termination, informing the employee of the employer’s decision to dismiss. Between these notices, the employer must conduct a fair investigation, giving the employee a chance to be heard. Failure to comply with procedural due process, even if just cause exists, can lead to legal repercussions for the employer.

CASE BREAKDOWN: THE STEEL BAR PILFERAGE

Cathay Pacific Steel Melting Corporation (CAPASCO) employed Levy Agao and others as delivery workers. Their work involved delivering steel bars, and they were organized into teams. The company discovered an attempted theft by one team, leading to an investigation. During this investigation, Columbus Bolabola, a helper in another team, confessed to participating in past pilferages and implicated the teams of Agao and Morante.

Bolabola detailed specific instances of theft, including dates, methods (like concealing extra steel bars within legitimate deliveries), and even the junk shop where they sold the stolen goods, Constancia Junk Shop. He described how they would manipulate deliveries, taking extra steel bars and selling them for personal profit. For example, he recounted an incident on October 27, 1988, where the Morante group delivered to New Liwayway Hardware and sold excess steel bars at Constancia Junk Shop, sharing the proceeds.

Based on Bolabola’s sworn affidavits, CAPASCO dismissed Agao and Morante’s groups. The dismissed employees filed an illegal dismissal case. Interestingly, the team initially caught attempting theft (Elmido’s group) later withdrew their complaint and admitted their guilt, further strengthening CAPASCO’s position regarding pilferage within its delivery operations.

The Labor Arbiter initially ruled in favor of CAPASCO, finding just cause for dismissal. The National Labor Relations Commission (NLRC) affirmed the finding of just cause but modified the decision. The NLRC acknowledged the validity of the dismissal due to loss of trust and confidence arising from the theft. However, it found that CAPASCO failed to provide procedural due process. The NLRC pointed out the lack of evidence of prior notice and investigation given to Agao and his co-workers before their dismissal. As a result, the NLRC ordered CAPASCO to pay each dismissed employee P1,000 as a penalty for this procedural lapse.

The case reached the Supreme Court on Petition for Certiorari filed by Agao and his group, questioning both the existence of just cause and the lack of due process. The Supreme Court sided with the NLRC. Justice Hermosisima, Jr., writing for the Court, emphasized the principle of deference to the factual findings of quasi-judicial bodies like the NLRC, especially when supported by substantial evidence. The Court found Bolabola’s testimony credible and detailed, stating, “we are impressed by the straightforward, detailed and vivid account of witness Bolabola of the incidents of pilferages committed by the individual complaints. They are too persuasive to be ignored.”

The Court also highlighted Agao’s own admissions in letters to CAPASCO management, where he acknowledged “overages” in deliveries and “petty thieveries” within the company, further corroborating the accusations. While upholding the just cause for dismissal, the Supreme Court affirmed the NLRC’s finding of a procedural due process violation. The Court reiterated that even with just cause, procedural due process is mandatory. Since CAPASCO failed to present evidence of proper notices and investigation, the penalty of P1,000 per employee for violation of due process was upheld. The Supreme Court concluded, “if the dismissal of an employee is for a just and valid cause but he is not accorded due process, the dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of due process.”

PRACTICAL IMPLICATIONS: BALANCING RIGHTS AND RESPONSIBILITIES

This case offers critical lessons for both employers and employees. For employers, it reinforces that having just cause to dismiss an employee is only half the battle. Strict adherence to procedural due process is equally crucial. Even when an employee is demonstrably guilty of misconduct, failing to provide proper notice and a fair hearing can lead to financial penalties and potential legal battles. Employers should implement clear procedures for investigating employee misconduct, ensuring proper documentation of notices, hearings, and the investigation process itself.

For employees, this case highlights the seriousness of acts of dishonesty in the workplace. Breaching the trust of an employer through theft constitutes just cause for dismissal. However, it also underscores the importance of due process rights. Employees facing termination are entitled to be informed of the charges against them and given a fair opportunity to present their side of the story.

Key Lessons for Employers:

• Just Cause is Essential but Not Sufficient: Proven misconduct like theft provides just cause for dismissal.
• Procedural Due Process is Mandatory: Always follow the twin notice rule – notice of intent to dismiss and notice of termination – with a fair investigation in between.
• Document Everything: Maintain records of notices, investigation proceedings, and evidence gathered.
• Fair Investigation is Key: Provide a genuine opportunity for the employee to be heard and present their defense.
• Seek Legal Counsel: Consult with labor law experts to ensure compliance with all legal requirements in termination cases.

FREQUENTLY ASKED QUESTIONS (FAQs)

Q: What constitutes “just cause” for dismissal in the Philippines?

A: Article 297 of the Labor Code lists several just causes, including serious misconduct, willful disobedience, gross and habitual neglect of duties, fraud or willful breach of trust, commission of a crime against the employer, and others.

Q: What is “due process” in employee dismissal cases?

A: Due process has two aspects: substantive (just cause for dismissal) and procedural (fair process). Procedural due process requires the twin notice rule and a fair hearing or investigation.

Q: What is the “twin notice rule”?

A: It requires two notices from the employer to the employee: first, a notice of intent to dismiss stating the grounds and giving opportunity to explain; second, a notice of termination after investigation, if dismissal is decided.

Q: What happens if an employer has just cause but fails to follow due process?

A: The dismissal may be upheld as valid (if just cause exists), but the employer can be penalized for violating procedural due process, often through nominal damages.

Q: Can an employee be dismissed based on the testimony of a single witness?

A: Yes, if the testimony is credible, detailed, and supported by substantial evidence, as seen in this case where Bolabola’s testimony was deemed sufficient.

Q: What kind of penalty can an employer face for failing to provide due process?

A: Penalties can vary. In this case, it was nominal damages of P1,000 per employee. In other cases, it could be back wages or other forms of compensation, depending on the circumstances and the severity of the procedural lapse.

Q: Is loss of trust and confidence a valid ground for dismissal?

A: Yes, “fraud or willful breach by the employee of the trust reposed in him” is a just cause for dismissal under the Labor Code. Theft clearly falls under this category.

Q: What should an employee do if they believe they were illegally dismissed?

A: Employees should immediately seek legal advice and consider filing an illegal dismissal case with the NLRC within a specific timeframe.

ASG Law specializes in Labor Law and Employment Disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.