Factory Worker Theft of Company Property: Termination Rules (PH)

A guard at the plant gate finds two rolls of copper wire, a box of packaging film or a bag of finished product inside a production worker’s backpack, and the plant manager wants the worker out by the end of the shift. Theft is one of the clearest just causes in Philippine labor law, and one of the easiest dismissals to lose when the case rests on a hurried gate search and an unsigned guard report.

This guide, for plant managers and HR officers, covers which Article 297 ground to charge, how much the item’s value matters, what factory evidence holds up, preventive suspension, and why the criminal case runs on a separate track.

Direct Answer

A factory worker caught stealing company property may be dismissed for serious misconduct under Article 297(a) [282(a)] of the Labor Code, and for fraud or willful breach of trust under Article 297(c) if the worker handles or guards the property.^[1][7] The employer needs only substantial evidence; a criminal conviction is not required.^[4] But dismissal must be proportionate to the item and the worker’s record, and the twin-notice procedure, with at least five calendar days to answer, must be followed.^[2][5][9]

Key Takeaways

• Theft of company property is a recognized just cause. The Supreme Court has said so for a telephone lineman who sold company equipment and for a 39-year factory worker caught with canned goods.^[4][6]
• Charge serious misconduct under Article 297(a) for line workers. Add Article 297(c) only when the worker holds a position of trust over the property, such as a storekeeper, inventory clerk or warehouse checker.^[7]
• An acquittal in the qualified theft case does not automatically undo a dismissal backed by substantial evidence.^[4]
• Value and record still matter. In Felizardo, a first-time jet printer operator caught with boots, a container and hamburger patties was ordered reinstated because dismissal was disproportionate.^[5]
• Preventive suspension is allowed when the worker’s presence threatens company property, for a maximum of 30 days without pay.^[10]
• A worker validly dismissed for theft is not entitled to separation pay or financial assistance.^[4][8]

Legal Basis

Authority	Classification	Rule Supported	Effect
Labor Code, Article 297(a) and (c) [282(a) and (c)]	Labor Code provision	Serious misconduct; fraud or willful breach of trust as just causes for dismissal	Binding law
Labor Code, Article 292(b) [277(b)]	Labor Code provision	Written notice and ample opportunity to be heard; employer bears the burden of proving a valid cause	Binding law
Labor Code, Article 113	Labor Code provision	Wage deductions only in the cases the law allows	Binding law
Omnibus Rules, Book V, Rule XXIII, Sections 8 and 9	Implementing rules	Preventive suspension for a serious and imminent threat to life or property; 30-day limit	Binding administrative rule
DOLE Department Order No. 147-15	Implementing rules	Twin-notice procedure; when a hearing or conference is required	Binding administrative rule
Reno Foods, Inc. v. NLM-Katipunan, G.R. No. 164016, March 15, 2010	Supreme Court jurisprudence	Theft of company canned goods is serious misconduct; acquittal does not bar dismissal; no financial assistance	Controlling jurisprudence
Felizardo v. Republic Flour Mills-Selecta Ice Cream Corp., G.R. No. 120450, February 10, 1999	Supreme Court jurisprudence	Dismissal disproportionate for low-value items taken by a first offender in a non-confidential post	Controlling jurisprudence
PLDT v. NLRC and Pangan, G.R. No. L-53552, October 18, 1988	Supreme Court jurisprudence	Theft of company property is a valid ground despite personal hardship	Controlling jurisprudence
P.J. Lhuillier, Inc. v. Velayo, G.R. No. 198620, November 12, 2014	Supreme Court jurisprudence	Two classes of positions of trust; breach must be willful, work-related and proven by substantial evidence	Controlling jurisprudence

Which Ground to Charge

Plants often write “theft, dishonesty and loss of trust” on every charge sheet. That shortcut backfires when the worker has no custody of the goods.

Serious misconduct for line workers

Article 297(a) [282(a)] covers serious misconduct in connection with the work.^[1] Taking finished goods, raw materials, scrap or tools out of the plant without authority fits the definition: it is willful, it is tied to the workplace, and it shows the worker is unfit to continue. In Reno Foods, a food-processing worker was caught at the gate during the routine exit search with six cans of the company’s products wrapped in nylon leggings inside her bag. The Court held that theft of company property is serious misconduct and upheld her dismissal.^[4] For the general elements, see serious misconduct dismissal rules and the glossary entry on serious misconduct.

Loss of trust only for positions of trust

Article 297(c) [282(c)] covers fraud or willful breach of the trust reposed in the employee.^[1] In P.J. Lhuillier v. Velayo, the Court identified two classes of positions of trust: managerial employees, and fiduciary rank-and-file employees such as cashiers, auditors and property custodians. The breach must be willful, work-related and proven by substantial evidence.^[7]

In a factory, that second class typically covers the warehouse custodian, the storekeeper who issues spare parts, the inventory controller, and the checker who signs out finished goods. A machine operator or packer usually does not handle the property in that fiduciary sense. For those workers, rely on serious misconduct. See the guide on loss of trust and confidence as a just cause.

Why not Article 297(d)?

Article 297(d) [282(d)] covers a crime committed against the person of the employer, the employer’s immediate family or authorized representatives.^[1] Theft of plant inventory is a crime against property, not against a person.

Value, Record and Proportionality

Theft is a just cause, but the penalty must still fit the act.

When the Court reinstated the worker

In Felizardo, a jet printer operator at a flour mill and ice cream plant was caught at the gate with a pair of boots, an aluminum container and fifteen hamburger patties. The company rulebook prescribed termination for stealing. The Court did not doubt the taking, but held that dismissal was disproportionate given the low value of the items, his clean record and his non-managerial, non-confidential job. It treated the time he was out of work as his suspension and ordered reinstatement without backwages.^[5] A code of conduct that says “termination on first offense” does not bind a Labor Arbiter.

When the Court upheld dismissal

In Reno Foods, the Court refused to let long service soften the penalty. The worker had served about 39 years and was near retirement. The Court said length of service is not a bargaining chip against the employer and that betrayal by a long-time employee is worse, not better.^[4] In PLDT v. NLRC and Pangan, a lineman sold company equipment and swapped in defective units to hide it. His need for money for a medical operation did not save him: acts of dishonesty in handling company property, the Court said, are a different matter.^[6]

Factors a factory should weigh

• What was taken: finished product, copper, spare parts and tools weigh more than canteen leftovers or scrap the plant throws away.
• Concealment: items hidden in clothing, lunch boxes or under a vehicle seat show intent.
• Cover-ups or collusion: falsified gate passes, altered counts, a guard or driver in on it.
• The worker’s role: custody of the item pushes toward Article 297(c).
• Prior record and past penalties for similar cases.

See disciplinary action and proportionality.

Factory Theft Evidence That Holds Up

The employer must prove the theft with substantial evidence.^[1] In Reno Foods, the case was won on a routine exit search by the guard on duty.^[4]

Evidence	What It Proves	Common Weakness
Guard’s gate inspection report and logbook entry	Item found, time, location, what the worker said	Written days later, unsigned, or by a guard who did not do the search
Photos of the seized items with the worker’s bag	Identity and quantity of the goods	Items returned to stock before they were photographed
Gate pass and material-out records	No authority to bring the item out	Plant routinely lets workers take scrap without passes
Inventory variance or cycle-count report	Missing stock matches what was found	Variance exists but cannot be tied to the worker
CCTV from the line, warehouse, locker room or gate	Who took the item and how it was concealed	Overwritten once the system’s retention period runs out
Witness statements from the line leader and co-workers	Context and prior suspicious acts	Identical, HR-drafted wording

Ask the worker to sign an acknowledgment that the items were found, but never force a confession. For what an Arbiter looks for, see evidence in illegal dismissal cases.

The Criminal Case and Preventive Suspension

Two separate tracks

A plant may file a theft or qualified theft complaint with the police or prosecutor, but it does not have to wait for the outcome. In Reno Foods, the worker was acquitted on reasonable doubt, yet the dismissal stood. The Court explained that a criminal conviction is not needed to find just cause, because a labor case requires only substantial evidence.^[4]

Preventive suspension

The implementing rules allow preventive suspension when the worker’s continued presence poses a serious and imminent threat to the life or property of the employer or co-workers.^[10] A worker with access to the warehouse, the tool crib or a finished-goods area who is suspected of taking stock usually meets that test.

• Issue the order in writing, stating the threat to property.
• The suspension may not exceed 30 days. After that, reinstate the worker or extend the suspension with pay.^[10]
• In Maricalum Mining, an unjustified suspension that ran far beyond 30 days was treated as constructive dismissal.^[10]

Step-by-Step Procedure

1. Secure the items. Have the guard log the find, photograph the items in the bag, and keep them as evidence.
2. Collect statements the same day. Get signed, handwritten statements from the inspecting guard, the line leader and any witness. Request the agency’s incident report if guards are outsourced.
3. Pull the records. Export CCTV, gate passes, material-out slips and the latest inventory count.
4. Decide on preventive suspension. Issue a written order only if the worker’s presence threatens company property, and diary day 30.^[10]
5. Issue the Notice to Explain. State the ground under Article 297(a), and 297(c) only if the worker holds a position of trust; the company rule violated; a detailed narration of the date, time, gate and items; and at least five calendar days from receipt to answer in writing.^[2][9] See the Notice to Explain guide.
6. Hold the conference. A hearing is required if the worker requests it in writing, if there are substantial evidentiary disputes, or if company rules require it.^[2] Allow a union representative in a unionized plant.
7. Decide on proportionality. Address the value of the goods, concealment, the worker’s role and record, and past penalties for similar cases.^[5]
8. Issue the Notice of Decision. State the facts found, the ground and the penalty. This completes the twin-notice rule.
9. Process final pay correctly. Release earned wages and benefits without unlawful deductions for the stolen goods.^[1] See company clearance and final pay.

Common Employer Mistakes

• Dismissing the worker at the gate, the same day, with no NTE and no chance to explain.
• Charging loss of trust against a machine operator who never had custody of the goods.
• Citing Article 297(d) for theft of inventory.
• Putting the seized items back in stock before they are photographed and logged.
• Relying on an inventory shortage alone, with no evidence linking it to the worker.
• Waiting for the criminal case to finish before starting the labor process.
• Dismissing a first offender over minimal items while only warning a supervisor for the same act.
• Deducting the value of the goods from final pay without legal basis.

Frequently Asked Questions

Can a factory worker be dismissed for a first offense of theft?

Yes. Theft of company property is serious misconduct, and one act can justify dismissal. But proportionality still applies. In Felizardo, a first offender in a non-confidential post who took low-value items was reinstated without backwages instead. High-value goods, concealment, falsified gate passes or a position of custody push the case toward dismissal.

Do we need a police report or criminal conviction first?

No. The labor case only needs substantial evidence. In Reno Foods, the worker was acquitted of theft on reasonable doubt, but the Supreme Court still upheld her dismissal because a criminal conviction is not necessary to find just cause. The criminal complaint and the disciplinary case run separately.

Should we charge loss of trust and confidence or serious misconduct?

For machine operators, packers and line workers, charge serious misconduct under Article 297(a). Loss of trust under Article 297(c) applies to managerial employees and fiduciary rank-and-file workers such as storekeepers, inventory clerks and property custodians. Charging both against a line worker is not fatal, but the trust ground is weaker.

Is a worker dismissed for theft entitled to separation pay?

No. The Supreme Court has held that separation pay as a measure of social justice is not available when the dismissal is for serious misconduct or acts reflecting on moral character. In Reno Foods, it set aside even a financial assistance award to a 39-year employee dismissed for theft.

Can we deduct the value of the stolen items from the worker’s final pay?

Not on your own. Article 113 of the Labor Code allows wage deductions only in limited cases recognized by law or regulation. Recover the goods themselves, or pursue their value through a civil or criminal case. An unauthorized deduction can become a separate money claim.

How long can we preventively suspend a worker suspected of theft?

Up to 30 days without pay, and only if the worker’s presence is a serious and imminent threat to company property or people. After 30 days, the plant must reinstate the worker or extend the suspension with pay. A prolonged unpaid suspension can be treated as constructive dismissal.

What to Do Next

If you are the employer

1. Lock down the evidence today: logbook entry, photos, seized items, CCTV export and gate pass records.
2. Check the worker’s role to decide whether Article 297(c) applies.
3. If the worker files at DOLE, attend the SEnA conference with the full file; see the SEnA filing process.^[3]

If you are the worker charged

1. Answer the NTE in writing within the period given, at least five calendar days, and keep a received copy.^[2]
2. Explain any authority you had to take the item, such as a supervisor’s permission or a scrap policy, and ask for a conference in writing if the facts are disputed.^[2]
3. If dismissed and you believe it was unjust, file a Request for Assistance under SEnA and, if unresolved, a complaint before the NLRC; see how to file an illegal dismissal case and prescription of labor claims.^[3]

For more on manufacturing workplaces, see the factory and warehouse workers hub, the guide on factory worker fighting at work, and when separation pay is due.

First action: use the free Notice to Explain generator to prepare a theft-of-company-property NTE for a factory worker, with the incident date, gate and items found, the Article 297(a) serious-misconduct ground and the five-day deadline filled in, then download it as a PDF.

Related Guides for Factory Workers

• Factory Worker Fighting at Work: Dismissal Rules (PH)
• Factory and Warehouse Worker Rights in the Philippines
• Construction Worker Drunk on Site: Termination Rules (PH)
• Construction Worker Refused to Wear PPE: Dismissal Rules (PH)
• Security Guard Sleeping on Duty: Termination Rules (PH)
• BPO Agent Data Privacy Breach: Termination Rules for Employers (PH)
• How to Terminate a BPO Agent for Chronic Tardiness in the Philippines
• BPO Agent No Call, No Show (AWOL): Employer Rules in the Philippines
• Terminate a Sales Representative for Underperformance or PIP (PH)
• Terminate Project Employee Before Project Completion: PH Rules
• Kasambahay Left Without Notice: Employer Rights and Rules (PH)
• Can a Kasambahay File a Complaint for Illegal Dismissal? (PH Guide)
• BPO Campaign Pull-Out: Redundancy vs Floating Status Rules (PH)
• Can a BPO Agent Sue for Constructive Dismissal Over a Transfer? (PH)
• BPO Night Differential Computation: Rates and Examples (PH)
• Construction Worker Overtime Pay Computation: Rates and Examples (PH)
• Security Guard 12-Hour Shift Overtime and Holiday Pay (PH)
• Serious Misconduct in the Philippines: Elements, Evidence, Dismissal Rules and Due Process
• Loss of Trust and Confidence as a Just Cause in the Philippines
• Warehouse Employee Positive Drug Test: Termination Rules (PH)

Sources and Legal Citations

Labor Code and Implementing Rules

[1] Presidential Decree No. 442, Labor Code of the Philippines, Articles 113, 277(b) and 282 (renumbered Articles 113, 292(b) and 297), Lawphil. Supports: serious misconduct and fraud or willful breach of trust as just causes; crimes against the person of the employer; limits on wage deductions; notice, hearing and burden of proof.

[2] DOLE Department Order No. 147-15, Amending the Implementing Rules and Regulations of Book VI of the Labor Code, Supreme Court E-Library. Supports: twin-notice procedure; at least five calendar days to answer; when a hearing or conference is required.

[3] Republic Act No. 10396 (2013), amending Article 228 of the Labor Code, Lawphil. Supports: mandatory conciliation-mediation of labor disputes.

Supreme Court Decisions

[4] Reno Foods, Inc. and/or Vicente Khu v. Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan, on behalf of Nenita Capor, G.R. No. 164016, March 15, 2010, Supreme Court E-Library. Supports: theft of company products found in a gate search is serious misconduct; acquittal in the criminal case does not bar dismissal; long service does not mitigate; no separation pay or financial assistance.

[5] Associated Labor Unions-TUCP and Renato Felizardo v. National Labor Relations Commission, Republic Flour Mills Group of Companies and/or Selecta Ice Cream Corporation, G.R. No. 120450, February 10, 1999, Supreme Court E-Library. Supports: dismissal disproportionate for low-value items taken by a first offender in a non-confidential position; reinstatement without backwages.

[6] Philippine Long Distance Telephone Company v. National Labor Relations Commission and Eduardo Pangan, G.R. No. L-53552, October 18, 1988, Lawphil. Supports: theft of company property is a valid ground for dismissal notwithstanding the employee’s personal hardship.

[7] P.J. Lhuillier, Inc. and Mario Ramon Ludeña v. Flordeliz Velayo, G.R. No. 198620, November 12, 2014, Supreme Court E-Library. Supports: two classes of positions of trust; breach must be willful, work-related and based on substantial evidence.

[8] Toyota Motor Philippines Corp. Workers Association (TMPCWA) v. National Labor Relations Commission, G.R. Nos. 158786 and 158789, October 19, 2007, Supreme Court E-Library. Supports: separation pay as social justice is not granted for dismissals based on serious misconduct or acts reflecting on moral character.

[9] King of Kings Transport, Inc. v. Mamac, G.R. No. 166208, June 29, 2007, Lawphil. Supports: specific grounds and detailed narration of facts in the first notice; at least five calendar days to respond.

[10] Maricalum Mining Corporation v. Antonio Decorion, G.R. No. 158637, April 12, 2006, Lawphil. Supports: preventive suspension under Book V, Rule XXIII, Sections 8 and 9 of the Omnibus Rules; threat to life or property; 30-day limit and extension with pay; prolonged suspension as constructive dismissal.

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Sources rechecked as of: October 18, 2026

This guide provides general legal information on Philippine labor law, not legal advice on specific facts. For a pending case, consult a lawyer or the DOLE or NLRC office handling the matter.