The Supreme Court held that probationary employees in the Philippines are entitled to security of tenure and full backwages if illegally dismissed. This ruling affirms that the Labor Code protects all workers, regardless of their employment status, against unjust termination. Moreover, the computation of backwages for illegally dismissed probationary employees should be reckoned from the time their compensation was withheld up to the finality of the court’s decision, underscoring the importance of due process and fair labor practices.

Can a Probationary Manager Claim Full Backwages After Unjust Dismissal?

In Macario R. Lopez v. NLRC, the petitioner, Macario Lopez, contested the decision of the National Labor Relations Commission (NLRC) regarding his illegal dismissal from La Union Transport Services Cooperative (LUTRASCO). Lopez, who was appointed General Manager on a probationary basis, was terminated after only four months due to alleged loss of trust and confidence and unsatisfactory performance. He filed a complaint for illegal dismissal, seeking reinstatement, backwages, damages, and attorney’s fees. This case highlights the extent of protection afforded to probationary employees under Philippine labor laws and the remedies available to them when unjustly terminated.

The Labor Arbiter initially ruled in favor of Lopez, finding his termination illegal and ordering his reinstatement with full backwages, wage differentials, moral damages, and attorney’s fees. However, the NLRC modified this decision, denying reinstatement, limiting backwages to three months, and deleting the awards for moral damages and attorney’s fees. The NLRC reasoned that as a probationary employee, Lopez was only entitled to limited backwages and separation pay. This prompted Lopez to file a petition for certiorari, arguing that he was entitled to three years of backwages and that the NLRC erred in deleting the awards for moral damages and attorney’s fees.

The primary issue before the Supreme Court was determining the appropriate amount of backwages and damages to be awarded to Lopez, considering his probationary status at the time of dismissal. The court had to reconcile the rights of probationary employees with the employer’s prerogative to terminate employment based on just cause or failure to meet reasonable standards. This involved interpreting relevant provisions of the Labor Code and the Constitution to ensure the protection of workers’ rights while acknowledging the legitimate business interests of employers. The resolution of this issue has significant implications for both employers and employees, clarifying the scope of security of tenure for probationary employees and the remedies available upon illegal dismissal.

The Supreme Court, siding with the Solicitor General’s argument, clarified that probationary employees are indeed entitled to security of tenure. The Court emphasized that Article XIII, Section 3 of the Constitution guarantees the rights of all workers to security of tenure, without distinguishing between regular and probationary employees. Furthermore, Article 281 of the Labor Code specifies the conditions under which a probationary employee’s services may be terminated:

“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.”

Building on this, the Court cited the case of Manila Hotel Corp. v. NLRC, et al., which laid down limitations on an employer’s power to terminate a probationary employment contract. These limitations include adhering to the contract’s specific requirements, ensuring the employer’s dissatisfaction is genuine and in good faith, and avoiding unlawful discrimination in the dismissal. Thus, the Court confirmed that probationary employees are on trial for a designated period, during which the employer assesses their qualifications for permanent employment.

Moreover, the Court referenced Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, which states that an employee unjustly dismissed from work is entitled to reinstatement without loss of seniority rights and full backwages from the time their compensation was withheld up to actual reinstatement. Since Lopez was illegally dismissed after the effectivity of this amendatory law, the Court sustained the NLRC’s finding that his reinstatement was not conducive to industrial harmony, given his managerial position. Consequently, the period for computing backwages was reckoned from April 1990, when his compensation was withheld, up to the finality of the Court’s decision. In lieu of reinstatement, the one-month separation pay awarded by the NLRC was deemed proper.

Regarding the total amount of backwages payable, the Supreme Court cited the doctrine established in Pines City Educational Center, et al. v. NLRC, et al. This doctrine stipulates that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement should be deducted from the backwages. The Court reasoned that employees should not be permitted to enrich themselves at the expense of their employer, and the law abhors double compensation. Since Lopez was employed as an editor-in-chief and columnist immediately after his dismissal, his earnings from that employment were to be deducted from his backwages.

Addressing Lopez’s claim for moral damages and attorney’s fees, the Court concurred with the NLRC’s rejection of these claims. Moral damages are recoverable only when the dismissal was attended by bad faith, fraud, or constituted an oppressive act or was done in a manner contrary to morals, good customs, or public policy. In this case, the records did not show that Lopez’s dismissal was done in bad faith or oppressively, nor was there any evidence of unnecessary embarrassment or humiliation. Additionally, Lopez was not entitled to attorney’s fees since his case did not fall under any of the exceptions stated in Art. 2208 of the Civil Code.

FAQs

What was the key issue in this case?	The key issue was determining the extent of backwages and damages a probationary employee is entitled to upon illegal dismissal. The court had to reconcile the rights of probationary employees with the employer’s prerogative to terminate employment.
Are probationary employees entitled to security of tenure?	Yes, probationary employees are entitled to security of tenure. The Constitution guarantees the rights of all workers, regardless of their employment status, to security of tenure, as long as the termination is not for just cause or failure to meet reasonable standards.
How are backwages calculated for illegally dismissed probationary employees?	Backwages are calculated from the time the compensation was withheld (the date of illegal dismissal) up to the finality of the court’s decision. Any income earned by the employee during the period of dismissal should be deducted from the total backwages.
Can an illegally dismissed employee be reinstated?	Reinstatement is a remedy for illegal dismissal. However, if reinstatement is not feasible, such as in cases where it would be detrimental to industrial harmony, separation pay may be awarded instead.
What is the basis for awarding moral damages in illegal dismissal cases?	Moral damages are awarded only if the dismissal was attended by bad faith, fraud, or constituted an oppressive act or was done in a manner contrary to morals, good customs, or public policy. The records must show evidence of such circumstances.
When are attorney’s fees awarded in labor cases?	Attorney’s fees are awarded only in specific circumstances outlined in Art. 2208 of the Civil Code. These include cases where the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect their interest.
What is the significance of Article 279 of the Labor Code?	Article 279 of the Labor Code, as amended, provides that an employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and full backwages. It underscores the importance of protecting workers’ rights and providing remedies for illegal dismissal.
What should employers do to avoid illegal dismissal claims?	Employers should ensure that terminations are based on just cause or failure to meet reasonable standards, with due process observed. They should also adhere to the specific requirements of employment contracts and avoid any form of unlawful discrimination.

The Supreme Court’s decision in Macario R. Lopez v. NLRC reaffirms the constitutional right to security of tenure for all employees, including those on probationary status. This case serves as a crucial reminder to employers to adhere to due process and fair labor practices when terminating employment, while also empowering employees with the knowledge of their rights and the remedies available to them under the law.

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: Macario R. Lopez vs. Hon. NLRC, G.R. No. 102874, January 22, 1996