Wednesday, October 02, 2013

Can a rank-and-file employee like a hotel service attendant be terminated on the ground of loss of trust and confidence?

Plain Language summary:

Case title:Philippine Plaza Holdings, Inc. vs. Ma. Flora M. Episcope,” G.R. No. 192826, Feb. 27, 2013


(1) Can a rank-and-file employee like a service attendant be terminated on the ground of loss of trust and confidence?

(2) What are the two classes of positions of trust?

(3) What are the requirements for the ground of loss of trust and confidence?

(4) Is proof beyond reasonable doubt necessary in dismissing an employee on the ground of loss of trust and confidence?

Relevant laws and cases:

Article 293 (formerly Article 279) of the Labor Code

Bristol Myers Squibb (Phils), Inc. v. Baban, citing Atlas Fertilizer Corporation v. National Labor Relations Commission

Lopez v. Alturas Group of Companies

Background facts

[1] Philippine Plaza Holdings, Inc. (PPHI) is the owner and operator of the Westin Philippine Plaza Hotel (Hotel).

Ma. Flora M. Episcope (Episcope) was employed by PPHI from July 24, 1984 until she was terminated on November 4, 2004. Grounds for her termination were dishonesty, willful disobedience, and serious misconduct amounting to loss of trust and confidence.

[2] To check the performance of the employees and the services of the Hotel’s outlets, PPHI regularly employed independent auditors or professional shoppers.

For this purpose, Sycip, Gorres and Velayo auditors dined at the Hotel’s Café Plaza on August 28, 2004. After dining, the auditors were billed the total amount of P2,306.65, representing the cost of the food and drinks they had ordered under Check No. 565938.

[3] Based on the audit report submitted to PPHI, Episcope was one of those who attended to the auditors. She was the one who handed the check and received the payment of P2,400.00. She then returned Check No. 565938, which was stamp marked “paid,” together with the change.

[4] Upon comparing the check receipt with the sales report of Café Plaza, it was discovered that the Hotel’s copy of the receipt had a discount of P906.45. This was due to the use of a Starwood Privilege Discount Card registered in the name of Peter A. Pamintuan. The receipt issued by Episcope to the auditors reflected the undiscounted amount of P2,306.65 since none of the auditors had this discount card.

[5] On September 30, 2004, the Hotel issued a Show-Cause Memo to Episcope asking her to explain why no disciplinary action should be taken against her for the questionable and invalid discount application on the check.

In her handwritten letter, Episcope admitted that she was on duty on the date and time in question. But she could no longer recall if the concerned guests presented a Starwood Privilege Discount Card.

[6] On October 4, 2004, PPHI placed Episcope on preventive suspension without pay.

[7] During the administrative hearing on October 6, 2004, Episcope confirmed that she was the one who presented the check and received the payment from the guests. But she denied stamping the check as “paid” or that she gave any discount without a discount card. She explained that she could not have committed these acts since all receipts and discount applications were handled by the cashier. But when asked why the discounted receipt was not given to the guests, she merely replied that she could no longer remember.

In a separate inquiry, the cashier of Café Plaza maintained that a discount card must have been presented since there was a Discount Slip and a stamped receipt indicating the discounted payment.

[8] Finding Episcope to have failed to sufficiently explain the questionable discount application, PPHI terminated her employment for committing acts of dishonesty, willful disobedience, serious misconduct, and loss of trust and confidence.

[9] Episcope filed a complaint for illegal dismissal with prayer for payment of damages and attorney's fees against PPHI before the NLRC.

Rulings of the Labor Arbiter and the NLRC

On October 20, 2005, the Labor Arbiter (LA) dismissed Episcope’s complaint for illegal dismissal.

The LA found that there was substantial evidence to support the charge of improper discount application and observed that the act resulted to a loss on the Hotel’s part. Accordingly, the LA held that Episcope’s actions rendered her unworthy of the trust and confidence demanded by her position.

On appeal, the NLRC affirmed the LA’s decision in its May 30, 2007 Resolution. It also denied Episcope’s motion for reconsideration in its November 14, 2007 Resolution.

Ruling of the Court of Appeals

The CA reversed the NLRC’s Decision. It found the report submitted by the auditors insufficient to prove that Episcope was guilty of the charges against her.

The CA described the report as a mere transaction account in tabular form, without evidentiary worth. It was unsigned and bore no indication of Episcope’s alleged culpability. The CA likewise did not give credence to the minutes of the administrative hearing because it was based on the same unaudited report.

The CA (1) declared Episcope’s dismissal illegal; (2) ordered her reinstatement to her former position without loss of seniority rights and benefits under the Labor Code; and (3) remanded the case to the NLRC for further proceedings on her money claims and other benefits.

PPHI moved for reconsideration but he CA in its July 5, 2010 Resolution denied the motion. PPHI then filed with the Supreme Court a petition for certiorari under Rule 45.

The Supreme Court ruling

[1] The Court reversed the findings and conclusion of the CA. The records show that Episcope committed acts of dishonesty that resulted to monetary loss on the part of PPHI. More significantly, her acts led to PPHI’s loss of trust and confidence in her.

Despite the questioned value of the unaudited and unsigned auditor’s report, all circumstances support the finding that Episcope was negligent in her duty to carefully account for the money she received from the café’s guests. Even though the receipts were prepared by the cashier, Episcope, as a service attendant, actually handled the money given to her by the guests. She should have at least known why there was a shortage in remittance. Yet when asked, she could not offer any plausible explanation but merely shifted the blame to the cashier.

[2] Article 293 (formerly Article 279) of the Labor Code25 provides that the employer must not terminate the services of an employee except only for a just or authorized cause.

Among the just causes for termination is the employer’s loss of trust and confidence in its employee. Article 296 (c) (formerly Article 282 [c]) of the Labor Code provides that an employer may terminate the services of an employee for fraud or willful breach of the trust reposed in him.  

But in order for loss of trust and confidence to be properly invoked, certain requirements must be complied with, namely:
  1. the employee 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.

[3] The two classes of positions of trust are:
(1) managerial employees whose primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision, and other officers or members of the managerial staff;

(2) fiduciary rank-and-file employees, such as cashiers, auditors, property custodians, or those who, in the normal exercise of their functions, regularly handle significant amounts of money or property. These employees, though rank-and-file, are routinely charged with the care and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence.
Episcope belonged to this latter class and therefore, occupied a position of trust and confidence.

[4] Proof beyond reasonable doubt is not required in dismissing an employee for loss of trust and confidence. It is sufficient that there is some basis to believe that the employee is responsible for the misconduct. The nature of the employee’s act rendered the employee absolutely unworthy of trust and confidence demanded by the position.

Loss of trust and confidence must be based on substantial evidence and not on the employer’s whims, caprices or suspicions. Otherwise, the employee would eternally remain at the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that an employee’s dismissal was arbitrary.