In a significant ruling, the Supreme Court upheld the right of employers to dismiss employees for failing to meet reasonable performance standards, specifically overturning the Court of Appeals’ decision in favor of an employee who consistently failed to meet the Average Handle Time (AHT) metric at Teleperformance. The Court emphasized that consistent failure to meet established, reasonable performance goals constitutes gross inefficiency, which is a valid ground for termination. This decision reinforces an employer’s prerogative to set and enforce performance standards necessary for business operations, ensuring they can maintain efficiency and service quality. This case highlights the balance between protecting employee rights and recognizing an employer’s need to manage performance effectively.

Can Employers Demand Efficiency? When Performance Metrics Justify Dismissal

Telephilippines, Inc. (TP), a business process outsourcing company, required its customer service representatives (CSRs) to maintain an Average Handle Time (AHT) of 7.0 minutes or below while handling calls for its Priceline account. Ferrando H. Jacolbe, a CSR at TP, consistently failed to meet this metric, despite being placed under Performance Improvement Plans (PIP) designed to help him improve. After repeated failures, TP terminated Jacolbe’s employment, citing his inability to meet the required performance standards. Jacolbe filed a complaint for illegal dismissal, arguing that his performance issues did not warrant such a severe penalty, especially since he had once received a Top Agent award. The Labor Arbiter (LA) initially ruled in favor of Jacolbe, but the National Labor Relations Commission (NLRC) reversed this decision, finding the dismissal valid. The Court of Appeals (CA), however, sided with Jacolbe, leading TP to appeal to the Supreme Court.

At the heart of this case lies the question of whether an employer can justly terminate an employee for failing to meet performance metrics, even after providing opportunities for improvement. The Supreme Court, in resolving this issue, underscored the importance of substantive and procedural due process in dismissal cases. Substantive due process requires that a dismissal be based on just or authorized causes, as defined in the Labor Code. Procedural due process, on the other hand, necessitates that the employer follow proper notice and hearing procedures before terminating employment. The burden of proving the existence of these valid causes rests with the employer, who must provide substantial evidence to support their claims.

The Court clarified that gross inefficiency is analogous to gross and habitual neglect of duty, which constitutes a just cause for termination under Article 297 of the Labor Code. Both involve specific acts of omission by the employee that result in damage to the employer’s business. Drawing from established jurisprudence, the Court noted that inefficiency is understood as a failure to attain work goals or quotas, either by not completing them within a reasonable timeframe or by producing unsatisfactory results. It emphasized that employers have the right to set reasonable work standards and implement disciplinary measures to ensure compliance, provided these standards are exercised in good faith and for the advancement of the employer’s interests.

In Jacolbe’s case, the records showed that his AHT scores consistently exceeded the 7-minute target for 62 consecutive weeks. Despite being enrolled in the SMART Action and Performance Improvement Plans, his performance did not improve. The Supreme Court thus found that Jacolbe’s repeated failure to meet the prescribed AHT mark fell under the definition of gross inefficiency, justifying his dismissal. The Court also addressed Jacolbe’s argument that his Top Agent award contradicted the claim of inefficiency. It clarified that this award, based on a single customer’s feedback on one call, did not negate his overall poor performance over an extended period. The AHT metric, the Court noted, was a key performance indicator used to assess the efficiency of CSRs in handling customer concerns, and it applied to all employees in the Priceline account.

Regarding procedural due process, the Court found that TP had complied with the requirements of providing two written notices and a hearing. Jacolbe received a Notice to Explain, specifying the grounds for his possible dismissal, and was given the opportunity to explain his side. He submitted letters explaining his position, and a disciplinary conference was held where he could further present his case. Subsequently, TP issued a written Notice of Termination after verifying the violation of the company’s Code of Conduct. The Supreme Court concluded that ample evidence supported the NLRC’s findings that Jacolbe’s dismissal was valid, and the CA had erred in substituting its judgment for that of the NLRC. This ruling reinforced the employer’s right to manage its operations effectively and to dismiss employees who fail to meet reasonable performance standards, despite being given opportunities to improve.

FAQs

What was the key issue in this case?	The key issue was whether Teleperformance had valid grounds to dismiss Ferrando Jacolbe for consistently failing to meet the company’s Average Handle Time (AHT) performance metric. The Supreme Court had to determine if this failure constituted just cause for termination.
What is Average Handle Time (AHT)?	AHT refers to the average time a customer service representative spends on the phone with a customer, calculated as (Average Talk Time + Hold Time) / Number of Calls. In this case, Teleperformance required its CSRs to maintain an AHT of 7 minutes or below.
What is a Performance Improvement Plan (PIP)?	A PIP is a program designed to help employees improve their performance by setting specific goals and providing support. At Teleperformance, employees who consistently failed to meet targets were enrolled in PIPs to assist them in enhancing their performance metrics.
What does substantive due process mean in termination cases?	Substantive due process requires that an employee’s dismissal be based on just or authorized causes as defined in the Labor Code. This ensures that the termination is fair and based on legitimate reasons, such as gross inefficiency or neglect of duty.
What does procedural due process entail in termination cases?	Procedural due process requires the employer to follow specific steps before terminating an employee, including providing written notices specifying the grounds for termination, giving the employee an opportunity to explain their side, and conducting a hearing or conference. This ensures fairness and allows the employee to respond to the charges against them.
What is considered gross inefficiency as a ground for dismissal?	Gross inefficiency is considered a failure to attain work goals or quotas, either by not completing them within a reasonable timeframe or by producing unsatisfactory results. It is analogous to gross and habitual neglect of duty, which is a just cause for termination.
Can an employer set performance standards for its employees?	Yes, an employer is entitled to prescribe reasonable work standards, rules, and regulations necessary for the conduct of its business. These standards must be exercised in good faith and for the advancement of the employer’s interests.
How did the Supreme Court define grave abuse of discretion in this context?	The Supreme Court defined grave abuse of discretion as the capricious and whimsical exercise of judgment, done in a despotic manner by reason of passion or personal hostility. In labor cases, it may be ascribed to the NLRC when its findings are not supported by substantial evidence.

This Supreme Court ruling serves as a crucial reminder of the balance between protecting employees and enabling employers to maintain operational standards. By clarifying the conditions under which an employee can be justly dismissed for inefficiency, the Court has provided a framework for businesses to manage performance effectively. For employers, this means ensuring that performance metrics are reasonable, consistently applied, and that employees are given adequate opportunities to improve.

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: TELEPHILIPPINES, INC. v. FERRANDO H. JACOLBE, G.R. No. 233999, February 18, 2019