De la Cruz, Jr. vs. NLRC

A probationary employee may be validly terminated for a just cause, including fraud or deceit that betrays the trust and confidence of the employer, even during the probationary period. The employer's loss of trust and confidence, when grounded on substantial evidence of dishonesty, constitutes a valid ground for dismissal.

Petitioner Florencio M. De La Cruz, Jr. was hired by private respondent Shemberg Marketing Corporation (Shemberg), a company engaged in the manufacturing, trading, distributing, and importing of various consumer products. The position of senior sales manager was newly created in line with Shemberg's objective of product positioning in the consumer market. The position carried supervisory and control functions over the sales force, including discretion to appoint district sales representatives and reshuffle salesmen to achieve sales targets. The petitioner's employment was subject to a probationary period of six months, as stated in his appointment paper and job description.

On May 27, 1996, petitioner Florencio M. De La Cruz, Jr. was hired by private respondent Shemberg Marketing Corporation (Shemberg) as senior sales manager with a monthly salary of ₱40,500. The position was newly created in line with Shemberg's objective of product positioning in the consumer market, and its duties included the supervision and control of the company's sales force, with some discretion to decide on matters within the scope of his functions, including the appointment of district sales representatives and the reshuffling of salesmen to achieve sales targets.

On September 14, 1996, Shemberg's human resource department manager, Ms. Lilybeth Y. Llanto, summoned petitioner and informed him of management's decision to terminate his services. When petitioner asked for the reason, Llanto informed him that it had something to do with the drop in the company's sales. Petitioner requested a meeting with Shemberg's vice president, Ernesto U. Dacay, Jr., but was told that management's decision was final. His request to be furnished a 30-day written notice was also denied. Consequently, petitioner filed a complaint for illegal dismissal, non-payment of salary, backwages, 13th month pay, and damages against Shemberg, Ernesto Dacay, Jr., and Lilybeth Llanto.

Respondents answered that petitioner's dismissal was premised on: (1) his poor performance as evidenced by the steady and substantial drop in company sales since his assumption as senior sales manager; (2) the dissatisfaction of his subordinates over his management style and dealings with the company's distributors, as evidenced by the joint affidavit of two subordinates, Ruel O. Salgado and Joel D. Sol; (3) his unauthorized use of company cellular phone for overseas personal calls; and (4) the unauthorized reimbursement of the plane tickets of his wife and child. In short, petitioner was terminated for his failure to meet required company standards and for loss of trust and confidence.

On appeal to the NLRC, respondents presented additional evidence: an affidavit by Ms. Lily Joy M. Sembrano, Shemberg's vice president for operations; petitioner's letter of appointment dated July 8, 1996; petitioner's job description; a memorandum dated July 30, 1996 warning petitioner about the huge drop in company sales; and an undated memorandum requiring petitioner to explain why he was claiming reimbursement for his wife's and child's plane tickets. Petitioner opposed the motion for reconsideration and questioned the authenticity of the additional evidence.

The Court of Appeals found substantial evidence that petitioner was guilty of unauthorized use of company funds with respect to the reimbursement of plane ticket fares. The appellate court noted that the possession by respondent corporation of the plane tickets of petitioner's wife and child clearly showed that the same were submitted to management for reimbursement along with other transportation expenses. Petitioner's denial could not prevail over the actual presentation of the plane tickets in the name of petitioner and his family, and terminal fee stubs bearing three different serial numbers but similarly dated. Petitioner opted not to explain why these plane tickets were in the possession of respondent corporation.

• Backwages for Failure to Comply with Two-Notice Requirement: Petitioner argued that the Court of Appeals committed reversible error when it refused to award backwages notwithstanding its factual finding that respondents failed to comply with the two-notice requirement, contrary to the doctrine in Serrano vs. NLRC and Isetann Dept. Store that an employee who was not given notice must be paid backwages from termination until it is finally determined that it was for a just cause.

• Unauthorized Reimbursement as Afterthought: Petitioner contended that the submission of his family's plane tickets for reimbursement was not tantamount to fraud and deceit, and that respondents' attempt to impute fraud and deceit to him was a mere afterthought, since it was only raised for the first time on appeal and not in the original position papers submitted to the labor arbiter.

• Damages and Attorney's Fees: Petitioner argued that the Court of Appeals committed grave abuse of discretion when it failed to award damages as well as attorney's fees.

• Probationary Status: Petitioner vigorously contended that he was not a probationary employee since Shemberg failed to disclose to him the reasonable standards for qualifying as a regular employee.

• Just Cause for Termination: Respondents argued that petitioner's dismissal was premised on his poor performance as evidenced by the drop in company sales, the dissatisfaction of his subordinates, his unauthorized use of company cellular phone for overseas personal calls, and the unauthorized reimbursement of the plane tickets of his wife and child.

• Loss of Trust and Confidence: Respondents maintained that petitioner was terminated for his failure to meet required company standards and for loss of trust and confidence, given his managerial position which required the full trust and confidence of his employer.

• Validity of Dismissal for Loss of Trust and Confidence: Whether the Court of Appeals committed grave abuse of discretion in ruling that the submission by petitioner of plane tickets for refund constituted unauthorized use of company funds, despite the absence of evidence on a specific prohibition regarding such request, and considering that the same was respondents' afterthought for not being raised in the original position paper before the labor arbiter.

• Entitlement to Backwages: Whether the Court of Appeals committed reversible error when it refused to award backwages notwithstanding its factual finding that respondents failed to comply with the two-notice requirement.

• Probationary Employment Status: Whether petitioner was a probationary employee who could be terminated for a just cause during the probationary period.

• Damages and Attorney's Fees: Whether the Court of Appeals committed grave abuse of discretion when it failed to award damages as well as attorney's fees.

• Validity of Dismissal for Loss of Trust and Confidence: No. The dismissal was valid. Petitioner's act of reimbursing his family's personal travel expenses out of company funds amounted to fraud or deceit which led to the loss of trust and confidence of his employer, a just cause for termination under the Labor Code.

• Entitlement to Backwages: No. The Court of Appeals correctly affirmed the NLRC decision, which awarded only unpaid wages and indemnity, not backwages, because the dismissal was for a just cause.

• Probationary Employment Status: Yes. Petitioner was a probationary employee, as stated in his appointment paper and job description, and could be terminated for a just cause during the probationary period.

• Damages and Attorney's Fees: No. The Court of Appeals did not commit grave abuse of discretion in failing to award damages and attorney's fees, as the dismissal was valid.

• Validity of Dismissal for Loss of Trust and Confidence: The Court reiterated the well-established rule that findings of fact of the Court of Appeals are conclusive on the parties and are not generally reviewable by this Court when supported by substantial evidence. The Court subscribed to the Court of Appeals' finding that there was substantial evidence to show that petitioner was guilty of unauthorized reimbursement of plane ticket fares. The possession by respondent corporation of the plane tickets of petitioner's wife and child clearly showed that the same were submitted to management for reimbursement. Petitioner's denial could not prevail over the actual presentation of the plane tickets, and his silence on the matter was taken against him. The Court rejected petitioner's contention that the matter was a mere afterthought, citing Article 221 of the Labor Code, which provides that technical rules of evidence are not binding in labor cases. The Court cited Bristol Laboratories Employees' Association vs. NLRC and Lopez vs. NLRC to support the NLRC's consideration of additional documentary evidence submitted on appeal.

• Entitlement to Backwages: The Court found that petitioner was holding a managerial position that required the full trust and confidence of his employer. While petitioner could exercise some discretion, this did not cover acts for his own personal benefit. His act of reimbursing his family's personal travel expenses out of company funds amounted to fraud or deceit, which justified termination. Since the dismissal was for a just cause, the award of backwages was not warranted.

• Probationary Employment Status: The Court noted that the evidence on record clearly showed that petitioner was well informed of the standards to be met before he could qualify as a regular employee, as stated in his appointment paper and job description. The job description stated: "Performance subject to evaluation and trial period for six (6) months or more." The Court defined a probationary employee as one who, for a given period of time, is under observation and evaluation to determine whether or not he is qualified for permanent employment. The length of time is immaterial in determining the correlative rights of both the employer and the employee. As a probationary employee, petitioner enjoyed only temporary employment status and was terminable anytime, as long as the termination was made before the expiration of the six-month probationary period. In this case, respondent Shemberg had good reason to terminate petitioner's employment—his dishonesty.

• Damages and Attorney's Fees: Since the dismissal was valid and for a just cause, there was no basis for awarding damages and attorney's fees.

• Loss of Trust and Confidence as Just Cause for Dismissal — A managerial employee's act of fraud or deceit that betrays the trust and confidence of the employer constitutes a just cause for termination. The employer's loss of trust and confidence must be grounded on substantial evidence of the employee's dishonesty or wrongdoing. In this case, the petitioner's unauthorized reimbursement of his family's plane tickets out of company funds constituted such fraud or deceit.

• Probationary Employment — A probationary employee is one who, for a given period of time, is under observation and evaluation to determine whether or not he is qualified for permanent employment. During the probationary period, the employer is given the opportunity to observe the skill, competence, and attitude of the employee. The services of a probationary employee may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known to the employee at the time of his engagement. The length of time is immaterial in determining the correlative rights of both the employer and the employee during the probationary period.

• Conclusiveness of Court of Appeals Factual Findings — Findings of fact of the Court of Appeals are conclusive on the parties and are not generally reviewable by the Supreme Court when supported by substantial evidence. The rationale is that the Supreme Court, not being a trier of facts, relies in good part on the assessment and evaluation of evidence by the lower courts.

• Non-Binding Technical Rules of Evidence in Labor Cases — Under Article 221 of the Labor Code, the rules of evidence prevailing in courts of law or equity shall not be controlling in proceedings before the NLRC or labor arbiters. The NLRC may validly admit documents presented only on appeal, as technicalities should not stand in the way of equitably and completely resolving the rights and obligations of the parties.

• "His act amounted to fraud or deceit which led to the loss of trust and confidence of his employer." — This passage states the core ratio decidendi: the petitioner's unauthorized reimbursement of family plane tickets constituted fraud or deceit, justifying termination for loss of trust and confidence.

• "We reiterate the well-established rule that findings of fact of the Court of Appeals are conclusive on the parties and are not generally reviewable by this Court when supported by substantial evidence." — This passage articulates the standard of review applied by the Supreme Court, affirming the deference given to appellate factual findings.

• "A probationary employee is one who, for a given period of time, is under observation and evaluation to determine whether or not he is qualified for permanent employment." — This passage defines the concept of probationary employment, which was central to determining the validity of the petitioner's termination.

• "As long as the termination was made before the expiration of the six-month probationary period, the employer was well within his rights to sever the employer-employee relationship." — This passage clarifies the employer's rights during the probationary period, supporting the validity of the termination in this case.

• Serrano vs. NLRC and Isetann Dept. Store, G.R. No. 117040, January 27, 2000 — Cited by petitioner to support his claim for backwages; the Court implicitly distinguished this case, as the dismissal in the present case was for a just cause.

• Bristol Laboratories Employees' Association vs. NLRC, 187 SCRA 118 (1990) — Followed; upheld the NLRC's consideration of additional documentary evidence submitted by the parties on appeal to prove breach of trust and loss of confidence as basis for dismissal.

• Lopez vs. NLRC, 245 SCRA 644 (1995) — Followed; held that under Article 221 of the Labor Code, the NLRC could validly admit certain documents proving the re-employment of the private respondent although they were presented only on appeal.

• Philippine-Singapore Ports Corporation vs. NLRC, 218 SCRA 77 (1993) — Cited for the proposition that technicalities should not be permitted to stand in the way of equitably and completely resolving the rights and obligations of the parties.

• Escorpizo vs. University of Baguio, 306 SCRA 497 (1999) — Cited for the definition of a probationary employee and the correlative rights of employer and employee during the probationary period.

• Martinez vs. CA, 358 SCRA 38 (2001) — Cited for the enumeration of exceptions to the rule that factual findings of the Court of Appeals are conclusive on the parties.

• Article 221, Labor Code — Provides that the rules of evidence prevailing in courts of law or equity shall not be controlling in proceedings before the NLRC or labor arbiters, and that the Commission shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure. Applied to justify the NLRC's consideration of additional evidence presented on appeal.

• Article 281, Labor Code — Provides that probationary employment shall not exceed six months from the date the employee started working, and that the services of a probationary employee may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known to the employee at the time of his engagement. Applied to determine that petitioner was a probationary employee who could be terminated for just cause during the probationary period.

• Vitug, J. (Chairman)
• Sandoval-Gutierrez, J.
• Carpio-Morales, J.