The Supreme Court clarified the requirements for validly terminating a probationary employee, emphasizing that employers must inform the employee of reasonable standards for regularization at the start of employment. While an employer’s failure to comply with internal performance review procedures does not invalidate a termination for just cause, it does warrant the payment of nominal damages to the employee. This decision underscores the importance of clear communication and fair processes in probationary employment.

From Probation to Permanency: Did Abbott Clear the Bar for Fair Employment Standards?

In Abbott Laboratories, Philippines v. Alcaraz, the Supreme Court grappled with the intricacies of probationary employment and the conditions under which an employee can be terminated for failing to meet regularization standards. At the heart of the matter was whether Abbott adequately informed Pearlie Ann Alcaraz, its Regulatory Affairs Manager, of the criteria for transitioning from probationary to regular employee status. This case delves into the balance between an employer’s prerogative to set performance standards and an employee’s right to be informed of those standards.

Alcaraz filed a complaint for illegal dismissal, arguing that she was not properly informed of the standards for regularization, thus entitling her to regular employee status. Abbott countered that it had communicated these standards, and that Alcaraz failed to meet them, justifying her termination. The Labor Arbiter (LA) initially dismissed Alcaraz’s complaint, but the National Labor Relations Commission (NLRC) reversed this decision, finding that Alcaraz was illegally dismissed. The Court of Appeals (CA) affirmed the NLRC’s ruling, leading Abbott to appeal to the Supreme Court.

The Supreme Court emphasized that a probationary employee, like a regular employee, is entitled to security of tenure. However, probationary employment allows termination not only for just or authorized causes but also for failing to qualify as a regular employee, provided that the employer communicated reasonable standards at the time of engagement. Article 295 of the Labor Code provides this framework, and the Implementing Rules further stipulate that failing to inform the probationary employee of these standards results in the employee being deemed a regular employee.

The Court pointed to two critical requirements for probationary employment: communicating regularization standards and doing so at the time of engagement. The key question was whether Abbott met these requirements. Abbott argued that Alcaraz was informed of the standards through various means, including the job advertisement, the employment contract, pre-employment orientation, and company manuals. The Court agreed with Abbott, after a review of the records.

“An employer is deemed to have made known the standards that would qualify a probationary employee to be a regular employee when it has exerted reasonable efforts to apprise the employee of what he is expected to do or accomplish during the trial period of probation.”

The Court highlighted several instances that demonstrated Abbott’s efforts to communicate the job expectations to Alcaraz. These included the detailed job description in the newspaper advertisement, the probationary status stipulated in the employment contract, and the orientation where her duties were discussed. In light of these instances, the Court determined that Alcaraz was well aware that her regularization depended on her ability to fulfill the requirements of her position as Regulatory Affairs Manager.

However, the Court found that Abbott failed to comply with its own internal procedure for evaluating probationary employees. Abbott’s Probationary Performance Standards and Evaluation (PPSE) procedure mandated formal reviews and discussions with the employee at the third and fifth months of employment, along with a Performance Improvement Plan if necessary. The court noted the failure to perform formal assessments or discuss her performance with her during the third and fifth months of her employment. Abbott’s failure to adhere to its own PPSE procedures constituted a breach of its contractual obligation to Alcaraz. This is because a company policy partakes of the nature of an implied contract between the employer and employee. The court referenced Parts Depot, Inc. v. Beiswenger:

Once an employer establishes an express personnel policy and the employee continues to work while the policy remains in effect, the policy is deemed an implied contract for so long as it remains in effect.

While this breach did not invalidate the termination, which was based on a valid cause, it rendered the termination procedurally infirm. According to jurisprudence, an employer who terminates an employee for a valid cause but through an invalid procedure is liable to pay nominal damages.

“Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.”

Comparing this situation to past rulings in Agabon v. NLRC and Jaka Food Processing Corporation v. Pacot, the Court determined that nominal damages of P30,000.00 were appropriate, as the dismissal was initiated by an act imputable to the employee, akin to dismissals due to just causes under the Labor Code.

Finally, the Court addressed the liability of the individual petitioners—Abbott’s officers. The Court stated that personal liability of corporate directors, trustees or officers attaches only when: (a) they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders or other persons; (b) they consent to the issuance of watered down stocks or when, having knowledge of such issuance, do not forthwith file with the corporate secretary their written objection; (c) they agree to hold themselves personally and solidarily liable with the corporation; or (d) they are made by specific provision of law personally answerable for their corporate action.

Alcaraz alleged bad faith on the part of these officers, but the Court found no evidence to support this claim. The Court emphasized that bad faith cannot be presumed and that the burden of proving it lies with the one alleging it.

In this case, the Court determined that the elements of forum shopping did not exist. The Court also clarified the difference between a violation of the certification requirement and forum shopping:

The distinction between the prohibition against forum shopping and the certification requirement should by now be too elementary to be misunderstood. To reiterate, compliance with the certification against forum shopping is separate from and independent of the avoidance of the act of forum shopping itself.

What was the key issue in this case?	The key issue was whether Abbott Laboratories sufficiently informed Pearlie Ann Alcaraz of the reasonable standards for regularization as a probationary employee. This determination affected whether her termination was legal.
What are the requirements for valid probationary employment?	There are two requirements: (1) the employer must communicate the regularization standards to the probationary employee; and (2) the employer must make such communication at the time of the probationary employee’s engagement. Failure to comply with either requirement results in the employee being deemed a regular employee.
What happens if an employer breaches its own company policies during termination?	Even if there is due cause to terminate employment and the employer satisfies its statutory duty to serve a written notice of termination, breaching company procedure makes the termination procedurally infirm. This warrants the payment of nominal damages.
What are nominal damages, and why were they awarded in this case?	Nominal damages are a small sum awarded to vindicate a right that has been violated, even if no actual loss occurred. They were awarded here because Abbott violated its own internal procedures in evaluating Alcaraz’s performance.
Are corporate officers personally liable for illegal dismissal?	Corporate officers can be held personally liable only if they acted in bad faith or with gross negligence in directing the company’s affairs. In this case, the Court found no evidence of bad faith on the part of Abbott’s officers.
What is the difference between probationary and regular employees in terms of termination?	Both probationary and regular employees are entitled to security of tenure and cannot be terminated without just cause. However, probationary employees can also be terminated if they fail to meet reasonable standards for regularization made known to them at the time of engagement.
What is forum shopping, and did it occur in this case?	Forum shopping occurs when a litigant files multiple suits involving the same parties and issues to secure a favorable judgment. The Court held that forum shopping did not exist in this case because the two petitions covered different subject matters and causes of action.
What happens if regularization standards are not communicated?	If the employer fails to inform the probationary employee of the reasonable standards upon which regularization would be based at the time of engagement, the employee shall be deemed a regular employee. This is a critical safeguard for employees under Philippine labor law.

This ruling highlights the necessity for employers to clearly communicate regularization standards to probationary employees and to adhere to their own internal procedures when evaluating performance and effecting terminations. While valid cause for termination may exist, failure to follow proper procedure can result in the payment of nominal damages, underscoring the importance of procedural fairness in employment matters.

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: Abbott Laboratories, Philippines v. Pearlie Ann F. Alcaraz, G.R. No. 192571, July 23, 2013