Serious Misconduct at Work: When Can an Employee Be Dismissed?

The Supreme Court recently clarified a critical question in Philippine labor law: when an employee commits serious misconduct, can the employer dismiss them, and does that dismissal automatically strip the employee of all benefits? In Manila Electric Company v. Argentera (G.R. Nos. 224729 and 225049, February 8, 2021), the Court ruled that benefits are not automatically forfeited upon dismissal unless a company policy or contract expressly says so.

The Case: Missing Disconnect Switch Blades

Apolinar Argentera worked for Manila Electric Company (Meralco) for over two decades, eventually becoming an acting foreman. In August 2012, Argentera and his crew visited the Forbes Park substation on several occasions. After each visit, security guards discovered disconnect switch blades missing—items that were not recorded in the required Substation Action Forms.

An investigation followed. Several witnesses testified against Argentera: security guards who noticed the missing blades, a crew member who said he saw Argentera and a co-worker remove the blades, and another who described a scheme of dismantling and selling retirable materials. Meralco dismissed Argentera in February 2014 for serious misconduct and violations of its Code of Conduct, citing Article 282 of the Labor Code.

The Issue: What Qualifies as Serious Misconduct?

The central question was whether Argentera's dismissal was valid and whether he still deserved his benefits. The Court had to determine if the evidence supported a finding of serious misconduct justifying termination.

The ruling: The Supreme Court upheld the dismissal. The Court explained that in labor cases, an employee's culpability need only be established by substantial evidence—not proof beyond reasonable doubt. Substantial evidence means there is some basis for the employer's belief that the employee committed the misconduct.

Here, multiple witnesses positively identified Argentera as responsible for the missing blades. His supervisors denied authorizing his visits to the substation on the relevant dates. Against this evidence, Argentera offered only general denials and failed to present witnesses to support his innocence. The Court noted that "a positive testimony prevails over a negative one."

The Court also rejected Argentera's argument that the loss was not proven. Security guards had been assigned to the substation since 2007 and were familiar with its equipment. Their logbook entries and testimonies established that the blades went missing on the dates Argentera's crew visited.

Are Benefits Automatically Forfeited Upon Dismissal?

The more significant ruling concerned Argentera's monetary benefits. The Court of Appeals had awarded him all benefits due under the law and the Collective Bargaining Agreement (CBA) as of his dismissal date. Meralco argued that an employee validly dismissed for serious misconduct should not receive any benefits.

The Supreme Court disagreed with Meralco. The Court held that without an express provision on forfeiture in a company policy or contractual stipulation, an employee's rights, benefits, and privileges are not automatically forfeited upon dismissal.

The Court pointed out that Meralco's own rules allowed for preventive suspension during investigation when an offense is punishable by dismissal. However, Argentera was never preventively suspended during the investigation that ran from November 2012 to January 2014. He continued working and earning his wages and benefits until his dismissal was finalized.

Meralco's policies did not state that employees under investigation lose their benefits, nor did they prescribe forfeiture as a penalty. The Court therefore affirmed the award of benefits, including the P70,000.00 lump sum under the CBA.

How This Affects Employers and Employees

This decision provides important guidance for both employers and workers in the Philippines.

For employers, the ruling emphasizes that dismissal for serious misconduct requires substantial evidence. A general denial by the employee will not defeat positive testimony from credible witnesses. However, employers must also review their policies: if they want to forfeit benefits upon dismissal, they must expressly state this in their company policies, CBAs, or individual employment contracts.

For employees, the case clarifies that losing a job for serious misconduct does not automatically mean losing all earned benefits. Unless a policy or contract explicitly provides for forfeiture, employees may still claim benefits that accrued before their termination.

Practical Takeaways

• Serious misconduct under Article 282 of the Labor Code justifies dismissal when supported by substantial evidence—not proof beyond reasonable doubt.
• Positive testimony from credible witnesses outweighs a dismissed employee's general denial, especially when the employee presents no corroborating evidence.
• Benefits are not automatically forfeited upon dismissal for serious misconduct. Forfeiture requires an express provision in a company policy, CBA, or employment contract.
• Preventive suspension matters. If an employer does not suspend an employee during investigation, the employee continues earning benefits until dismissal takes effect.
• Employers should review their policies to ensure they clearly state the consequences of dismissal, including any forfeiture of benefits, to avoid unintended liability.

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