Theft as ground for employee dismissal must be supported by substantial evidence. Where in a case a money was missing and no direct evidence shows who took the same, employer must present substantial evidence to establish the charge against employees alleged to have taken them.

Thus, the SC held in the following case:

Norman Panaligan, et al. vs. Phyvita Enterprises Corporation
G.R. No. 202086, June 21, 2017


Respondent Phyvita Enterprises Corporation is in the business of health club massage parlor, spa and other related services under the name and style of Starfleet Reflex Zone (“Starfleet”). Panaligan, et al. Norman Panaligan (“Panaligan”), Ireneo Villajin (“Villajin”) and Gabriel Penilla (“Penilla”) were the employees of Phyvita assigned as Roomboys at Starfleet.

Sometime on 25 January 2005, the Finance Assistant of Phyvita for Starfleet Girly Enriquez (“Enriquez”) discovered that the amount of One Hundred Eighty Thousand Pesos (Php180,000.00) representing their sales for 22nd, 23rd and 24th of January 2005 was missing including receipts, payrolls, credit card receipts and sales invoices. She immediately reported the same to her immediate superior Jorge Rafols (“Jorge Rafols”). As such, they searched for the missing documents and cash. However, their search remained futile.

As advised by Phyvita’s Legal Officer, they reported the alleged theft incident to the Parañaque City Police Station to conduct an investigation. However, the Parañaque Police were not able to gather sufficient information that would lead them as to who committed said theft. Being unsuccessful, the said police investigation was merely entered into the police blotter.

Meanwhile, Panaligan, together with other employees, filed a complaint before the Department of Labor and Employment (DOLE)-National Capital Region (NCR) against Starfleet for the alleged underpayment of wages, nonpayment of legal/special holiday, five (5)-day service incentive leave pay, night shift differential pay, no pay slip, signing of blank payroll, withheld salary due to non-signing of blank payroll. Acting on said complaint, the DOLE conducted an inspection.

In the interim, individual Office Memoranda were issued by Starfleet’s Assistant Operations Manager Jerry Rafols (“Jerry Rafols”) against Panaligan, et al. directing them to explain in writing why no disciplinary action shall be imposed against them for alleged violation of Class D1.14 of Starfleet’s rules and regulations, particularly any act of dishonesty, whether the company has incurred loss or not, more specifically their alleged involvement in a theft wherein important documents and papers including cash were lost which happened last 25 January 2005 at Phyvita’s establishment.

Panaligan, et al. were, likewise, placed on preventive suspension pending the investigation of the said alleged theft they committed. They were even asked to report at Phyvita on the 3rd, 9th and 10th of May 2005, respectively. Upon personal service of the said Office Memoranda, the said employees refused to receive the same.

Acting on the said Office Memoranda, only Panaligan submitted his hand written explanation which merely stated “wala ako kinalaman sa ibinibintang sakin.” Come the scheduled administrative hearing dates, Panaligan, et al. failed to attend the same.

As such, Human Resource Department Manager of Phyvita Leonor Terible issued Office Memoranda against the same employees recommending them to participate in the administrative proceedings that Phyvita would conduct. Having failed to participate in the investigation proceedings conducted by Phyvita, Memoranda were issued against Panaligan, et al. informing them that they are terminated from their employment on the ground that they violated the company’s rules and regulations by stealing company documents and cash. They were also informed that such termination is without prejudice to the filing of criminal charges against them.

Some complainants in the DOLE inspection case settled the dispute. The claims of those who did not settle were endorsed to NLRC.

Phyvita, as represented by Enriquez, filed a criminal complaint for theft against Panaligan, et al. before the Office of the City Prosecutor of Parañaque. But this was dismissed due to insufficient evidence.

For their dismissal from work, Panaligan, et al. filed the complaint with the NLRC alleging, inter alia, illegal dismissal and payment of separation pay.

LA Ruling:

The Labor Arbiter declared that Panaligan, et al., were legally terminated from employment on the ground of loss of trust and confidence.

Panaligan, et al. appealed the case.

NLRC Ruling:

On appeal, the ruling of the LA was reversed and set aside by the NLRC. The NLRC arrived at the conclusion that Panaligan, et al., were illegally dismissed from employment.

The NLRC subsequently denied Phyvita’s motion for reconsideration. Thus, Phyvita elevated the case to the Court of Appeals.

CA Ruling:

The appellate court reversed the NLRC and reinstated the Decision of the Labor Arbiter.

A motion for reconsideration filed by Panaligan, et al., was denied for lack of merit by the Court of Appeals. Hence, Panaligan, et al., filed the petition with the SC.


Whether or not employees charged for the missing money of employer can be dismissed for serious misconduct and willful breach of trust despite absence of direct evidence

Whether or not the disputable presumption that the persons in possession of stolen items are presumed to have stolen them is overcome by the explanation given by employees being charged

SC Ruling:

The SC found the petition meritorious.

The SC held that the applicable provision of law to this case is Article 297 of the Labor Code, paragraph (a) serious misconduct and (c) willful breach of trust.

The SC cited the case of Maula vs. Ximex Delivery Express, Inc., on the nature of serious misconduct as a just cause to terminate an employee according to the Labor Code.

Guide to Valid Dismissal of Employees Second Edition by Atty. Villanueva

Misconduct is improper or wrong conduct; it is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. The misconduct, to be serious within the meaning of the Labor Code, must be of such a grave and aggravated character and not merely trivial or unimportant. Thus, for misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) it must relate to the performance of the employee’s duties; and (c) it must show that the employee has become unfit to continue working for the employer.

On the other hand, 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. Loss of trust and confidence to be a valid cause for dismissal must be work related such as would show the employee concerned to be unfit to continue working for the employer and it must be based on a willful breach of trust and founded on clearly established facts. Such breach is willful if it is done intentionally, knowingly, and purposely, without justifiable excuse as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. The loss of trust and confidence must spring from the voluntary or willful act of the employee, or by reason of some blameworthy act or omission on the part of the employee.

For an employer to validly dismiss an employee on the ground of loss of trust and confidence under Article 282 (c) of the Labor Code, the employer must observe the following guidelines: 1) loss of confidence should not be simulated; 2) it should not be used as subterfuge for causes which are improper, illegal or unjustified; 3) it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and 4) it must be genuine, not a mere afterthought to justify earlier action taken in bad faith. More importantly, it must be based on a willful breach of trust and founded on clearly established facts.

The SC ruled that in order to dismiss an employee on the ground of loss of trust and confidence, the employee must be guilty of an actual and willful breach of duty duly supported by substantial evidence. Substantial evidence is that amount of evidence which a reasonable mind might accept as adequate to support a conclusion.

In illegal dismissal cases, the burden of proof is on the employer that the dismissal was for just cause. The SC did not find substantial evidence to support the allegation of theft against Panaligan, et al.

The records of this case clearly indicate that no direct evidence was presented to link Panaligan, et al., to the theft that they allegedly committed. In fact, the questioned payroll sheets that Panaligan, et al., attached to the labor complaint they filed before the DOLE-NCR are the only concrete proof that Phyvita used to support its allegation.

However, the said documents were not specifically enumerated as among the stolen items in the police report of the alleged incident of theft, while a previous incident report merely stated that “several copies of payroll” were taken. Phyvita first claimed that these payroll sheets allegedly stolen from Enriquez’s safekeeping were the same ones in Panaligan, et al. ‘s, possession when its employee, Jesse Pangilinan (Pangilinan), executed an affidavit to that effect right after attending a preliminary hearing of the labor case initiated by Panaligan, et al. Pangilinan’s statement was supported by the joint affidavit made by Rommel Garcia (Garcia) and Jay-R Kasing (Kasing) who were also in Phyvita’s employ.

The problem with Pangilinan’ s statement according to the SC is that it is self-serving since it favors his employer which is involved in a labor dispute with Panaligan, et al., and it does not show criminal liability since it only establishes Panaligan, et al.’s, possession of the questioned payroll sheets but not the fact that they themselves stole the same.

The SC also found inconsistency in the statement of Pangilinan with the other facts on record. Pangilinan only knew of the questioned payroll sheets were in the possession of Panaligan, et al., when they presented the same during the May 29, 2005 DOLE-NCR hearing. The aforementioned date is crucial to the case because the month before, or on April 28, 2005, Panaligan, et al., were preventively suspended from work and given written notices to explain in writing within twenty-four (24) hours why they should not face disciplinary sanction for their alleged involvement in the incident of theft.

They were then served individual notices dated May 26, 2005. Thereafter, sometime in June 2005, Garcia and Kasing purportedly came forward and pointed to Panaligan, et al., as among the perpetrators of the alleged theft. Considering the said chronology of events, there was no clear ground for Phyvita to preventively suspend and later terminate the services of Panaligan, et al., when the company’s actions predated the bases for doing so.

Alternatively stated, Phyvita had charged and terminated Panaligan, et al., before it had even obtained its supposed “proof” of their misdeed.

Phyvita argues that, being in possession of stolen items, Panaligan, et al., are presumed to have stolen the same unless contradicted or overcome by other evidence as mandated by Rule 131, Section 30 of the Revised Rules on Evidence. However, the SC held that the application of such disputable presumption is limited to cases where such possession is either unexplained or that the proffered explanation is rendered implausible in view of independent evidence inconsistent thereto.

In the present case, Panaligan, et al.’s possession of the questioned payroll sheets was explained by the sworn affidavit of former Phyvita employee Grasparil who freely admitted that he was the source of the documents which he allegedly received from Enriquez.     Significantly, Phyvita proffered no counter-statement from Enriquez specifically refuting Grasparil’ s narrative.

Being roomboys, Panaligan, et al. occupied positions of trust. However, even with the lower burden of proof in labor cases, there is a dearth of substantial evidence to support a finding that they were indeed guilty of a willful breach of their employer’s trust. There was no just and valid cause to terminate their employment for loss of trust and confidence or even for serious misconduct.


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