Letter to a Lawyer

Dear Attorney,

I hope this letter finds you well. I am seeking your expert legal advice regarding a concern involving an employee's potential liability for theft. Specifically, the situation involves an employee who collected funds amounting to no less than PHP 200,000 on behalf of the company but failed to remit the amount.

I would like to understand the legal implications of this incident under Philippine law. Can the employee be sued for theft, or does this fall under a different legal classification, such as breach of trust or estafa? Additionally, I would like to know the potential remedies available to the employer, including whether criminal or civil action can be pursued and any procedural steps involved. Your guidance on this matter would be greatly appreciated.

Thank you for your time and assistance.

Sincerely,
A Concerned Employer

Legal Article: Employee Liability for Non-Remittance of Company Collections in the Philippines

Under Philippine law, an employee who fails to remit collections or funds entrusted by the employer could potentially be held liable under several legal frameworks, including theft, estafa (swindling), or breach of fiduciary duty. The exact legal course depends on the facts of the case, particularly the employee’s intent, the nature of the funds, and the circumstances surrounding the failure to remit.

Key Legal Principles

1. Theft Under the Revised Penal Code

The Revised Penal Code of the Philippines defines theft under Article 308 as the taking of personal property belonging to another with intent to gain, without the owner’s consent. For theft to apply, the following elements must be proven:

Personal Property is Involved – The funds or collections belong to the employer.
Physical Taking – The employee physically takes the funds or otherwise removes them from the employer's possession or control.
Lack of Consent – The employer has not consented to the taking or retention of the funds.
Intent to Gain – The employee must have intended to derive personal gain from the misappropriation.

In the context of company collections, theft may apply if the employee collected money under the guise of performing their duties and deliberately converted it for personal use without the employer’s permission.

2. Estafa (Swindling)

More commonly, cases involving non-remittance of funds by employees fall under estafa rather than theft. Article 315 of the Revised Penal Code provides that estafa is committed by a person who defrauds another by abuse of confidence or deceit, resulting in damage or prejudice to the offended party.

Elements of Estafa

The elements of estafa by abuse of confidence, applicable to cases of non-remittance, are:

Entrustment of Property – The employer entrusted the collections or funds to the employee.
Conversion or Misappropriation – The employee converted the funds for personal use or disposed of them contrary to the terms of the entrustment.
Demand for Return – The employer demanded the return of the funds or compliance with the obligation, and the employee failed to do so.
Intent to Defraud – The employee acted with intent to defraud the employer.

For instance, if the employer can prove that the employee collected PHP 200,000, failed to remit the amount, and instead used it for personal expenses, the case would likely be classified as estafa.

Estafa vs. Theft

Unlike theft, estafa involves a fiduciary relationship. The funds were lawfully in the employee's possession but were later misused or converted to personal use.

3. Breach of Fiduciary Duty and Civil Liability

An employer may also pursue a civil case for breach of fiduciary duty or collection of a sum of money in cases where the employee’s actions do not meet the threshold for criminal liability. Civil remedies focus on the recovery of the misappropriated funds rather than penalizing the employee.

Applicable Legal Remedies

A. Criminal Action

An employer may file a criminal case for estafa or theft, depending on the circumstances:

Filing a Complaint – The employer must file a complaint with the Office of the City Prosecutor, supported by evidence such as receipts, records, and correspondence showing the entrusted amount and the failure to remit.
Preliminary Investigation – The prosecutor will determine if there is probable cause to indict the employee.
Trial and Sentencing – If convicted, penalties for estafa or theft may include imprisonment and restitution.

Penalties

Under Article 315 of the Revised Penal Code, the penalty for estafa depends on the amount involved:

For amounts over PHP 12,000 but less than PHP 22,000, the penalty ranges from prision correccional (6 months to 6 years).
For amounts exceeding PHP 22,000, the penalty includes an additional year for every PHP 10,000 exceeding PHP 22,000, but not more than 20 years in total.

B. Civil Action

If criminal intent cannot be proven, the employer may file a civil case to recover the amount:

Filing a Collection Suit – The employer can initiate a civil case for recovery of the misappropriated amount, with interest and damages.
Small Claims Court – For amounts under PHP 1,000,000, the case may be resolved through the simplified procedure of the small claims court, which does not require legal representation.

Evidentiary Considerations

The success of any legal action depends heavily on evidence. Employers should document:

Entrustment of Funds – Written instructions, acknowledgment receipts, or company policies showing the employee’s duty to remit collections.
Failure to Remit – Statements of account, financial records, or notices of demand proving non-remittance.
Intent to Defraud – Evidence that the employee deliberately misused the funds, such as personal transactions or unexplained expenditures.

Defenses Available to Employees

An employee accused of theft or estafa may raise the following defenses:

Lack of Criminal Intent – The employee may argue that the non-remittance was due to negligence or unforeseen circumstances rather than fraud.
Dispute Over Entrustment – The employee may challenge the employer’s claim that they were obligated to remit the funds.
Repayment – While not a complete defense, returning the funds may mitigate penalties in a criminal case or serve as grounds for settlement in a civil case.

Preventive Measures for Employers

To minimize risks of misappropriation:

Implement Internal Controls – Establish robust financial controls, including dual signatures for fund releases and regular audits.
Require Written Acknowledgments – Employees should sign receipts or agreements for collections they handle.
Set Clear Policies – Company policies should outline the consequences of non-remittance, including immediate termination and legal action.

Conclusion

Yes, an employee can be sued for theft or estafa for failing to remit company collections. The classification of the case depends on the circumstances, particularly whether the funds were unlawfully taken (theft) or lawfully entrusted and subsequently misused (estafa). Employers have the option of pursuing criminal and civil remedies to recover misappropriated amounts and deter future misconduct.

Legal proceedings can be complex and require meticulous preparation of evidence. Employers are advised to consult with a lawyer to determine the appropriate course of action based on the specifics of the case.