Loss of trust and confidence in managerial employees

Loss of trust and confidence in managerial employees | Daily Tribune

The dismissal of a managerial employee on the ground of loss of trust and confidence is generally easier to justify than that of a rank-and-file worker. The law grants employers wider latitude when dealing with employees occupying positions of responsibility, since their roles demand utmost fidelity. Yet this prerogative is not absolute. The charge must still be founded on a clear, factual basis — not on whim, suspicion, or convenience.

In one case, the Supreme Court declared the termination of a managing director invalid because it rested on unsubstantiated claims. The employee had been hired as a consultant and later elevated to a top managerial post. Some time later, management ended his services for “loss of trust” but failed to identify any specific act that eroded such confidence. He was simply told that his employment was terminated — no details, no explanation.

The employee sought redress, and although the labor arbiter ruled in his favor, the decision was reversed by the higher labor tribunal and affirmed by the appellate court. The matter reached the Supreme Court, which sided with the employee. The Court stressed that even for managerial employees, dismissal based on loss of trust and confidence requires substantial evidence. Employers cannot rely on broad accusations or generalized dissatisfaction. What is required is a real and demonstrable basis for the alleged breach of trust.

The Court emphasized that management prerogatives, while recognized, must never be exercised arbitrarily. Dismissal from work affects not only livelihood but also dignity. Hence, even high-ranking employees are entitled to due process and fair dealing. In this case, the employer’s bare assertion — unsupported by proof or particulars — was insufficient to justify dismissal. The Court found the termination illegal.

Contrast this with another case where the dismissal of a managerial employee was upheld. The employee, a shift superintendent in a power plant, discovered that a subordinate was cutting a component of company equipment. He instructed the subordinate to return the item, but did not make a written incident report, as required. Instead, he merely mentioned the matter to his fellow supervisors. It was only after an anonymous message reached top management that an internal investigation ensued. The inquiry revealed the supervisor’s failure to report the incident and his attempt to downplay it. The investigating panel recommended his dismissal, which the company implemented.

The supervisor filed a case for illegal dismissal. The labor arbiter initially ruled in his favor, but this was overturned by the higher labor tribunal. The appellate court later reinstated the finding of illegal dismissal, prompting the employer to elevate the case to the Supreme Court.

The High Court ultimately ruled that the dismissal was valid. As a top-level managerial employee, the supervisor bore a high degree of responsibility over company operations and property. His omission — failure to promptly submit a report — constituted a breach of the trust reposed in him. The Court reiterated that for managerial employees, proof beyond a reasonable doubt is not required. What is needed is a genuine and reasonable basis for the employer to believe that the employee has breached its trust. In this instance, the evidence was sufficient.

Taken together, these decisions illustrate two sides of the same doctrine. Employers have the prerogative to terminate managerial employees for loss of trust and confidence, but this power is not unbridled. The ground must be anchored on clearly established facts. Where there is no proof of misconduct or neglect, dismissal is unjustified. But when the evidence shows a real breach of duty or a failure to uphold managerial responsibility, the employer’s decision will be sustained.

In the end, loss of trust and confidence remains a valid ground for termination —provided it is exercised with fairness, good faith, and due regard for evidence. Trust, after all, is the foundation of leadership. Once broken by proven acts, it may warrant separation; but when merely presumed or imagined, it cannot stand as the basis for dismissal.