Disclaimer: The following discussion is provided for informational purposes only and does not constitute legal advice. For advice specific to your situation, always consult a qualified legal professional in the Philippines.

Overview

Filing a fraud case against an employee in the Philippines involves navigating both criminal and labor laws. Depending on the nature and severity of the alleged offense, the employer may pursue (1) criminal action under the Revised Penal Code or special laws, and (2) administrative or disciplinary action under the Labor Code and company policies. In some cases, civil actions for damages may also be filed concurrently.

This article outlines the key laws, procedures, and considerations in filing a fraud case against an employee in the Philippine context.

1. Definitions of Fraud Under Philippine Law

Fraud generally refers to an act of deceit, trickery, or misrepresentation done to gain an unlawful advantage over another. While the term “fraud” is broad, Philippine law provides specific offenses under the Revised Penal Code (RPC) which can apply to fraudulent conduct:

Estafa (Swindling) under Articles 315–318 of the RPC.
- Commonly invoked when an employee misappropriates money, goods, or services entrusted to them or when they defraud the employer through false pretenses.
- Estafa has multiple modes, including misappropriation, abuse of confidence, deceit, or fraudulent means.
Qualified Theft under Article 310 of the RPC.
- Occurs if the employee commits theft against the employer, taking property without consent, and it is considered “qualified” because of the trust relationship between employer and employee.
Falsification of Documents under Articles 170–172 of the RPC.
- Occurs if the employee falsifies a document or signature for personal gain or to conceal wrongdoing.
Other Special Laws may apply depending on the industry or the type of fraud. For instance:
- Access Devices Regulation Act (R.A. No. 8484) for credit card or ATM fraud;
- Cybercrime Prevention Act of 2012 (R.A. No. 10175) if fraud was committed using computers or online platforms.

2. Possible Legal Avenues

2.1 Criminal Action

A criminal complaint may be filed with the Office of the City/Provincial Prosecutor (often referred to as the “Prosecutor’s Office”) if the facts suggest a violation of the Revised Penal Code or relevant special laws.

Key considerations in filing a criminal case:

Evidence of wrongdoing: The employer must have sufficient evidence proving deceit, misappropriation, or theft—e.g., transaction records, affidavits of witnesses, admission by the employee, forensic evidence (for cyber fraud), etc.
Venue: The complaint is usually filed in the jurisdiction where the fraudulent act was committed or where any element of the offense occurred.
Prescriptive periods: The law imposes time limits for filing criminal actions (e.g., generally up to 20 years for crimes punishable by reclusion temporal, but this varies depending on the specific crime).
Burden of proof: The prosecution must prove the guilt of the accused “beyond reasonable doubt.”

2.2 Labor/Administrative Action

Even if the employer decides not to file or is not yet ready to file a criminal case, the employer may pursue administrative or disciplinary action against the employee. This can lead to dismissal for just cause under the Labor Code of the Philippines:

Just cause for termination (Article 297 of the Labor Code): Serious misconduct, fraud, or willful breach of trust are recognized as valid grounds to terminate employment.
Due process requirements:
1. Notice to Explain (NTE) or “First Notice” – the employer notifies the employee in writing of the allegations and asks the employee to submit a written explanation.
2. Administrative Hearing or Conference – the employee is given the opportunity to respond to charges, present evidence, and defend themselves.
3. Notice of Decision (NOD) or “Second Notice” – the employer provides a final notice stating the decision and the reason for the decision.
Documentation is crucial: Employers must keep records of the investigation, evidence, notices, and decisions.

2.3 Civil Action for Damages

The employer may also consider filing a civil case to recover damages, especially if the fraudulent act caused significant financial loss. This could be filed in a regular trial court:

Basis: Quasi-delict, breach of contract, or other provisions of the Civil Code.
Remedy: Monetary compensation for actual damages, moral damages (if proven), and, in some cases, exemplary damages.
Independence from criminal action: A civil action can be filed separately, or it can be instituted alongside the criminal action (in many cases of estafa, the civil aspect is deemed “impliedly instituted” with the criminal action, unless specifically waived).

3. Steps in Filing a Criminal Case

Gather Evidence:
- Collect all documents (e.g., bank statements, invoices, receipts), electronic data (e.g., emails, messages, system logs), and any other pertinent records.
- Identify witnesses and secure their sworn statements or affidavits.
Prepare the Complaint-Affidavit:
- The employer (or the employer’s representative) executes a Complaint-Affidavit detailing the facts of the fraud, attaching supporting evidence.
- Witnesses also execute their respective affidavits.
File with the Prosecutor’s Office:
- Submit the Complaint-Affidavit and supporting documents to the Office of the City/Provincial Prosecutor where the offense was committed.
- Pay any required filing fees (if applicable).
Preliminary Investigation:
- The Prosecutor’s Office conducts a preliminary investigation to determine if probable cause exists to file the case in court.
- The accused employee is given the opportunity to file a Counter-Affidavit.
- The prosecutor may require a clarificatory hearing or ask for additional evidence.
Resolution and Information:
- If the prosecutor finds probable cause, a Resolution is issued, and an Information (formal charge) is filed in the appropriate trial court.
- If the prosecutor dismisses the complaint, the employer may file a motion for reconsideration or elevate the dismissal to the Department of Justice (DOJ) through a Petition for Review.
Arraignment and Trial:
- Once the Information is filed, the court sets the arraignment date, and the accused enters a plea.
- Trial ensues, during which the prosecution and defense present evidence.
- If found guilty, the court imposes the appropriate penalty under the law. The accused may appeal.

4. Administrative/Labor Process

Notice to Explain (NTE):
- The employer issues an NTE describing the alleged fraudulent act, specifying company policies or laws violated, and giving the employee the chance to explain in writing.
Administrative Hearing or Conference:
- The employer holds a hearing or conference to allow the employee to present defenses or mitigating circumstances.
- The employer can also present the evidence of fraud during this stage.
Notice of Decision (NOD):
- After evaluating the evidence and the employee’s explanations, the employer issues a final decision.
- If the decision is dismissal, the notice must clearly state the grounds for termination.
Post-termination Remedies:
- The employee can file a complaint for illegal dismissal at the National Labor Relations Commission (NLRC) if they believe due process was not followed or if the grounds for termination are invalid.
- The employer must be prepared to defend the decision, including presenting evidence and documentation of due process.

5. Evidentiary Requirements and Documentation

To succeed in a fraud case—whether criminal or in an administrative setting—solid evidence is essential:

Documentary Evidence: Contracts, receipts, bank statements, ledgers, emails, messages, or any material record showing the employee’s involvement in fraudulent activities.
Testimonial Evidence: Affidavits or sworn statements from co-workers, third-party witnesses, or forensic experts (in cases of digital fraud).
Physical Evidence: If physical items or misappropriated goods are recovered, they may be used in court or at an administrative hearing.
Expert Reports: In sophisticated fraud cases (e.g., forensic accounting, IT forensics), expert testimony or official reports may be necessary.

6. Potential Penalties and Liabilities

Criminal Penalties:
- The penalties vary depending on the specific provision of the Revised Penal Code or the special law violated.
- For estafa and qualified theft, the penalty typically depends on the value of the property or amount defrauded.
- Imprisonment ranges from a few months (arresto mayor) to many years (reclusion temporal), depending on the gravity of the offense.
Administrative Sanctions:
- Termination from employment is a common administrative remedy in fraud cases.
- If found guilty of serious misconduct or willful breach of trust, the dismissed employee may lose separation benefits and back pay.
Civil Liabilities:
- The court can order the employee to pay restitution or indemnify the employer for losses, including actual damages, interest, and sometimes exemplary damages if warranted.

7. Common Defenses Raised by Employees

Lack of Criminal Intent or Deceit: The employee may argue there was no intent to commit fraud, or no material deception occurred.
Absence of Proof of Misappropriation or Theft: The defense may contend that the employer failed to prove the act was unauthorized or that the funds/property are indeed missing.
Lack of Due Process: In an administrative context, the employee might claim the employer did not follow the twin-notice requirement. This could lead to an illegal dismissal finding before the NLRC if not properly addressed.
Mistake of Fact or Good Faith: The employee might assert that any discrepancy was due to error or oversight rather than fraudulent intent.

8. Practical Tips for Employers

Implement Strong Internal Controls: Preventing fraud starts with measures such as separation of duties (e.g., different people handling procurement, payment, and auditing), routine audits, and strict approval processes.
Maintain Organized Records: Proper documentation of transactions and employee responsibilities helps detect anomalies and provides evidence if fraud occurs.
Conduct Thorough Investigations: Before filing a criminal case or terminating employment, ensure you have gathered sufficient evidence.
Consult Legal Counsel Early: A lawyer can guide the filing of the complaint, assess the strength of evidence, and provide advice on potential settlement options if warranted.
Avoid Premature Public Disclosure: Defamation or malicious prosecution risks arise when accusations are publicly disclosed without strong evidence. Keep communication confidential until and unless it is necessary to disclose.
Ensure Labor Law Compliance: Even when fraud is evident, failing to follow due process for termination can result in liability for back wages or reinstatement.

9. Key Government Agencies and Judicial Bodies

Office of the City/Provincial Prosecutor: Handles preliminary investigations for criminal complaints.
Regional Trial Courts (RTCs): Exercise jurisdiction over criminal cases like estafa and qualified theft depending on penalty thresholds.
Metropolitan/Municipal Trial Courts (MeTC, MTC): Lower courts that handle cases involving lower penalties or amounts.
National Labor Relations Commission (NLRC): Handles labor disputes, including illegal dismissal cases.
Department of Labor and Employment (DOLE): Provides oversight on compliance with labor laws and regulations.
Department of Justice (DOJ): Reviews prosecutorial decisions and may overturn dismissals or direct the filing of charges upon appeal.

10. Conclusion

Filing a fraud case involving an employee in the Philippines requires navigating both criminal and labor frameworks. An employer should carefully gather evidence, consult legal counsel, and adhere to due process both in administrative proceedings (under the Labor Code) and criminal proceedings (under the Revised Penal Code). Proper documentation, internal controls, and a well-structured investigative process are vital to safeguard the employer’s interests and ensure that the case proceeds effectively.

Remember that every case is unique. The prudent course of action is to seek professional legal advice to evaluate the specific facts, advise on the appropriate charges, ensure compliance with procedural requirements, and protect the rights of all parties involved.

Disclaimer: This article provides a general overview and should not be construed as legal advice. For a detailed analysis specific to your circumstances, please consult a qualified lawyer in the Philippines.