LOSS OF TRUST AND CONFIDENCE IS VALID FOR THE LAPSES AND INEFFICIENCIES IN DUTIES OF MANAGERIAL EMPLOYEE

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Loss of trust and confidence as a ground for dismissal of employees requires that two 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. For the SC, these two requisites are present in this case.

Thus, the Supreme Court held as follows:

Del Monte Fresh Produce (Phil.), Inc. vs. Betonio
G.R. No. 223485, December 4, 2019

Loss of trust and confidence; Willful breach of trust; Lapses; Inefficiencies; Managerial employee; Procedural due process; If the dismissal is based on a just cause, then the noncompliance with the procedural due process should not render the termination from employment illegal or ineffectual; Employer’s failure to follow its internal rules result in violation of procedural due process making it liable for indemnity in the form of nominal damages; As a general rule, an employee who has been dismissed for any of the just causes enumerated under Art. 297 of the Labor Code is not entitled to separation pay; By way of exception, separation pay or financial assistance may be granted to an employee who was dismissed for a just cause as a measure of social justice or on grounds of equity

Facts:

Petitioner Del Monte Fresh Produce (PHIL.), Inc. (DMFPPI), is a corporation engaged in the business of providing technical assistance, inspection, and coordination services to Del Monte Fresh International, Inc. (DMFII).

Respondent Reynaldo P. Betonio (Betonio) was employed in 2008 by DMFPPI as its Manager for Port Operations at Tadeco Wharf, San Vicente, Panabo, Davao del Norte. Later, he was promoted as Senior Manager whose duty is to ensure prompt, efficient, and accurate loading and shipment of fruits to the market of DMFII. Further, he must ascertain that the bananas delivered to the port will be promptly loaded to their assigned vessels, or immediately placed in cold storage to avoid deterioration.

Beginning April 2010, the Human Resource (HR) Department of DMFPPI received reports/complaints about Betonio’s inefficiencies in the operation of the port. The reports/complaints came from the managers and directors of different departments of DMFPPI, the market of Del Monte International in Japan, and the local growers of DMFPPI.

On account of the problems, reports, and complaints received by the HR of DMFPPI, the HR Manager, Ma. Cirila Canseco (Canseco) informed Betonio of the management’s plan to commence disciplinary action against him. Canseco told Betonio that the charge against him would be gross and/or habitual neglect of duties, punishable with dismissal.

To allegedly  save Betonio from the embarrassment of going through an administrative investigation of his case, and for him to maintain an unblemished record of employment, Canseco gave Betonio the choice of having a graceful exit by tendering his voluntary resignation. However, he decided to go through a formal investigation of his case.

Through a Show Cause Memo, Betonio was charged with gross and habitual neglect of duties, and breach of trust and confidence. In his response, he explained point by point the infractions leveled against him, and denied having failed to execute his duties with utmost diligence. A meeting was conducted by the Administrative Committee wherein he was made to explain the charges against him.

In the Minutes of the Meeting, it was stated that the Administrative Committee will come up with a recommendatory report that if the top management disagrees with the recommendation they will reconvene to discuss the decision to be adopted.

While the Administrative Committee found Betonio inefficient in the management and operation of the port, it opined that his lapses were not enough for his dismissal. As such, the committee recommended that the charges against him be dismissed. Despite the recommendation, a Notice of Disciplinary Action was issued by the top management, terminating Betonio’s employment on the ground of gross and habitual neglect of duties and breach of trust and confidence.

Thus, Betonio filed before the Labor Arbiter (LA) a Complaint for illegal dismissal with money claims.

LA Ruling:

The LA ruled in favor of Betonio holding DMFPPI liable for illegally dismissing him.

According to the LA, while it is true that Betonio had committed errors and lapses in the performance of his duties and responsibilities, those lapses or errors did not amount to gross and habitual neglect of duty as contemplated by law.

Aggrieved, DMFPPI elevated the case before the National Labor Relations Commisssion (NLRC).

NLRC Ruling:

The NLRC reversed the LA’s Decision and ruled in favor of DMFPPI.

The NLRC held that while Betonio cannot be dismissed on the ground of gross and habitual neglect of duty, he may be dismissed on the ground of loss of trust and confidence as he was a Senior Manager of DMFPPI. According to the NLRC, his breach of DMFPPI’s trust and confidence was amply proven by substantial evidence. However, in the dissenting opinion of Commissioner Proculo T. Sarmen (Commissioner Sarmen), he affired the LA’s Decision.

Betonio filed a Motion for Reconsideration. Pending resolution of his motion, the case was re-raffled to Commissioner Sarmen, as the new ponente of the case. In a Resolution dated November 20, 2012, the NLRC reversed itself and reinstated the ruling of the LA in favor of Betonio. DMFPPI filed a motion for reconsideration but it was denied.

Aggrieved, DMFPPI filed a petition for certiorari with prayer for preliminary injunction and temporary restraining order before the Court of Appeals (CA).

CA Ruling:

The CA granted DMFPPI’s application for TRO. The CA affirmed the November 20, 2012 and February 27, 2013 Resolutions of the NLRC in favor of Betonio.

The CA ruled that Betonio should only be liable for ordinary breach, not for breach of trust and confidence; as such, dismissal from employment was too harsh and incommensurate to his infractions.

According to the CA, admonition, warning, reprimand or suspension would have been sufficient punishment for Betonio. The CA likewise opined that DMFPPI should have taken into account the recommendation  of the Administrative Committee to dismiss the charges against Betonio. Lastly, the CA found that Betonio’s termination was made without due process of law.

DMFPPI moved for a reconsideration but it was denied. Hence, the petition before the Supreme Court (SC).

Issue/s:

Whether or not a managerial employee who fails to properly perform his managerial duties can be validly dismissed for loss of trust and confidence

Whether or not for committing lapses and inefficiencies a managerial employee committed breach of duty to be unworthy of the trust and confidence of his employer warranting dismissal for loss of trust and confidence

Whether or not employer’s violation of its internal rules on procedural due process gives rise to liability for indemnity in the form of nominal damages

SC Ruling:

The SC found merit in the petition.

The SC held that it is well-settled that to justify a valid dismissal based on loss of trust and confidence, the concurrence of two 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. For the SC, these two requisites are present in this case.

Anent the first requisite, the SC held that Betonoi was the Senior Manager for Port Operations of DMFPPI. He was expected to be always on top of any situation that may occur at the port. Such intricate position undoubtedly required the full trust and confidence of DMFPPI. Indubitably, he held a position of trust and confidence in the company.

As to the second requisite, the SC held that there must be an act that would justify the loss of trust and confidence, the degree of proof required in proving loss of trust and confidence differs between a managerial employee and a rank and file employee. Citing Lima Land, Inc. vs. Cuevas in distinguishing managerial from rank-and-file employees, the SC held that as regards managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal.

Set against the paramaters, the SC held that Betonio’s employment, as DMFPPI’s Senior Manager for Port Operations, may be terminated for breach of trust under the Labor Code. As managerial employee of DMFPPI, the proper operation of port activities depended mainly on Betonio’s strict compliance with the protocols, and his prompt and regular coordination with the other departments. Significantly, the nature of goods which he was tasked to handle were all fresh fruits which were extremely perishable in nature. On account of this, time was certainly of the essence in loading them on the vessels or storing them in cold storage.

However, Benito failed to properly manage the port. Loading/shipment of fruits on the vessels was inaccurate, there was delay in the loading in the cold storage and the fruits overstayed in the cold storage. There was erroneous reporting to the other departments. As his lapses affected only the operations of the port, but also DMFPPI’s market, his attention was called to address the problem. However, despite this, the same problems occurred.

Other lapses and inefficiencies of Betonia involve failure to maximize the loading capacity of the vessels, being heavily dependent on his subordinates and not fully cognizant of what was going on in his department, quick to come up with convenient excuses for problems in the port by pointing the blame on others instead of taking full responsibility for the lapses of his department.

One of Betonio’s gross transgressions was the discrepancy between the fruits ordered by the clients in Japan and those he actually shipped for several instances. This incident resulted in monetary damages to DMFPPI, not to mention the damage it caused to DMFPPI’s reputation and standing in the market.

The SC held that it has long been established that an employer cannot be compelled to retain an employee who is guilty of acts inimical to his interests, especially when circumstances exist justifying loss of confidence to the employee. This is more so in cases involving managerial employees or personnel occupying positions of responsibility, such as Betonio’s position.

In this case, it cannot be disputed that Betonio committed lapses and inefficiencies in the performance of his duty as DMFPPI’s Senior Manager for Port Operations. While there may be debate whether his negligence was gross and habitual, the factual background of the case undoubtedly shows that he breached his duties as to be unworthy of the trust and confidence of DMFPPI. The SC held that Betonio was validly dismissed on the ground of DMFPPI’s loss of trust and confidence on him.

As to procedural due process, the SC held that although there was a just cause for Betonio’s dismissal, he was not afforded procedural due process. Under the internal rules of DMFPPI, the administrative committee will first come up with a recommendatory report on his case; that if the top management disagrees with the committee’s recommendation, they will reconvene to discuss the decision to be adopted.

While the administrative committee found Betonio to be inefficient and ineffectual in the operation of the port, it opined that his lapses were not enough for his dismissal. Consequently, the top management disagreed with the administrative committee’s recommendation. However, instead of reconvening with the administrative committee to discuss the final decision to be adopted on Betonio’s case, DMFPPI unilaterally proceeded to terminate his employment. This deprived him of his last chance to be heard  by DMFPPI.

The SC held that if the dismissal is based on a just cause, then the noncompliance with the procedural dueprocess should not render the termination from employment illegal or ineffectual. Instead, the employer must indemnify the employee in the form of nominal damages.

The SC upheld the dismissal of Betonio granting him financial assistance as a measure of social justice and equitable concession. As a general rule, an employee who has been dismissed for any of the just causes enumerated under Art. 297 of the Labor Code is not entitled to separation pay. However, by way of exception, separation pay or financial assistance may be granted to an employee who was dismissed for a just cause as a measure of social justice or on grounds of equity. The SC pronounced that said concept was thoroughly discussed in Solid Bank Corp. vs. NLRC.

Applying in this case the concept of equity or the principle of social and compassionate justice to the cause of labor, the SC held that Betonio is entitled to separation pay as a measure of financial assistance—equivalent to one month salary for every year of service, a fraction of at least six months being considered as one whole year. This is in consideration of the fact that Betonio’s dismissal was not due to any act attributable to his moral character.