The Supreme Court ruled that an employee initially hired with a clause for performance confirmation is considered a regular employee from the start, not a probationary one, if the company’s intention was to grant permanent status. This decision clarifies the rights of employees whose employment contracts contain seemingly contradictory terms, emphasizing the importance of the employer’s intent and actions over the literal wording of the contract. The ruling reinforces the protection afforded to labor under Philippine law, especially when ambiguities arise in employment agreements, and ensures that employees are not unjustly deprived of their security of tenure.

From Co-Terminus to Regular: Can a Performance Appraisal Undermine Employment Security?

Amelyn Buenviaje was initially hired by Philippine National Oil Company-Energy Development Corporation (PNOC-EDC) as an Assistant to the Chairman, a position co-terminous with her father’s tenure. Later, she assumed the role of Marketing Division Manager, and was subsequently appointed as Senior Manager for Marketing Division. Her appointment letter stated her status would be changed to regular, retroactive to July 1, 2001, but also stipulated that her appointment was “subject to confirmation by your immediate superior based on your performance during the next six months.” After receiving an unsatisfactory performance appraisal, PNOC-EDC terminated her employment, arguing she failed to qualify for regular status. Buenviaje filed a complaint for illegal dismissal, leading to a legal battle that questioned whether she was a regular employee with security of tenure, and whether her dismissal was lawful.

The Labor Arbiter initially ruled in favor of Buenviaje, declaring her a regular employee and finding her dismissal illegal. The National Labor Relations Commission (NLRC) affirmed her regular status but concluded she was not illegally dismissed because her appointment was subject to confirmation based on performance. On appeal, the Court of Appeals (CA) partially modified the NLRC’s decision, agreeing that Buenviaje was a regular employee entitled to security of tenure and thus illegally dismissed, entitling her to separation pay and backwages. PNOC-EDC argued that the clause in Buenviaje’s appointment letter regarding performance confirmation meant she was a probationary employee. However, the Supreme Court disagreed, emphasizing that the ambiguity should be resolved in favor of labor, as mandated by the Labor Code.

The Supreme Court’s decision hinged on several key points. Firstly, the Court underscored the importance of interpreting ambiguities in employment contracts in favor of the employee. Citing De Castro v. Liberty Broadcasting Network, Inc., the Court reiterated that doubts arising from the evidence or interpretation of agreements should be resolved to protect the laborer’s rights. Secondly, the Court examined PNOC-EDC’s intent, finding that the company had, in effect, hired Buenviaje as a permanent employee from the outset. This was evidenced by the company’s instruction to the HRMD to amend her status to regular, the retroactive effect of her regular status, and the use of performance appraisal forms intended for permanent managerial employees.

The Court contrasted Buenviaje’s situation with that of a probationary employee. A probationary employee, as defined by the Court, is one who is on trial by an employer to determine their qualification for permanent employment. For probationary employment, the employer must inform the employee of the reasonable standards for regularization at the time of engagement. In Abbott Laboratories, Philippines v. Alcaraz, the Court highlighted that Alcaraz was informed of these standards through various means, including publication of the job description, explicit statements in the offer sheet and employment contract regarding probationary status, and pre-employment orientation and training.

In Buenviaje’s case, the Court found that the job description attached to her appointment letter merely outlined her duties and responsibilities but failed to provide specific, measurable standards for performance evaluation. The job description was distinct from the appraisal form, which contained specific performance standards. Since PNOC-EDC failed to inform Buenviaje of these standards at the time of her engagement, it could not validly claim that she was a probationary employee. The Court emphasized,

“The receipt of job description and the company’s code of conduct in that case was just one of the attendant circumstances which we found equivalent to being actually informed of the performance standards upon which a probationary employee should be evaluated.”

The Court determined that Buenviaje was illegally dismissed due to PNOC-EDC’s failure to comply with substantive and procedural requirements for valid dismissal. The Court cited the requirements for terminating a permanent employee, which include a just or authorized cause, two written notices, and an opportunity to be heard. PNOC-EDC did not meet these requirements, as it operated under the incorrect assumption that Buenviaje was a probationary employee. Moreover, even if Buenviaje were considered a probationary employee, her dismissal would still be illegal due to the failure to inform her of the reasonable standards for regularization at the time of her engagement.

The Supreme Court analyzed whether PNOC-EDC had just cause for dismissing Buenviaje. Under Article 297 of the Labor Code, an unsatisfactory rating can be a just cause for dismissal only if it amounts to gross and habitual neglect of duties or gross inefficiency. The Court found that Buenviaje’s performance, though found to be poor, did not meet this threshold. The Court noted the inconsistent results of her performance appraisals within a short span of time, indicating that her shortcomings did not amount to the required level of negligence or inefficiency. Even if her performance were sufficient ground for dismissal, PNOC-EDC failed to provide the necessary notices, violating her right to due process.

The Court affirmed the award of separation pay and attorney’s fees to Buenviaje. Since reinstatement was no longer feasible due to strained relations, separation pay with full backwages was deemed appropriate. Attorney’s fees were also granted, as Buenviaje was forced to litigate to protect her rights. Additionally, the Court addressed the issue of moral and exemplary damages, noting that such damages require proof that the dismissal was attended by bad faith or fraud, or was oppressive to labor. The Court found that while there was no malice or bad faith in the second evaluation, there was apparent bad faith in treating Buenviaje as a probationary employee despite the intention of granting her permanent status. The Court reduced the amounts of moral and exemplary damages awarded by the Labor Arbiter, finding them excessive in the absence of sufficient evidence of the extent of Buenviaje’s moral suffering. Citing Magsaysay Maritime Corporation v. Chin, Jr., the Court set the moral damages at P30,000 and exemplary damages at P25,000.

Lastly, the Court ruled that the individual respondents, Aquino and Guerzon, should not be held solidarily liable. To hold a director or officer personally liable for corporate obligations, it must be alleged and proven that they assented to patently unlawful acts of the corporation or were guilty of gross negligence or bad faith. In this case, the Court found insufficient evidence that Aquino and Guerzon were personally motivated by ill-will in dismissing Buenviaje. The decision underscores the principle that corporate agents are not personally liable for corporate obligations unless they acted with malice or bad faith.

FAQs

What was the key issue in this case?	The key issue was whether Amelyn Buenviaje was a regular employee of PNOC-EDC and whether her termination was legal, considering the terms of her employment contract and performance appraisals. The Supreme Court clarified the criteria for determining regular employment status and the conditions under which an employee can be legally dismissed.
How did the Supreme Court define a probationary employee?	The Supreme Court defined a probationary employee as someone who is on trial by an employer to determine their qualification for permanent employment. It emphasized that the employer must inform the employee of the reasonable standards for regularization at the time of engagement.
What happens when there’s ambiguity in an employment contract?	When there’s ambiguity in an employment contract, the Supreme Court ruled that it should be resolved in favor of the employee. This is in line with the policy under the Labor Code to afford protection to labor and to construe doubts in favor of labor.
What are the requirements for validly dismissing a permanent employee?	For a permanent employee to be validly dismissed, there must be a just or authorized cause, the employer must furnish the employee with two written notices, and the employee must be given an opportunity to be heard. These requirements ensure due process is observed.
Can an unsatisfactory performance rating be grounds for dismissal?	An unsatisfactory performance rating can be grounds for dismissal only if it amounts to gross and habitual neglect of duties or gross inefficiency. A single or isolated act of negligence is not sufficient to justify dismissal.
Why was Buenviaje awarded separation pay?	Buenviaje was awarded separation pay because the Supreme Court deemed reinstatement no longer feasible due to strained relations between her and PNOC-EDC. Separation pay with full backwages was considered a fair resolution in lieu of reinstatement.
When are moral and exemplary damages awarded in illegal dismissal cases?	Moral and exemplary damages are awarded when the dismissal is attended by bad faith or fraud, or is oppressive to labor. Bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.
Under what conditions can corporate officers be held personally liable for illegal dismissal?	Corporate officers can be held personally liable if it is alleged and proven that they assented to patently unlawful acts of the corporation or were guilty of gross negligence or bad faith. There must be clear and convincing evidence of their direct involvement and malicious intent.

This case serves as a critical reminder to employers about the importance of clearly defining employment terms and communicating performance standards to employees. It also highlights the judiciary’s commitment to protecting labor rights and ensuring fair treatment in the workplace.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Philippine National Oil Company-Energy Development Corporation vs. Amelyn A. Buenviaje, G.R. Nos. 183200-01, June 29, 2016