Upholding Just Cause in Employment Termination: The Boundaries of Company Policy and Due Process

The Supreme Court recently clarified the delicate balance between an employer's right to dismiss workers for just cause and an employee's right to security of tenure. In First Glory Philippines, Inc. v. Lumantao (G.R. No. 237166, March 6, 2019), the Court ruled that fraud committed through manipulation of company systems justifies dismissal, but that employers must strictly follow their own disciplinary rules when imposing penalties. The case provides important guidance on how company policies and due process operate in termination disputes.

The Facts of the Case

First Glory Philippines, Inc. (FGPI), a garment manufacturing company, terminated four of its employees who were officers and members of the company union. The employees were accused of manipulating the company's Radio Frequency Identification (RFID) system to record falsely high efficiency ratings. One employee, Brian Lumantao, was dismissed for failing to meet the 70% efficiency standard and for habitual tardiness and absences.

The company issued memoranda to the employees, directing them to submit written explanations and appear at scheduled investigations. Despite receiving these notices, none of the employees responded. The union instead filed a Notice of Strike, alleging unfair labor practice. FGPI gave the employees a second opportunity to explain, but they again failed to appear.

The Legal Issue

The central question was whether the employees were dismissed for just cause under Article 297 (formerly 282) of the Labor Code. The Court of Appeals had ruled that the dismissals were illegal because FGPI failed to present the actual copy of its RFID Directives and Code of Conduct. The Supreme Court reviewed this finding.

The Supreme Court's Ruling

The Court held that the dismissal of three employees for fraud was valid. Fraud as a ground for dismissal requires: (1) an act, omission, or concealment; (2) involving a breach of legal duty, trust, or confidence; (3) committed against the employer; and (4) in connection with the employee's work. The employees' manipulation of the RFID system to make it appear they worked with greater efficiency than they actually did constituted fraud, rendering them unfit for continued employment.

The Court rejected the argument that the absence of the actual RFID Directives was fatal. The relevant provisions were properly cited in the memoranda sent to the employees, and the employees never questioned the existence of the company rules—only their implementation.

However, the Court ruled differently for Lumantao. His dismissal for poor performance and habitual tardiness was disproportionate. FGPI's own Code of Conduct prescribed progressive discipline—warnings, suspensions, and only then separation. The company failed to follow its own penalty structure and could not show that it had communicated performance standards to Lumantao or warned him about his alleged deficiencies.

Practical Takeaways

• Fraud justifies immediate dismissal. Manipulating company systems or deceiving an employer about work performance can constitute just cause for termination under Article 297(d) of the Labor Code.
• Employers need not present the full company manual in every case. As long as the specific violated provisions are cited in the notice and the employee was aware of them, dismissal may be upheld.
• Progressive discipline matters. Employers who adopt codes of conduct with graduated penalties must follow them. Dismissal at the first instance may be illegal if the company's own rules require lesser penalties.
• Employees must respond to charges. Refusing to submit written explanations or attend investigations does not prevent dismissal—it may actually strengthen the employer's case.
• Performance standards must be communicated. Before dismissing for poor performance, employers must show that standards were set, communicated to the employee, and that the employee was given a chance to improve.

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