Loss of trust and confidence

The ground of loss of trust and confidence is not a magic wand that automatically justifies the termination of employment. It must be wielded with caution, supported by substantial evidence, and anchored on a clear breach of duty. Otherwise, employers risk running afoul of the constitutional guarantee of security of tenure.

In Cornworld Breeding Systems Corporation v. Court of Appeals (G.R. 204075, 17 August 2022), the Supreme Court rejected the employer’s claim of loss of trust and confidence. Cornworld hired Lucena as a field laborer in 1982, and through the years, she rose to become vice president for research and development.

In January 2009, a heated exchange occurred between her and a superior during a meeting. The following month, another employee was assigned to oversee her office, effectively placing her on floating status. Feeling aggrieved, Lucena filed a complaint for constructive dismissal.

Cornworld justified its actions by alleging loss of trust and confidence. Both the Labor Arbiter and the National Labor Relations Commission sided with the company. The Court of Appeals reversed these rulings, and the case eventually reached the Supreme Court.

The High Court held that to validly terminate an employee based on loss of trust and confidence, two requisites must be met: first, the employee must hold a position of trust and confidence; and second, there must be a willful breach of trust founded on clearly established facts.

In Lucena’s case, the Court found no substantial proof that her actions were willful, intentional, or performed with malice. Cornworld’s claim was based more on suspicion and strained relations than on any deliberate misconduct. Accordingly, the Court ruled that her dismissal was unjustified.

Contrast this with Citibank Savings, Inc. v. Rogan (G.R. 220903, 29 March 2023), where the Supreme Court upheld the dismissal of an employee on the same ground. Rogan, a cash/operations officer, was found remiss in verifying transactions handled by an account officer — an omission that breached the bank’s policies on fund transfers. Following due process, Citibank terminated her employment. The Labor Arbiter and the NLRC upheld the dismissal, but the Court of Appeals reversed them. Citibank elevated the case to the Supreme Court, which ultimately reinstated the validity of Rogan’s termination.

The Court reasoned that Rogan held a position of trust, being directly responsible for the handling and verification of financial transactions. Her failure to observe the highest degree of diligence expected of bank employees constituted a just cause for termination. The Court emphasized that banks, given the fiduciary nature of their business, must exercise extraordinary care in the supervision and selection of their personnel. Any lapse in diligence not only exposes the institution to losses but also erodes public confidence in the banking system.

Taken together, these cases illustrate that while loss of trust and confidence is a valid ground for dismissal, it must rest on solid evidence, not mere suspicion or personal animosity. The breach must be willful, intentional, and related to the employee’s duties. The rule applies with greater force to employees who occupy positions requiring fiduciary responsibility — managers, cashiers, auditors, and others who handle money or confidential records.

Employers should therefore invoke this ground judiciously. The right to dismiss must be balanced with the employee’s right to security of tenure. Trust, once lost, may justify termination — but only when the loss is clearly founded on facts, not feelings.

As these rulings show, the law protects both sides. It shields employers from the risk of disloyalty and dereliction, but it also guards employees against arbitrary or whimsical dismissal. The key lies in fairness, due process, and evidence — not mere loss of temper or confidence.