Dear Atty. Kathy,

Our company hired Employee X in June 2025 as a Department Head. After his semi-annual performance appraisal last June 2026, Management assessed that X failed to achieve his key performance indicators (KPIs). Since X is a managerial employee, the company needs to know if X may be validly separated from the company due to unsatisfactory performance, resulting in loss of trust and confidence. Management is saying that they cannot trust X anymore with the operations of his department since he failed to achieve his KPIs.

Tatum

Dear Tatum,

Loss of trust and confidence is one of the just causes for the dismissal of an employee under Article 297 of the Labor Code, which provides that an employer may terminate an employment for fraud or willful breach of trust reposed in him by his employer or duly authorized representative.

Clearly, the employer cannot be obliged to continue employing a person who has committed acts prejudicial to its interest, especially a willful breach of trust under the Labor Code. The reason for this is that employees in positions of trust are held to greater standards of loyalty and responsibility.

According to the Supreme Court, 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

Based solely on your narration, X is a Department Head and a managerial employee. This satisfies the first condition that the employee must be holding a position of trust and confidence.

On the second condition, that there must be an act that would justify the loss of trust and confidence, the Company should have documentary basis of X’s failure to achieve the KPIs and its adverse consequences to the Company. In addition, the relevant performance evaluation must be specific on the period covered; it is conducted by a competent individual, for example, the immediate superior; and a copy is duly served to X. Failing in these, there would be no basis for X’s poor performance, and it necessarily follows that there is no basis for the loss of trust and confidence reposed in X.

In sum, where X’s status as a managerial employee is not disputed, the Company’s allegation of poor performance resulting in loss of trust and confidence must be clearly and convincingly supported by established facts in accordance with jurisprudence, otherwise it would not be sufficient to warrant X’s valid separation for poor performance resulting in loss of trust and confidence.

(Noel M. Manrique vs. Delta Earthmoving Inc., et al., G.R. No. 229429, 9 November 2020)

Atty. Kathy Larios