Loss of confidence due to conflict of interests

The Supreme Court recently decided a case involving a big university in Baguio and its college dean, who was "compelled" to resign due to conflict of interests, when the latter formed a corporation of  his own, for the purpose of conducting board review classes and tutorial center. The act of the dean was deemed a case of conflict of interests because it was in direct competition with the university. The highest court of the land considered the "forced resignation" as a virtual dismissal, but a valid one and a legitimate exercise of the university administration's management prerogative. This was in the case of  Baguio Central University versus Dean I.G, ( name withheld to protect his reputation), in case numbered GR 188267, decided by the High Court on 02 December 2013 through Justice Arturo D. Brion.

The dean was hired by the university in 1991 but in 2005, he organized a review and language center, using the university's main campus as the official address stated in the articles of incorporation. The incorporation documents stated that the center's primary purpose was to conduct review classes for the board exams for teaching, nursing and engineering, and its secondary purpose was to offer tutorials and proficiency training for foreign languages. The dean also caused the putting up just outside the university campus of a big streamer inviting enrollees to the center. The university president called the dean's attention. Thereafter, the dean tendered his ''resignation'' and forthwith filed a case of illegal dismissal before the Labor Arbiter on 08 December 2005. He alleged constructive dismissal and asked for reinstatement and damages.

On 30 June 2006, the labor arbiter decided in favor of  the dean and ordered the university to pay him separation pay, in lieu of reinstatement and granted all money claims and the plea for tax refund. On appeal, the NLRC reversed the decision on 28 November 2007, ruling that there was a just cause to terminate the dean's services. The dean elevated the case to the Court of Appeals, which, on 12 March 2009, decided in the Dean's favor agreeing with the labor arbiter's original judgment. The Supreme Court, however, in turn, reversed the Court of  Appeals and agreed with the NLRC. The highest court ruled that the university acted correctly in terminating the employment of the dean. The main reason for so deciding was conflict of interests, resulting to loss of confidence. The law on the matter is well-settled in the annals of our labor jurisprudence.

Loss of trust and confidence is a just cause for dismissal under Article 282 ( now Article 288 ) of the Labor Code. The Supreme Court held that, first of all, the position of dean is a position of trust and confidence. Secondly, the act of putting up a review center, in direct competition with the university, was a clear case of conflict of interests. The High Court approved the decision of  the university because the act of the dean was clearly proven by competent evidence, including admission. The Supreme Court stressed that, as applied to the dismissal of managerial employees, the employer (University) enjoys a wider latitude of discretion. To drive home its point, the court said: " Employers are not required to present proof beyond reasonable doubt as mere existence of some basis for believing that such employee has breached the trust of the employer would suffice for dismissal."

As long as the employer  ''has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein rendered him unworthy of the trust and confidence demanded of his position, the dismissal on such ground would be valid.'' It is not a valid defense that the university did not suffer any damage or that the dean did not gain anything because the venture did not materialize at all. The heart of the principle of  loss of confidence is that the dean did, in fact, breach the forbidden line of expected propriety and fidelity to trust. The court only focused on the fact that he was the dean and that he violated his employer's trust by trying to engage in business, which was in direct competition with that of his employer, the university.

The Supreme Court concluded its decision by reiterating what is now a settled doctrine: An employer may not be compelled to continue in its employ a person whose continuance in the service would patently be inimical to its interests. The Court however, awarded the dean the amount of thirty thousand pesos, by way of nominal damages, because the university failed to afford him due-process, as required by the Labor Code. This is in consonance with the Agabon doctrine (485 Phil 248, and Concepcion versus Minex, 663 SCRA 496, 24 January  2012). This case should serve as a warning to all deans and school administrators who are similarly situated. HR managers of educational institutions may get in touch with this columnist as president of  People Management Association of the Philippines and enjoy the privilege of free consultations on the matter.

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