When Can an Employer Validly Dismiss for Loss of Trust and Confidence: The Yonzon Case

The Supreme Court has long recognized that an employer may dismiss an employee for loss of trust and confidence. But this ground is not a blank check. In Yonzon v. Coca-Cola Bottlers Philippines, Inc. (G.R. No. 226244, June 16, 2021), the Court clarified the limits of this doctrine and struck down a company policy so vague that it allowed the employer to label almost anything as "confidential."

The Facts of the Case

Anniebel B. Yonzon was hired by Coca-Cola Bottlers Philippines, Inc. as an HR Generalist in December 2010. After her dismissal in April 2011, she filed an illegal dismissal case. The NLRC ruled in her favor and ordered her reinstatement. Coca-Cola reinstated her, but to a different position—HR Staff instead of HR Generalist—and at a lower salary.

While her first case was pending, Yonzon filed a motion before the NLRC alleging that she was being discriminated against. To support her claim, she attached the salaries of four other HR Generalists who were her juniors but were receiving higher pay. Coca-Cola then issued a Notice to Explain and preventively suspended her for 30 days. It later dismissed her for unauthorized disclosure of confidential company information and loss of trust and confidence.

The Issue

The central question was whether Yonzon was validly dismissed on the ground of loss of trust and confidence.

The Ruling

The Supreme Court ruled in favor of Yonzon. Her dismissal was illegal.

The Court explained that for a dismissal based on loss of trust and confidence to be valid, two conditions must concur: (1) the employee must occupy a position of trust and confidence; and (2) the employer must establish some basis for the loss of trust—that is, an act justifying it.

Who Holds a Position of Trust and Confidence?

The Court identified two classes of employees who hold positions of trust and confidence:

• Managerial employees—those vested with powers to lay down management policies and to hire, transfer, suspend, or discipline employees.
• Fiduciary rank-and-file employees—those who, in the normal and routine exercise of their functions, regularly handle significant amounts of money or property, such as cashiers, auditors, and property custodians.

Yonzon, an HR Administration Analyst, fell under neither class. Her duties involved communications campaigns, organizational climate surveys, and HR services processes like payroll and benefits administration, timekeeping, and employee data management. She did not handle significant amounts of money or property.

Significantly, the Court cited San Miguel Foods, Inc. v. San Miguel Corp. Supervisors and Exempt Union (670 Phil. 421 [2011]), which held that a payroll master and other employees with access to salary and compensation data are not confidential employees. Access to payroll information alone does not make an employee hold a position of trust and confidence.

The Problem with the Company Policy

The Court also found that Coca-Cola's Red Book provision prohibiting disclosure of confidential company information was vague and unreasonable. The rule did not define what made information confidential, nor did it give examples or standards. This gave the company too much leeway to label anything as confidential at its whim.

Relying on Mirant (Philippines) Corp. v. Caro (734 Phil. 160 [2014]), the Court noted that company policies must be fair and reasonable, and penalties must be commensurate to the offense. The Court also cited the principle that in case of doubt, labor legislation and labor contracts shall be construed in favor of the safety and decent living for the laborer. The exact article number of this provision is not specified in the library materials reviewed.

The Court also noted that Yonzon disclosed the salary information to the NLRC—an officer of the court—for the sole purpose of showing discrimination. She had no sinister motive.

The Remedy

Since Yonzon was illegally dismissed, she was entitled to reinstatement. However, given the length of time that had passed, the Court awarded separation pay equivalent to one month's salary for every year of service, in lieu of reinstatement, plus full backwages and attorney's fees equivalent to 10% of the total monetary award.

Practical Takeaways

• Loss of trust and confidence is not automatic. The employer must prove that the employee holds a position of trust and confidence and that there is a factual basis for losing that trust.
• Job title is not decisive. What matters is the nature and scope of the employee's actual work. Access to salary data, by itself, does not make an employee a confidential or fiduciary employee.
• Company policies must be clear. A rule that vaguely prohibits disclosure of confidential information without defining what is confidential may be struck down as unreasonable and unfair.
• Employees may use evidence in litigation. Disclosing information to a court or tribunal for the legitimate purpose of pursuing a legal claim is not the same as leaking trade secrets to competitors.
• Ambiguity favors the employee. Doubts in labor rules and contracts are resolved in favor of the worker.

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