Loss of trust and confidence is a just cause for termination under the Labor Code (fraud or willful breach by the employee of the trust reposed in them by the employer or duly authorized representative), but it is applied with important safeguards to prevent abuse. The doctrine applies to two classes of employees: first, managerial employees, those vested with powers to lay down management policies or to hire, discipline, and dismiss employees; and second, fiduciary rank-and-file employees, those who, in the normal and routine exercise of their functions, regularly handle significant amounts of money or property (such as cashiers, tellers, warehousemen, or property custodians). For the other ordinary rank-and-file employees who do not occupy positions of trust, loss of confidence is generally not an available ground. The requisites are: first, the employee holds a position of trust and confidence (managerial or fiduciary rank-and-file); and second, there is an act that would justify the loss of trust and confidence, that is, the act must be real, founded on clearly established facts, and the breach must be willful, done intentionally, knowingly, and purposely, without justifiable excuse, not a mere carelessness or an ordinary breach. A distinction is drawn in the degree of proof: for managerial employees, the mere existence of a basis for believing that they breached the trust suffices; for fiduciary rank-and-file employees, the employer must present proof of involvement in the alleged misconduct and mere accusation is not enough. Crucially, loss of confidence must not be used as a subterfuge for illegal causes; it must be genuine and not simulated, arbitrary, or an afterthought. So loss of trust and confidence justifies dismissal of managerial and fiduciary rank-and-file employees for a willful breach founded on established facts, and cannot be a mere pretext.
A Just Cause With Safeguards
Loss of trust and confidence (a willful breach of trust) is a just cause for dismissal, but applied with safeguards to prevent abuse.
Two Classes of Employees
It applies to (1) managerial employees, and (2) fiduciary rank-and-file employees who regularly handle money or property (cashiers, tellers, custodians). It generally does not apply to ordinary rank-and-file in non-trust positions.
Requisites and Degree of Proof
Requisites: a position of trust and a willful breach founded on established facts. For managers, a basis to believe the breach suffices; for fiduciary rank-and-file, the employer must show proof of involvement. It must be genuine, not a pretext.
Practical Takeaways
- Applies to managers and money/property-handling rank-and-file;
- Needs a willful breach founded on established facts;
- Cannot be a pretext — higher proof for rank-and-file.
Frequently Asked Questions
Who can be dismissed for loss of trust and confidence? Managerial employees and fiduciary rank-and-file employees who regularly handle significant amounts of money or property, such as cashiers, tellers, or property custodians. It generally does not apply to ordinary rank-and-file in non-trust positions.
What are the requisites of loss of trust and confidence? The employee holds a position of trust and confidence, and there is an act, founded on clearly established facts, that constitutes a willful breach of that trust, done intentionally and without justifiable excuse.
Is the proof required the same for managers and rank-and-file? No. For managerial employees, the mere existence of a basis for believing they breached the trust suffices. For fiduciary rank-and-file employees, the employer must present proof of their involvement in the misconduct.
Can an employer just claim loss of confidence to dismiss someone? No. Loss of confidence must be genuine and founded on established facts, not simulated, arbitrary, or an afterthought. It cannot be used as a subterfuge for an illegal dismissal.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.