G.R. No. 111222 January 18, 1995
CITIBANK, N.A., petitioner, vs. DR. JOSE C. GATCHALIAN, in his capacity as Voluntary Arbitrator, CITIBANK PHILIPPINES EMPLOYEES UNION (CPEU) and EMY LLONILLO, respondents.

FACTS

Petitioner Citibank discovered a scheme to defraud it via fictitious credit card applications from alleged employees of Asian-Pacific Broadcasting Company, Inc. (APBCI). Florence Verendia of APBCI and Teresita Supnad, a Citibank employee, falsified applications and obtained cards. Respondent Emerita “Emy” Llonillo, a Citibank clerk-typist, admitted that on five occasions, she personally picked up seven newly approved and unsigned credit cards after Verendia telephoned her. Llonillo signed Card Pull-Out Request Forms, acknowledging responsibility for delivering the cards to the cardholders, and then delivered them to Verendia or her messenger. The cards were later used fraudulently.
After investigation, Citibank dismissed Llonillo for loss of trust and confidence and gross negligence. The case was elevated to voluntary arbitrator Dr. Jose C. Gatchalian. During arbitration, the union refused to present evidence after a subpoena request was denied. The voluntary arbitrator ordered Llonillo’s reinstatement without backwages, ruling her negligence was not both gross and habitual as required under Article 282(b) of the Labor Code.

ISSUE

Whether the voluntary arbitrator committed grave abuse of discretion in ordering the reinstatement of respondent Llonillo.

RULING

Yes. The Supreme Court reversed the voluntary arbitrator’s decision and upheld Llonillo’s dismissal for gross negligence. The Court clarified that the voluntary arbitrator erred in applying Article 282(b) of the Labor Code, which pertains to gross and habitual neglect of duties. Llonillo was dismissed under Article 282(a) for serious misconduct and under Article 282(c) for fraud or willful breach of trust, or for gross negligence constituting breach of trust. The legal logic is that an employer has the right to dismiss an employee for gross negligence alone when the negligence is of such a grave and serious character that it leads to substantial financial loss and erodes the trust reposed by the employer. Llonillo’s actions—repeatedly picking up and delivering unsigned credit cards to a non-cardholder in violation of bank policy, despite her long tenure and presumed knowledge of procedures—directly facilitated a substantial fraud. This constituted gross negligence warranting dismissal, irrespective of proof of habitual neglect. Her lengthy service did not mitigate this breach, as it actually heightened her responsibility to adhere strictly to bank protocols designed to prevent fraud.