Termination for Loss of Trust and Confidence

Loss of trust and confidence is a recognized just cause for termination under Article 297(c) of the Labor Code. It is a ground that employers often invoke — but courts scrutinize heavily. The Supreme Court has consistently held that loss of trust and confidence, to be a valid ground for dismissal, must be based on willful acts, founded on clearly established facts, and not merely on suspicion or speculation.

The ground applies differently to rank-and-file employees and managerial employees. For regular rank-and-file employees, the act constituting the basis for loss of trust must be work-related, must be serious, and must warrant the trust reposed in the employee. For managerial employees — who hold positions of trust and who exercise significant authority or discretion — the standard is somewhat less stringent: even acts that do not constitute a crime or gross violation may suffice, provided they reflect a genuine breach of the trust the position demands.

But in both cases, the key requirement is evidence. Courts require that the acts constituting loss of trust must be established by substantial evidence — relevant evidence which a reasonable mind might accept as adequate to support the conclusion. An employer cannot simply declare that they no longer trust an employee without showing the specific acts that form the basis of that distrust. Vague allegations, unverified reports, or conclusions not supported by documentary or testimonial evidence will not carry the case.

We have seen employers lose illegal dismissal cases not because the underlying concern was unfounded, but because they acted on suspicion rather than established facts: they terminated an employee suspected of fraud without completing the investigation; they dismissed a cashier based on a single unverified complaint from a customer; they let go of a manager based on reports from other employees that were never confronted in a formal proceeding.

The proper approach is to conduct a thorough investigation before making any decision, to confront the employee with specific evidence of the acts in question, to give the employee a genuine opportunity to respond, and to base the decision on the totality of the evidence gathered. Termination grounded in completed, documented facts is defensible. Termination based on assumption is not.