Arlyn Bago had been working for Standard Insurance Company for about eight years as an encoder. The company’s branch manager accused several employees of manipulating commissions and spreading malicious rumors about her. An internal audit followed.

According to the audit, several employees had been diverting portions of commissions intended for agents and even the branch manager herself. The auditors also found that the employees maintained a common fund into which the diverted money was pooled and from which they could later borrow for personal emergencies. During the investigation, Arlyn admitted that she had participated in the scheme and apologized to both the company and her branch manager.

After conducting its investigation, the company terminated Arlyn’s employment. She filed a complaint for illegal dismissal.

One of her principal arguments was straightforward. She claimed that the company itself had not actually lost any money. According to her, the funds involved came from commissions payable to agents and the branch manager, not from the company’s own coffers. Since the employer supposedly suffered no financial prejudice, she argued that dismissal was too severe a penalty.

Was Arlyn correct?

No, she was not. The Court explained that the absence of financial loss does not excuse an employee’s dishonest conduct. Quoting earlier jurisprudence, the Court emphasized that whether or not the employer was financially prejudiced is immaterial. What matters is the employee’s participation in a fraudulent scheme that destroys the trust essential to the employment relationship.

The Court likewise rejected the argument that the amount involved was insignificant. According to the Court, the law does not focus on whether the employee took a small amount or a large one.

Rather, the decisive consideration is the fraudulent scheme itself and the resulting breach of the employer’s trust and confidence. The Supreme Court also found that Arlyn had been afforded due process.

She received written notices explaining the charges against her, was required to submit written explanations, and was given the opportunity to participate in the company’s investigation. More importantly, she repeatedly acknowledged her participation in the misconduct and even pleaded for another chance, expressing remorse for what had happened.

Finally, the Court held that Arlyn’s eight years of service did not save her job. While length of service may sometimes mitigate the penalty imposed on an employee, it does not excuse acts of dishonesty.

The Court explained that trust, once lost, is difficult—if not impossible—to restore. To treat long years of service as a shield against dismissal for fraud would reward disloyalty rather than loyalty.

Accordingly, the Supreme Court upheld Arlyn’s dismissal. The Court ruled that an employee’s participation in a dishonest scheme constitutes a valid ground for termination, even if the employer itself did not suffer direct financial loss.

Bago v. NLRC. G.R. NO. 170001, April 04, 2007