Breach of Trust as Just Cause for Employee Dismissal in the Philippines

In the Philippines, employers may terminate an employee for just causes defined by law. One of the most commonly invoked—and frequently litigated—grounds is "loss of trust and confidence." The Supreme Court case of Schering Employees Labor Union (SELU) and Lucia P. Sereneo v. Schering Plough Corporation (G.R. No. 142506, February 17, 2005) clarifies how this ground operates in practice, particularly for employees holding positions of responsibility.

The Facts of the Case

Lucia P. Sereneo worked for Schering Plough Corporation as a professional medical representative and later became a field sales training manager. In January 1996, she was elected president of the Schering Employees Labor Union (SELU) and began renegotiating the collective bargaining agreement with management.

Shortly after, the company sent Sereneo notices requiring her to explain her failure to implement marketing projects. She was later charged with misappropriation of company funds, falsification and tampering of company records, and submission of false reports. When she refused to submit explanations, the company evaluated her records and found her guilty of dishonesty, willful breach of trust, and willful disobedience. Her employment was terminated on October 11, 1996.

The union filed a complaint for illegal dismissal and unfair labor practice, alleging that the termination was a form of union busting.

The Issue

The central question before the Supreme Court was whether Sereneo was illegally dismissed from employment.

The Ruling

The Supreme Court upheld the dismissal, ruling that the company had valid grounds to terminate Sereneo under Article 282 of the Labor Code, which allows an employer to terminate employment for:

• Serious misconduct or willful disobedience
• Gross and habitual neglect of duties
• Fraud or willful breach of the trust reposed by the employer
• Commission of a crime against the employer
• Other analogous causes

The Court found that Sereneo falsified company call cards by altering the dates of her actual visits to physicians. She was also found guilty of misappropriating company funds by falsifying food receipts. These acts demonstrated dishonesty and clearly breached the trust reposed in her by her employer.

Key Principles on Breach of Trust

This case reinforces several important principles regarding loss of trust and confidence as a ground for dismissal:

First, the breach must be willful—meaning the employee intentionally committed the act that destroyed the employer's trust. In Sereneo's case, the falsification of records was a deliberate act.

Second, the ground applies to employees who hold positions of trust and confidence, such as managers, supervisors, and those handling company funds or sensitive records. Sereneo's role as a field sales training manager placed her in such a position.

Third, the employer must have reasonable grounds to believe that the employee breached its trust. The Court found that the company's evidence—the altered call cards and falsified receipts—provided a valid basis for its conclusion.

Fourth, the burden of proving unfair labor practice lies with the union or employee. The Court noted that the accusation of union busting was "bereft of any proof" and that the union failed to present substantial evidence to support its claim.

Practical Takeaways

• Loss of trust and confidence is a valid just cause for dismissal, but employers must prove willful breach with substantial evidence.
• Documentation matters. The company's case succeeded because it had concrete evidence—altered call cards and falsified receipts—to support its charges.
• Employees should respond to formal charges. Sereneo's refusal to answer the company's notices worked against her, as the Court noted she failed to refute the specific charges.
• Union membership does not shield an employee from valid dismissal. The Court found no evidence that the termination was an act of union busting.
• Due process simply means an opportunity to be heard. The company gave Sereneo ample time to explain, satisfying the requirement of procedural due process.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.