LOSS OF TRUST AND CONFIDENCE AS GROUND FOR TERMINATION OF A MANAGERIAL EMPLOYEE; LACK OF PREVIOUS RECORD OF INFRACTION CANNOT SERVE AS JUSTIFICATION TO REDUCE THE SEVERITY OF THE PENALTY

Loss of trust and confidence is a ground for dismissal. To justify a valid dismissal based on loss of trust and confidence, the concurrence of two (2) conditions must be satisfied: (1) the employee concerned must be holding a position of trust and confidence; and (2) there must be an act that would justify the loss of trust and confidence. These two requisites are present in this case.

Thus, the Supreme Court held in the following case:

SM Development Corporation, et al. vs. Ang
G.R. No. 220434, July 22, 2019

Loss of trust and confidence; Willful breach of trust of managerial employee; Previous records of infractions;

Facts:

Respondent Theodore Gilbert Ang was hired by SMDC as its Project Director since December 2006. In his complaint, he alleged that sometime in January 2012, he applied for a two-week vacation leave, which was approved by Rosaline Qua, SMDC’s President.

Thereafter, Ang received a Notice to Explain from Atty. Ojeda, Jr., concerning the cost status of one of his assigned projects, the Field Residences. He submitted his explanation on the various issues and concerns affecting the Field Residences. He denied the alleged cost overrun in the general preliminaries and presented the data in relation to other projects which negates the accusation of cost overrun. He included relevant documents affecting the project showing that he was not remiss in his duties. He also submitted the joint response letter of the engineers of the project to refute SMDC, et al.s’ claim that the engineers were not aware of the project construction cost.

Atty. Ojeda, Jr. and Hizon called him for a meeting where he was informed that the management, without stating specific reasons, wants him to resign from his current work. He received a text message from Atty. Ojeda, Jr., stating that due to his “imminent resignation,” Henry Sy, Jr., is requesting him to make the necessary turnover of his functions to Ms. Imee Landicho. He received another text message from Atty. Ojeda, Jr., with the same tenor.

Ang went on his scheduled vacation and reported back to work afterwards. Subsequently, he was called by Hizon and was made to receive the Memorandum with subject Show Cause Notice, which contains, among others, the following: (a) direction for him to explain more accusations therein enumerated within five working days; (b) direction for him to tum-over work to Landicho; (c) informing him of a 30-day preventive suspension without pay.

In the Show Cause Notice, he was charged with gross and habitual neglect of duties and loss of trust and confidence due to the following infractions and omissions: (1) SM Synergy’s non-collection of P4.5M cost of repainting of Clusters 1 & 2 in Chateau Elysee; (2) violation of Chateau’s Master Deed and Presidential Decree No. 957 in relation to the discrepancy of residential and parking slots at Field Residences; (3) sale of non-existing parking slots at Field Residences; ( 4) sale of storage areas at Field Residences not covered by license to sell; ( 5) failure to clear with the COO the expense in the amount of P52,000.00 Philippine Currency, for the holding of the 2010 Chateau Elysee Basketball League; (6) SMDC Subsidy of P21M OpEx for Field Residences in 2010-11 due to delay in the amendment of MDDR; and (7) low sales generated from Chateau.

After serving the penalty, Ang informed Hizon that his suspension was over and he will report back to work; but he received a phone call from the HRD Manager that he does not need to report to work because he was already dismissed. He then called Hizon asking for an explanation, and the latter asked him for a meeting where he was served with a termination letter dated May 15, 2012. He was surprised to learn of an alleged administrative hearing mentioned in the said termination letter because he was never given any notice or even notified of the said hearings.

Consequently, he filed a case for illegal dismissal with money claims against SM Development Corporation (SMDC), Joann Hizon (Hizon) SMDC’s Head of Human Resources Department, Atty. Mena Ojeda, Jr. (Atty. Ojeda, Jr.) SMDC’s Vice President Legal, and Rosaline Qua (Qua) SMDC ‘s President (collectively, SMDC, et al.).

For their part, the SMDC, et al. averred that sometime in 2012, the management of SMDC received reports on several incidents and negligent acts directly involving Ang as Project Director which resulted in pecuniary loss to SMDC or which exposed the corporation and its officers to possible criminal, administrative and civil sanctions. Several meetings were then held between Ang and the management of SMDC to discuss these incidents. These reports were consolidated and attached to a Memorandum dated April 16, 2012 with the subject “Show-Cause Notice.” However, Ang did not submit any explanation to the charges hurled against him and even failed to attend the administrative hearings despite due notice. Thus, a decision was rendered to dismiss him effective May 16, 2012.

LA Ruling:

The LA dismissed the complaint.

The LA found that there were substantial documentary evidence showing that there was a just and valid cause for Ang’s dismissal on the grounds of incompetence and gross and habitual neglect of duties.

The Ang filed an appeal with the NLRC.

NLRC Ruling:

The NLRC dismissed the appeal for lack of merit and affirmed the LA’s decision.

The NLRC held that Ang’s position as a Project Director is imbued with trust and confidence. The charges and violations, as well as his neglectful acts, were inadequately met by his explanations; thus, he was dismissed for loss of trust and confidence.

Aggrieved, he filed a Motion for Reconsideration but it was denied. Hence, he filed a Petition for Certiorari with the CA.

CA Ruling:

The CA granted the petition and reversed and set aside the ruling of the labor tribunals.

The CA found that Ang has been illegally dismissed and ordered the SMDC, et al.s to: (1) reinstate Ang without loss of seniority rights and other privileges; (2) pay full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time his compensation was withheld up to the time of his actual reinstatement; and (3) pay attorney’s fees equivalent to 10% of the total monetary award.

Issue/s:

Whether or not a managerial employee may be dismissed for loss of trust and confidence

Whether or not the lack of previous record of inefficiency, infractions or violations of company rules for almost six years of service can serve as justification to reduce the severity of the penalty

Whether or not a dismissed employee not afforded the opportunity to confront the witnesses against him through an administrative hearing before he was dismissed was deprived of procedural due process

SC Ruling:

The SC found the petition meritorious.

It has long been established that an employer cannot be compelled to retain an employee who is guilty of acts inimical to his interests. This is more so in cases involving managerial employees or personnel occupying positions of responsibility.

There is no doubt that Ang is a managerial employee. As such, he should have recognized that such intricate position requires the full trust and confidence of his employer.

Due to the nature of his occupation, Ang’s employment may be terminated for willful breach of trust under Article 297(c)22 of the Labor Code. To justify a valid dismissal based on loss of trust and confidence, the concurrence of two (2) conditions must be satisfied: (1) the employee concerned must be holding a position of trust and confidence; and (2) there must be an act that would justify the loss of trust and confidence. These two requisites are present in this case.

The first requisite has already been determined. Ang, as SMDC’s project director, is holding a position of trust and confidence. As to the second requisite, that there must be an act that would justify the loss of trust and confidence, however, the degree of proof required in proving loss of trust and confidence differs between a managerial employee and a rank and file employee.

In terminating managerial employees based on loss of trust and confidence, proof beyond reasonable doubt is not required, but the mere existence of a basis for believing that such employee has breached the trust of his employer suffices. As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just cause for termination of employment, is premised on the fact that an employee concerned holds a position where greater trust is placed by management and from whom greater fidelity to duty is correspondingly expected. The betrayal of this trust is the essence of the offense for which an employee is penalized.

Set against these parameters, the Court holds that Ang was validly dismissed based on loss of trust and confidence. Ang was not an ordinary company employee. His position as one of SMDC’s Project Director is clearly a position of responsibility demanding an extensive amount of trust from SMDC, et al.. The entire project account depended on the accuracy of the classifications made by him. It was reasonable for the SMDC, et al.s to trust that Ang had basis for his calculations and specifications. The preparation of the project is a complex matter requiring attention to details. Not only does these projects involve the company’s finances, it also affects the welfare of all the other employees and clients as well.

Ang’s failure to properly manage these projects clearly is an act inimical to the company’s interests sufficient to erode SMDC’s trust and confidence in him. He ought to know that his job requires that he keep the trust and confidence bestowed on him by his employer untarnished. He failed to perform what he had represented or what was expected of him, thus, SMDC had a valid reason in losing confidence in him which justified his termination.

The right of an employer to freely select or discharge his employees is subject to the regulation by the State in the exercise of its paramount police power. However, there is also an equally established principle that an employer cannot be compelled to continue in employment an employee guilty of acts inimical to the interest of the employer and justifying loss of confidence in him.

Finally, although there was a just cause for Ang’s dismissal, he was not afforded procedural due process. In particular, the records of this case was bereft of any showing that a hearing or conference was conducted on May 7 and 9, 2012. While Ang was given a chance to explain his side and adduce evidence in his defense through his written explanation, he was not afforded the opportunity to confront the witnesses against him through an administrative hearing before he was dismissed. Considering all the circumstances surrounding this case, the Courts finds the award of nominal damages in the amount of P30,000.00 to be in order.