Probationary Employees and Due Process in termination

What is a probationary employee?

A probationary employee is provided for in Article 281 of the Labor Code of the Philippines:

Art. 281. Probationary employment. Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.

The Supreme Court has elaborated on what it means to be a probationary employee:

A probationary employee, as understood under Article 282 (now Article 281) of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. A probationary appointment is made to afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient employee. The word probationary, as used to describe the period of employment, implies the purpose of the term or period but not its length.

Being in the nature of a trial period the essence of a probationary period of employment fundamentally lies in the purpose or objective sought to be attained by both the employer and the employee during said period. The length of time is immaterial in determining the correlative rights of both in dealing with each other during said period. While the employer, as stated earlier, observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other, seeks to prove to the employer, that he has the qualifications to meet the reasonable standards for permanent employment.

It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied employment. In that sense, it is within the exercise of the right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently.^[1]

What is the correct legal procedure for terminating a probationary employee?

The scenario is of an employee who has not yet been regularized. If, before the end of the probationary period, the employer determines that the employee is not qualified for permanent employment, how is his employment terminated in accordance with legal due process?

The process actually begins early in the employment of the probationary employee. It begins with informing the new hire of the standards by which he is to be judged during the probationary period. The Supreme Court discusses this in Mercado vs. AMA Computer College-Paranaque City, Inc., G.R. No. 183572, April 13, 2010, 618 SCRA 218:

Labor, for its part, is given the protection during the probationary period of knowing the company standards the new hires have to meet during the probationary period, and to be judged on the basis of these standards, aside from the usual standards applicable to employees after they achieve permanent status. Under the terms of the Labor Code, these standards should be made known to the employees on probationary status at the start of their probationary period, or at the time during which the probationary standards are to be applied. Of critical importance in invoking a failure to meet the probationary standards, is that the employer should show, as a matter of due process, how these standards have been applied. This is effectively the second notice in a dismissal situation that the law requires as a due process guarantee supporting the security of tenure provision, and is in furtherance of the basic rule in employee dismissal that the employer carries the burden of justifying a dismissal. These rules ensure compliance with the limited security of tenure guarantee the law extends to probationary employees.

Whereas a regular employee is typically entitled to the two-notice requirement^[2] for his employment to be terminated due to just cause, the process is different in the case of a probationary employee dismissed because of his failure to qualify as a regular employee in accordance with reasonable standards made known to him at the time of engagement.

In the case of Philippine Daily Inquirer vs. Leon M. Magtibay, Jr., G.R. No. 164532, July 24, 2007, the Supreme Court ruled that such a dismissal

… does not require notice and hearing. Due process of law for this second ground consists of making the reasonable standards expected of the employee during his probationary period known to him at the time of his probationary employment. By the very nature of a probationary employment, the employee knows from the very start that he will be under close observation and his performance of his assigned duties and functions would be under continuous scrutiny by his superiors. It is in apprising him of the standards against which his performance shall be continuously assessed where due process regarding the second ground lies, and not in notice and hearing as in the case of the first ground.

Due process for a probationary employee consists in having informed him of the standards against which his performance will be continuously assessed during the probationary period.

These work standards should be understood at the time of his engagement and then, if he fails to meet these standards, a written notice is served to the him by the employer within a reasonable time from the effective date of termination.^[3]

In all cases of probationary employment, the employer shall make known to the employee the standards under which he will qualify as a regular employee at the time of his engagement. Where no standards are made known to the employee at that time, he shall be deemed a regular employee.^[4]

This was upheld in Abott Laboratories vs. Alcaraz, G.R. No. 192571, July 23, 2013:

A different procedure is applied when terminating a probationary employee; the usual two-notice rule does not govern.  Section 2, Rule I, Book VI of the Implementing Rules of the Labor Code states that “if the termination is brought about by the x x x failure of an employee to meet the standards of the employer in case of probationary employment, it shall be sufficient that a written notice is served the employee, within a reasonable time from the effective date of termination.”

While affirming that the two-notice rule does not apply to probationary employees who are terminated for failure to meet the employer’s standards, Abott Laboratories also cautions employers to comply with their own internal procedure in evaluating the performance of a probationary employee. These policies are often found in the company handbooks and in office memoranda circulated to the employees. The reason is that company personnel policies create a contractual obligation on the part of both the employee and the employer to abide by the same.

Note that the reason for terminating a probationary employee seems to make a difference to the Court. The two-notice rule does not apply to probationary employees terminated because of failure to meet the reasonable standards made known to them at the time of engagement. However, it still appears to be a requirement for probationary employees terminated because of just cause.^[5] It is thus important that the grounds for termination are made clear during the termination, and that documentation be meticulous throughout the process.

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[1]       International Catholic Migration Commission v. NLRC, G.R. No. 72222, January 30, 1989, 169 SCRA 606.

[2]       The first written notice should be served on the employee and contain the specific grounds for termination against him, along with a directive that the employee is given at least 5 days to submit his written explanation for why he should not be terminated. The employer should also set a conference or hearing in which the employee will be given the opportunity to explain and present evidence on his behalf.

If termination is found justified after these, the employer should serve a second written notice on employee which shows that all the circumstances involving the charge against have been considered and that the grounds have been established to justify the termination of employment.

[3]    Philippine Daily Inquirer vs. Leon M. Magtibay, Jr., G.R. No. 164532, July 24, 2007

[4]    Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code cited in Aliling vs. Feliciano, G.R. No. 185829, April 25, 2012

[5]       Art. 282. Termination by employer. An employer may terminate an employment for any of the following [just] causes:

1. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
2. Gross and habitual neglect by the employee of his duties;
3. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
4. Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
5. Other causes analogous to the foregoing.

cf Philippine Daily Inquirer vs. Magtibay, ibid, for termination of a probationary employee for just cause.