Understanding Loss of Trust and Confidence as a Valid Ground for Employee Dismissal in the Philippines

In the Philippines, an employer may terminate a managerial employee for loss of trust and confidence. But this ground is not a blank check for dismissal. The Supreme Court, in Noel M. Manrique v. Delta Earthmoving, Inc. (G.R. No. 229429, November 9, 2020), reminded employers that this ground must be genuine, supported by evidence, and cannot be used to justify a termination made in bad faith.

The case involved a managerial employee who was verbally told to stop reporting for work, without any formal notice or opportunity to defend himself. The Court ruled his dismissal illegal, clarifying the limits of the loss of trust and confidence doctrine.

The Facts of the Case

Noel Manrique was hired as Assistant Vice President for Mining Services of Delta Earthmoving, Inc. in January 2013. He was assigned to a mine site in Nueva Vizcaya, where he later served as Officer-in-Charge while his immediate supervisor was on break.

In December 2013, Manrique was told to pack his things and stop reporting for work. When he went to the head office to verify, the Executive Vice President confirmed his termination and even asked him to sign a voluntary resignation letter in exchange for one month's salary. Manrique refused and filed a complaint for illegal dismissal.

The company claimed Manrique was validly dismissed for poor performance resulting in loss of trust and confidence. It presented a performance evaluation and memoranda alleging neglect of duty, delayed reports, and failure to submit budgets. Manrique denied these allegations, noting that his immediate supervisor had actually commended his work.

The Two Conditions for Valid Dismissal

Under Article 297(c) of the Labor Code, an employer may terminate an employee for fraud or willful breach of trust. But the Supreme Court has long required two conditions to concur:

1. The employee must hold a position of trust and confidence.
2. There must be an act that justifies the loss of that trust.

Manrique, as a managerial employee, clearly held a position of trust. The dispute centered on the second condition.

Proof Required for Managerial Employees

For managerial employees, the employer need not prove the breach beyond reasonable doubt. A reasonable basis for believing the employee breached trust is enough. This is less stringent than the standard for rank-and-file employees, where the employer must show actual involvement in the alleged acts.

However, the Court stressed that this does not give employers a free hand. The ground must be genuine, not a mere afterthought to justify an earlier action taken in bad faith.

What Made the Dismissal Illegal

The Court found several red flags in the company's case. The performance evaluation had no date or period covered, was conducted by someone who was not Manrique's immediate supervisor, and was never shown to him. The memoranda supposedly documenting his negligence were not served on him either.

Meanwhile, Manrique's immediate supervisor had emailed him commending his work at the project site. The Court agreed with the Labor Arbiter that the evaluation and memoranda appeared to be a belated attempt to justify a dismissal that was already decided upon.

The company also failed the procedural requirement. Under Article 292(b) of the Labor Code, an employer must give two written notices: the first stating the reasons for termination and affording the employee an opportunity to be heard, and the second indicating the final decision. Manrique received neither. He only learned of his termination verbally and had to personally verify it at the head office.

Practical Takeaways

• Loss of trust and confidence is a valid ground for dismissal, but it must be based on genuine, documented acts — not vague allegations or belatedly prepared documents.
• The employer bears the burden of proof. It must show clear evidence of the employee's breach, not just assert that trust was lost.
• Procedural due process is mandatory. The two-notice rule applies to all dismissals, including those based on loss of trust and confidence. Failure to comply makes the dismissal illegal.
• Documents must be served on the employee. A performance evaluation or memorandum that was never given to the employee will be viewed with suspicion and may be disregarded.
• Immediate supervisors matter. Their firsthand assessment of an employee's work carries weight, especially when it contradicts the evaluation of higher-ups who were not on-site.

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