LOSS OF TRUST AND CONFIDENCE DOES NOT ARISE WHEN THE EMPLOYEE MERELY ACCEPTED HER EXTENDED APPOINTMENT AND ENTERED INTO THE FUNCTIONS OF HER OFFICE IMMEDIATELY THEREAFTER

Loss of trust and confidence as ground for termination requires the employer to not only demonstrate that the employee concerned is holding a position of trust, but also prove the existence of an act justifying the supposed loss of trust and confidence.

PNOC Development and Management Corporation (PDMC) vs. Gomez
G.R. Nos. 220526-27, July 29, 2019

Loss of trust and confidence; The employer should not only demonstrate that the employee concerned is holding a position of trust, but also prove the existence of an act justifying the supposed loss of trust and confidence; The ground of loss of trust and confidence should not be used as a subterfuge for causes which are improper, illegal, or unjustified, nor arbitrarily asserted in the face of overwhelming evidence to the contrary

Facts:

Gomez is a lawyer who used to work as Legal Manager of Petron Corporation (Petron) and availed of early retirement on April 30, 1994 when the company was privatized. On May 1, 1994, she was appointed by Filoil Refinery Corporation (Filoil) as its Corporate Secretary and Legal Counsel with the rank, compensation and benefits she used to enjoy in Petron. Filoil’s privatization was then underway, hence, to facilitate the transition, its Board of Directors (Board) appointed Gomez as Administrator of a special task-force comprised of former employees of Petron who retained their respective ranks, compensation, benefits, and privileges.

Filoil was reorganized and renamed to PNOC Development and Management Corporation and, as a result, the task-force was abolished and its members were given termination notices on March 5, 1996. Gomez continued to serve as corporate secretary of PDMC in the interim. On September 23, 1996, she, as credit to her service in the defunct task-force, was appointed as Administrator and Legal Counsel of the company. Gomez was due to retire on August 11, 1998. However, then incumbent PDMC president Simeon Ventura extended her term as Administrator effective until August 11, 2004.

In the meantime, a new Board of Directors took over, which, on March 29, 1999, removed Gomez from her post as corporate secretary. In a succeeding board meeting, the new set of directors also questioned Gomez’s continued employment as Administrator. While Gomez presented the appointment letter signed by Ventura, the Board, based on the advice of its legal department, expressed the view that the term extension in the appointment letter was ultra vires -this, because Gomez’s position was functionally that of a vice-president or general manager whose extension of term should have been made with the Board’s approval and in accordance with the by-laws. The Board believed that Gomez’s de facto tenure could be validly terminated.

While the matter was pending before the Board, Gomez’s salary was withheld. Thus, , she filed a complaint for non-payment of wages, damages and attorney’s fees before the Labor Arbiter. She later amended the complaint to include other money claims as well. Thereafter, the Board resolved to terminate her services retroactive to the date of her supposed retirement. This development led to yet another amendment in the complaint to include the charge of illegal dismissal.

At the initial stage of the proceedings, the Labor Arbiter, on motion of PDMC, had dismissed the complaint for lack of jurisdiction based on the notion that the case involves an intra-corporate dispute falling under the competence of the Securities and Exchange Commission.

In its Decision, the NLRC reversed the Labor Arbiter and directed the remand of the case for further proceedings. At that point, as the merits were being heard for the first time, PDMC brought its jurisdictional objection before the CA and eventually found its way to this Court in a petition docketed as G.R. No. 174044.

In its November 27, 2009 Decision in said case which had already attained finality, the SC affirmed that Gomez, in her capacity as PDMC Administrator, was indeed a regular managerial employee whose objection to her termination is properly and exclusively cognizable by the labor tribunal.

LA Ruling:

The Labor Arbiter issued a Decision finding Gomez to have been illegally dismissed.

NLRC Ruling:

On appeal, the NLRC affirmed in toto the findings and conclusion of the Labor Arbiter.

It explained that as a consequence of Gomez’s illegal dismissal, she was thereby entitled to full backwages and all benefits which the company regularly pays to its employees.

PDMC and Gomez separately moved for reconsideration, but their motions were denied.

CA Ruling:

Finding illegal dismissal, the CA dismissed PDMC’s petition for failure to prove a misconduct on the part of Gomez as basis for the claim of loss of trust and confidence.

Partly granting Gomez’s petition, it affirmed in all respects the NLRC’s award of backwages, unpaid salaries, 13th month pay, and all other customary benefits and privileges, but declined to award moral and exemplary damages. In addition, it directed the payment of retirement benefits accruing to Gomez as well as attorney’s fees, and imposed a 6% interest per annum on all these awards.

Aggrieved, PDMC sought recourse to the Supreme Court.

Issue/s:

Whether or not the employee who merely accepted her extended appointment as approved by the former President and entered into the functions of her office immediately thereafter even without the new Board’s approval is guilty of loss of trust and confidence

Whether or not a de facto tenure could be validly terminated where the employee is of the honest belief that her employment was extended by the previous company president

SC Ruling:

The SC denied the petition.

According to the SC, termination of employment by an employer for just causes under Article 282 [now Art. 297 in a re-numbered Labor Code] of the Labor Code implies that the employee concerned has committed, or is guilty of, some violation against the employer – be it misconduct: neglect of duty, breach of trust, or a crime or offense committed against the employer or his family or representatives.

Thus, it can be said that when the employee’s dismissal is based on any of these just causes, it is the employee himself that initiated the dismissal process by giving a just cause therefor.

PDMC has not at any time given substantial proof to its theory. Aside from its reiterative argument that Gomez could hardly be trusted by management owing to the circumstances of her appointment, PDMC did not offer proof, much less made a definite allegation, of any misconduct, deed, or act from which we might adjudge by legal and jurisprudential yardstick whether her continued employment would be truly detrimental to the management of the corporation as claimed.

The only positive act attributable to Gomez which appears to have animated PDMC’s complaint from the beginning is the fact that she had merely accepted her extended appointment and entered into the functions of her office immediately thereafter. Yet for the Court to validate on that basis alone, the claim of loss of trust and confidence – either as a principal ground for termination or as an analogous cause – would be too far a stretch, hence, arbitrary and illegal.

Jurisprudence is replete with guidelines on citing loss of trust and confidence as ground for termination. Citing the case of Bravo vs. Urios College, the SC held that this case requires the employer to not only demonstrate that the employee concerned is holding a position of trust, but also prove the existence of an act justifying the supposed loss of trust and confidence.

Further, the SC held that PJ Lhuillier, Inc. vs. Camacho declares that there should be proof of involvement in the events in question, and that mere uncorroborated assertion and accusation by the employer will not suffice. Wesleyan University-Philippines vs. Reyes, citing General Bank & Trust Company vs. Court of Appeals, warns that it may not be used as a subterfuge for causes which are improper, illegal, or unjustified, nor arbitrarily asserted in the face of overwhelming evidence to the contrary. More importantly, its assertion as a ground for termination must be genuine, and not a mere afterthought to justify an earlier action taken in bad faith.

Indeed, this ground must be employed with much caution, lest it be open to abuse in curtailment of rights to security of tenure.