Breach of Trust Justifies Dismissal: Employers' Right to Terminate Probationary Employment

Probationary employment is a period of evaluation for both employer and employee. During this time, the employer observes whether the employee meets reasonable standards for regular employment. But what happens when a probationary employee commits an act that destroys the employer's trust? The Supreme Court's decision in De la Cruz, Jr. v. National Labor Relations Commission (G.R. No. 145417, December 11, 2003) provides clear guidance.

The Case: A Senior Sales Manager's Short Tenure

Florencio M. de la Cruz, Jr. was hired by Shemberg Marketing Corporation as senior sales manager on May 27, 1996, with a monthly salary of P40,500. His position involved supervising the sales force, appointing district sales representatives, and reshuffling salesmen to achieve sales targets.

Barely four months later, on September 14, 1996, the company terminated his services. The management cited poor sales performance, low morale among subordinates, unauthorized use of the company cellphone for overseas personal calls, and unauthorized reimbursement of plane tickets for his wife and child.

The Issue: Was the Dismissal Legal?

De la Cruz filed a complaint for illegal dismissal. He argued that he was not informed of the reasonable standards for regular employment, making his probationary status questionable. He also claimed that the charge of fraud was an afterthought, raised only on appeal.

The central question: Could an employer validly terminate a probationary employee for breach of trust and dishonesty?

The Ruling: Breach of Trust is a Just Cause

The Supreme Court ruled in favor of the employer, affirming that the dismissal was for a just cause. The Court found substantial evidence that De la Cruz submitted plane tickets for his family's personal travel and sought reimbursement from company funds without authorization.

The Court emphasized that De la Cruz held a managerial position that required the full trust and confidence of his employer. While he could exercise some discretion in his functions, this discretion "obviously did not cover acts for his own personal benefit." His act of reimbursing personal travel expenses out of company funds amounted to fraud or deceit, which justified the employer's loss of trust and confidence.

Probationary Employment Under Article 281

The Court applied Article 281 of the Labor Code, which states that probationary employment shall not exceed six months. Under this provision, a probationary employee's services may be terminated for a just cause or when the employee fails to qualify as a regular employee in accordance with reasonable standards made known at the time of engagement.

The Court noted that De la Cruz's appointment paper and job description clearly informed him that his performance was "subject to evaluation and trial period for six (6) months or more." This satisfied the requirement that standards be made known to the employee.

Key Principles Established

The decision clarifies several important points:

First, a probationary employee is terminable anytime before the six-month period expires, as long as the termination is for a just cause or based on failure to meet reasonable standards.

Second, dishonesty in a managerial position is a serious offense. When an employee's role requires the employer's full trust, any act of fraud or deceit—even one involving relatively small amounts—can justify dismissal.

Third, under Article 221 of the Labor Code, technical rules of evidence do not bind labor tribunals. The NLRC may consider additional evidence presented on appeal, as long as it helps ascertain the facts of the case speedily and objectively.

Practical Takeaways

• Employers may terminate probationary employees before the six-month period ends if there is a just cause, such as dishonesty or breach of trust, or if the employee fails to meet reasonable performance standards.
• Document the standards for regular employment in the appointment letter or job description. The Court upheld the dismissal partly because the standards were clearly communicated in writing.
• For managerial employees, trust is paramount. Acts that betray that trust—even personal reimbursement claims—can justify loss of trust and confidence as a ground for dismissal.
• Employees should be cautious about personal expenses. Using company funds for personal benefit without authorization, even if the amount is small, can have serious consequences.
• Labor tribunals may admit evidence presented late. The NLRC can consider additional evidence on appeal, so employers are not strictly bound by the initial pleadings.

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