Key Takeaway: Employers May Dismiss Employees for Loss of Trust and Confidence Under Specific Conditions

Belarso v. Quality House, Inc., G.R. No. 209983, November 10, 2021

Imagine dedicating over three decades to a company, only to be dismissed over a single incident. This was the reality for Evelina Belarso, a long-time supervisor at Quality House, Inc., who found herself at the center of a legal battle after being accused of attempting to steal company property. The central question in this case was whether her dismissal was justified under the grounds of loss of trust and confidence, a critical issue for both employers and employees in the Philippines.

Evelina Belarso, after 34 years with Quality House, Inc., was dismissed following an incident where a belt buckle was found in her bag during a routine inspection. Belarso claimed she was framed, but the company argued that her actions constituted a breach of trust. This case delves into the nuances of when an employer can legally terminate an employee based on loss of trust and confidence.

Legal Context: Understanding Loss of Trust and Confidence

In Philippine labor law, the concept of loss of trust and confidence is a just cause for termination under Article 297 of the Labor Code. This provision allows an employer to dismiss an employee for “fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.” However, the Supreme Court has established that such a dismissal must meet two conditions:

• The employee must hold a position of trust and confidence, where greater trust is placed by management and from whom greater fidelity is expected.
• There must be some basis for the loss of trust and confidence, supported by clear and convincing proof of an actual breach of duty.

Employees in positions of trust and confidence are divided into two classes: managerial employees, who have the power to lay down management policies and make significant employment decisions, and fiduciary rank-and-file employees, who regularly handle significant amounts of money or property. This distinction is crucial because it determines whether the loss of trust and confidence doctrine applies.

For example, a cashier who misappropriates funds or a property custodian who attempts to steal company assets would fall under this category. The Supreme Court has emphasized that the essence of the offense is the betrayal of trust, which is why the burden of proof on the employer is high.

Case Breakdown: The Journey of Evelina Belarso

Evelina Belarso’s journey began on November 14, 1976, when she was hired by Quality House, Inc., a manufacturer and distributor of leather products. Over the years, she progressed from working in the belt department to becoming the supervisor of the Raw Materials Warehouse in 1987. Her role involved the custody, safekeeping, and release of raw materials, placing her in a position of trust and confidence.

On December 10, 2010, during a routine inspection, a belt buckle was discovered in Belarso’s bag. She denied any knowledge of how it got there, asserting that her bag was left in a visible location where anyone could have placed the item inside. Despite her explanation, Quality House, Inc. placed her on preventive suspension and later dismissed her, citing loss of trust and confidence and violation of company rules.

Belarso filed a complaint for illegal dismissal, which was initially upheld by the Labor Arbiter (LA). However, the National Labor Relations Commission (NLRC) reversed the LA’s decision, finding that Quality House, Inc. had established a just cause for dismissal. The Court of Appeals (CA) affirmed the NLRC’s ruling, leading to Belarso’s appeal to the Supreme Court.

The Supreme Court reviewed the case, focusing on the conflicting factual findings of the LA and NLRC. In its decision, the Court emphasized:

“First, Belarso never denied in her Petition that she held a position of trust and confidence. Her appointment letter showed that she assumed the position of Raw Materials Supervisor in 1987. As a supervisor, she was responsible for the custody, handling, safekeeping, and releasing of QHI’s raw materials.”

“Second, QHI was able to establish the basis of its loss of trust on Belarso: her violation of the company rule prohibiting the stealing or attempting to steal company property.”

The Court found that Belarso’s position as a supervisor placed her in a fiduciary role, and the evidence presented by Quality House, Inc., including incident reports and affidavits, supported the claim of a breach of trust. Belarso’s defense of being framed was deemed unsubstantiated, and her previous infractions further justified the company’s decision.

Practical Implications: Navigating Loss of Trust and Confidence

This ruling underscores the importance of clear evidence in cases involving loss of trust and confidence. Employers must ensure they have substantial proof before dismissing an employee, especially one in a position of trust. For employees, understanding the criteria that qualify their role as one of trust and confidence is crucial for protecting their rights.

Businesses should review their policies and ensure they are aligned with legal standards. Employees in fiduciary roles should be aware that their actions are under scrutiny and that any breach of trust can lead to severe consequences.

Key Lessons:

• Employers must provide clear and convincing evidence of a breach of trust to justify dismissal.
• Employees in positions of trust and confidence should be cautious of their actions, as they are held to a higher standard.
• Length of service does not automatically mitigate the severity of a breach of trust.

Frequently Asked Questions

What constitutes a position of trust and confidence?

A position of trust and confidence includes managerial employees who have the authority to make significant employment decisions and fiduciary rank-and-file employees who regularly handle significant amounts of money or property.

Can an employee be dismissed for loss of trust and confidence without evidence?

No, the employer must provide clear and convincing proof of an actual breach of duty to justify dismissal on these grounds.

Does length of service affect the validity of dismissal for loss of trust and confidence?

Length of service does not automatically mitigate the severity of a breach of trust. In some cases, it may even aggravate the offense if the employee is in a position of trust.

What should employees do if they believe they were wrongfully dismissed?

Employees should file a complaint with the appropriate labor authorities and seek legal counsel to review their case and explore their options.

How can employers protect themselves from wrongful dismissal claims?

Employers should ensure they have robust policies in place, conduct thorough investigations, and document any breaches of trust with clear evidence.

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