Employee theft—legally categorized under Serious Misconduct or Willful Breach of Trust—is a distressing reality for many businesses in the Philippines. However, because the Labor Code is generally protective of employees, employers must navigate the termination process with surgical precision. One procedural misstep can turn a valid dismissal into an "illegal dismissal" case, resulting in costly backwages and damages.

I. Legal Grounds for Termination

In the Philippine jurisdiction, employee theft falls under Article 297 (formerly 282) of the Labor Code. It is rarely cited as "theft" in a labor notice; instead, it is classified under the following Just Causes:

Serious Misconduct: The act must be related to the performance of the employee’s duties and show that the employee is unfit to continue working.
Willful Breach of Trust and Confidence: This applies specifically to "trustee employees" (managers or those handling cash/property). To dismiss on this ground, the employer must prove the employee's involvement in the loss and that the breach was "real" and "founded on clearly established facts."
Commission of a Crime: When the act constitutes a crime (like Qualified Theft under the Revised Penal Code) against the employer or their immediate family.

II. The Two-Notice Rule: Procedural Due Process

Proving the theft is only half the battle. The Philippine Supreme Court strictly enforces the Two-Notice Rule. Failure to follow this, even if the theft is caught on camera, makes the dismissal "procedurally infirm."

The First Written Notice (Notice to Explain/NTE):

This must contain the specific grounds for termination.
It must contain a detailed narration of the facts (date, time, and involved items).
It must give the employee a reasonable opportunity to explain their side (usually at least five (5) calendar days).

The Administrative Hearing/Conference:

While not always mandatory if the employee waives it, the employer must offer a chance for a hearing where the employee can present evidence or bring a representative (legal counsel or union officer).

The Second Written Notice (Notice of Decision):

After considering the explanation, the employer issues a notice stating whether the employee is being terminated or penalized. It must clearly state that all circumstances have been evaluated.

III. Evidence and Burden of Proof

In labor cases, the "Burden of Proof" rests entirely on the employer. The quantum of evidence required is Substantial Evidence—that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.

CCTV Footages: These are highly persuasive but must be properly authenticated.
Audit Trails: Discrepancies in point-of-sale (POS) systems or inventory logs.
Witness Statements: Sworn affidavits from co-workers or security guards.
Written Admissions: If an employee signs a confession, it must be proven that it was signed voluntarily and without duress.

IV. Preventive Suspension

During the investigation, an employer may place the employee under Preventive Suspension if their continued presence poses a "serious and imminent threat" to the company's property or life.

Duration: Maximum of 30 days.
Pay: This period is usually unpaid. However, if the suspension exceeds 30 days and the employer wants to extend it, they must pay the employee’s wages during the extension.

V. Criminal vs. Labor Cases

It is a common misconception that you must win a criminal case for "Qualified Theft" to fire an employee.

Labor Case: Requires only Substantial Evidence. You can fire someone even if the criminal case is still pending.
Criminal Case: Requires Proof Beyond Reasonable Doubt.
Result: Even if an employee is acquitted in a criminal court (due to a technicality), their dismissal may still be upheld in a labor court if there was enough evidence to breach the employer's trust.

Key Considerations for Employers

Important Note: Avoid "forced resignations." Coerced resignation letters are viewed by the Department of Labor and Employment (DOLE) as "Constructive Dismissal," which carries the same penalties as illegal dismissal.

Inventory of Property: Always maintain a clear paper trail of custody for the stolen items.
Document Everything: From the moment the discrepancy is found to the final exit interview.

Would you like me to draft a template for a Notice to Explain (NTE) specifically for a suspected theft incident?