Supreme Court Applies Relation-to-Work Test in Dismissal Case - International Law Office

Facts
Decision
Comment

In Villamor Golf Club v Pehid (GR 166152; October 4 2005) it was found that a disciplinary charge of fraud and misappropriation in the custody of non-company funds could not form the basis of an employee's termination from employment, even though the funds were kept in a locker room located on company premises.

Facts

The plaintiff was employed as an attendant in the men's locker room of a golf club. The employee and his subordinates set up a mutual fund from the tips they received from customers, guests and members of the club. The mutual aid agreement was unknown to the golf club.

Subsequently, an audit of the mutual fund was conducted and a portion could not be accounted for. The members of the mutual fund group complained to the golf club management, which commenced disciplinary proceedings against the plaintiff. After due investigation, he was found guilty of dishonesty and dismissed from service. He immediately contested the employer's decision and filed suit. The Labour Arbitration Court ruled in his favour, holding that no proof was adduced that he was the custodian of the funds and the acts attributed to him were not work related. However, the Labour Appellate Commission reversed the initial ruling, holding that the employee was lawfully dismissed for breach of trust. On certiorari, the Court of Appeals reinstated the labour court's ruling and the dismissal of the suit. The golf club management went to the Supreme Court on a question of law.

Decision

The golf club management contended that the employee violated the company rule which penalizes "all other acts of dishonesty which cause or tend to cause prejudice to Villamor Golf Club". It claimed that the misappropriation committed by the employee caused prejudice to the golf club's smooth operation and performance of services for clientele. It was also alleged that his act compromised the maintenance of order, camaraderie and trust and confidence, given his employment role. The club contended that his failure to deliver the cash entrusted to him as head of the locker room personnel and custodian of the collective tips was a valid cause justifying dismissal.

The Supreme Court dismissed the argument, holding that the company provision in question must be understood as relating to or involving misappropriation of golf club funds, or the act must tend to cause prejudice against the club. The fund in question comprised voluntary contributions of the employees and its existence was not known to the golf club management, which had not been entrusted with its custody. The alleged misappropriation could not be considered a dishonest act against the club and did not create prejudice against it. The charge against the employee was not in relation to the duties of his work and thus did not provide grounds for disciplinary action.

Comment

The ruling reflects conventional jurisprudence, confining disciplinary grounds to causes involving direct work-related issues. In the past, the Supreme Court has invalidated dismissals or reduced the penalty to a suspension for such causes as fighting between employees over personal matters, fraud against a canteen concessionaire and theft of electricity by a member of an electric cooperative. The reversal of the penalty may be justified in this case - not strictly because it was not work related, but because the evidence against the employee was insufficient.

What may have been overlooked is the adverse effect of some acts that are not directly work related, but which may still affect the working relationships of employees. In Villamor Golf Club there was a link between work and the act objected to, as the mutual fund came from the customer tips earned by the employees, the members were limited to locker room attendants and the funds were kept within a locker room on the premises. The misappropriation certainly created distrust among the employees, which may have hindered the smooth operation of the club. If theft against customers could be penalized, theft against co-employees taking place on the company premises should similarly be punished.

In civil service jurisprudence, the Supreme Court has permitted the punishment of employees who commit fraud with regard to mutual aid funds that are private in nature; the justification is that the public servant becomes a member of such mutual funds precisely because of his or her official function. There is no compelling reason why this approach cannot be applied to private employment cases, provided that the act is clearly, albeit indirectly, linked to work and prejudice is created against the employer.

For further information on this topic please contact Ernesto Caluya at JGLaw (Jimenez Gonzales Liwanag Bello Valdez Caluya & Fernandez) by telephone (+63 2 815 9071) or by fax (+63 2 817 3251) or by email (etcaluya@jglawph.com).