Illegal Dismissal: Probable Cause Alone Does Not Justify Termination

The Supreme Court recently clarified an important point in labor law: a finding of probable cause for a criminal offense does not automatically mean an employer had valid grounds to dismiss an employee. In Prudencio Clemente, Jr. v. ESO-Nice Transport Corporation (G.R. No. 228231, August 28, 2019), the Court reinstated the ruling of the National Labor Relations Commission (NLRC) that a bus dispatcher was illegally dismissed, even though a prosecutor had found probable cause for qualified theft against him.

The Case Background

Prudencio Clemente, Jr. worked as a bus dispatcher for ESO-Nice Transport Corporation. In August 2013, an audit revealed that numerous collections had not been deposited into the company's bank account. The company sent Clemente a notice requiring him to explain unremitted collections, including a P15,000 payment from United Van Association, a P60,000 payment from M. Kaley, and "other sales."

Clemente denied any wrongdoing, explaining that he was on day-off when the United Van payment was collected and that he had remitted the M. Kaley payment to the company cashier. Despite his explanation, the company terminated him in October 2013, citing his alleged admission to fraudulently taking P56,710.46.

The Procedural History

The Labor Arbiter ruled that Clemente was illegally dismissed, finding that the company failed to substantiate its claim of qualified theft. The NLRC affirmed this ruling, noting that the prosecutor found probable cause only against the cashier, Alex Garcia, and not against Clemente.

The Court of Appeals (CA) reversed, ruling that the company had complied with due process requirements and that the probable cause finding justified the dismissal. However, the CA found the penalty of dismissal disproportionate and ordered reinstatement without backwages.

The Supreme Court's Ruling

The Supreme Court reversed the CA and reinstated the NLRC's decision. The Court made two key rulings.

First, the company failed to comply with procedural due process. The August 22, 2013 notice was defective because it required Clemente to explain "other sales" without specifying what these were. The notice also failed to mention which company rule was violated or which ground under the Labor Code provision on termination by employer was being charged. Additionally, the company gave Clemente only 72 hours to respond, when jurisprudence requires at least five calendar days.

Second, the company failed to establish a valid (substantive) ground for dismissal. The Court emphasized that a finding of probable cause for qualified theft does not automatically translate to a valid ground for termination. As held in Copy Central Digital Copy Solution v. Domrique (764 Phil. 694 [2015]), the evidence must still be evaluated to determine whether it meets the standard of substantial evidence.

The Court examined the minutes of the September 28, 2013 meeting and found nothing showing that Clemente admitted to appropriating company funds. The purported admission dated October 3, 2013 was doubtful, especially since Clemente had consistently denied the charge. At most, the evidence showed possible negligence, which is not a just cause for termination under the Labor Code.

The Distinction Between Substantive and Procedural Due Process

The Court reiterated the important distinction between two types of due process violations:

• Substantive due process violation (dismissal without just or authorized cause) renders the dismissal invalid and entitles the employee to reinstatement and full backwages.
• Procedural due process violation (dismissal with just cause but without proper procedure) does not invalidate the dismissal but obligates the employer to pay nominal damages.

Since Clemente was dismissed without just cause, he was entitled to reinstatement and full backwages. However, given the strained relations between the parties, the Court awarded separation pay in lieu of reinstatement.

Practical Takeaways

• Probable cause is not enough. A criminal finding of probable cause does not automatically justify dismissal. Employers must still prove their case under the substantial evidence standard.
• The notice must be specific. A notice to explain that refers to "other sales" without detail fails the due process requirement. The notice must contain a detailed narration of facts and cite the specific company rule or legal ground violated.
• Five days minimum. Employees must be given at least five calendar days to respond to a notice to explain, not just 72 hours.
• A meeting is not a hearing. A mere meeting where no opportunity is given to present defenses does not satisfy the hearing requirement.
• Distinguish the two due processes. A dismissal without just cause entitles the employee to reinstatement and backwages; a dismissal with just cause but defective procedure only warrants nominal damages.

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