Probationary Employment Contract

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Legal basis

The following are the legal bases:

  • P.D. 442, otherwise known as the Labor Code;
  • Omnibus Rules Implementing the Labor Code; and
  • Supreme Court Decisions.

Concept

A probationary employment contract is an employment arrangement between an employer and a probationary employee.

“There is probationary employment when the employee upon his engagement is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment based on reasonable standards made known to him at the time of engagement.” (Robinsons Galleria/Robinsons Supermarket Corporation v. Ranchez, G.R. No. 177937)

The probationary or trial period shall not exceed 180 calendar days. (Article 296, Labor Code)

These or the exceptions to when the probationary period may exceed the 180 calendar days:

1. Apprenticeship agreement; and

2. Teaching personnel in the private sector.

Requirements

The following are the 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.

“In other words, the employer is made to comply with two (2) requirements when dealing with a probationary employee: first, the employer must communicate the regularization standards to the probationary employee; and second, the employer must make such communication at the time of the probationary employee’s engagement. If the employer fails to comply with either, the employee is deemed as a regular and not a probationary employee.” (Abbott Laboratories, Philippines v. Alacaraz, G.R. No. 192571, 23 July 2013)

Test for probationary employment

The principal test is the existence of a probationary period.

Probationary period

“There is probationary employment where the employee upon his engagement is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment based on reasonable standards made known to him at the time of engagement. The probationary employment is intended to afford the employer an opportunity to observe the fitness of a probationary employee while at work, and to ascertain whether he will become an efficient and productive employee. While the employer observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other hand, seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent employment. Thus, the word probationary, as used to describe the period of employment, implies the purpose of the term or period, not its length.” (Tamson’s Enterprises, Inc. v. Court of Appeals, Sy, G.R. No. 192881, 16 November 2011)

“More importantly, satisfactory performance is and should be one of the basic standards for regularization. Naturally, before an employer hires an employee, the former can require the employee, upon his engagement, to undergo a trial period during which the employer determines his fitness to qualify for regular employment based on reasonable standards made known to him at the time of engagement. This is the concept of probationary employment which is intended to afford the employer an opportunity to observe the fitness of a probationary employee while at work, and to ascertain whether he will become an efficient and productive employee. While the employer observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other hand, seeks to prove to the satisfaction of the employer that he has the qualifications to meet the reasonable standards for permanent employment.” (Carvajal v. Luzon Development Bank, G.R. No. 186169, 01 August 2012)

Probationary period, different for teaching personnel in the private sector

“A reality we have to face in the consideration of employment on probationary status of teaching personnel is that they are not governed purely by the Labor Code. The Labor Code is supplemented with respect to the period of probation by special rules found in the Manual of Regulations for Private Schools.” (Mercado v. AMA Computer College-Paranaque City, Inc., G.R. No. 183572, 13 April 13, 2010)

“Subject in all instances to compliance with the Department and school requirements, the probationary period for academic personnel shall not be more than three (3) consecutive years of satisfactory service for those in the elementary and secondary levels, six (6) consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses are offered on a trimester basis.” (Section 92, Manual of Regulations for Private Schools)

“The use of employment for fixed periods during the teachers’ probationary period is likewise an accepted practice in the teaching profession.” (Mercado v. AMA Computer College-Paranaque City, Inc., G.R. No. 183572, 13 April 13, 2010)

“The common practice is for the employer and the teacher to enter into a contract, effective for one school year. At the end of the school year, the employer has the option not to renew the contract, particularly considering the teacher’s performance. If the contract is not renewed, the employment relationship terminates. If the contract is renewed, usually for another school year, the probationary employment continues. Again, at the end of that period, the parties may opt to renew or not to renew the contract. If renewed, this second renewal of the contract for another school year would then be the last year – since it would be the third school year – of probationary employment. At the end of this third year, the employer may now decide whether to extend a permanent appointment to the employee, primarily on the basis of the employee having met the reasonable standards of competence and efficiency set by the employer. For the entire duration of this three-year period, the teacher remains under probation. Upon the expiration of his contract of employment, being simply on probation, he cannot automatically claim security of tenure and compel the employer to renew his employment contract. It is when the yearly contract is renewed for the third time that Section 93 of the Manual becomes operative, and the teacher then is entitled to regular or permanent employment status… It is important that the contract of probationary employment specify the period or term of its effectivity. The failure to stipulate its precise duration could lead to the inference that the contract is binding for the full three-year probationary period.” (Magis Young Achievers’ Learning Center v. Adelaida P. Manalo, G.R. No. 178835, 13 February 2009)

“We have long settled the validity of a fixed-term contract in the case Brent School, Inc. v. Zamora that AMACC cited. Significantly, Brent happened in a school setting. Care should be taken, however, in reading Brent in the context of this case as Brent did not involve any probationary employment issue; it dealt purely and simply with the validity of a fixed-term employment under the terms of the Labor Code, then newly issued and which does not expressly contain a provision on fixed-term employment.” (Mercado v. AMA Computer College-Paranaque City, Inc., G.R. No. 183572, 13 April 13, 2010)

Probationary period, work after results in regular employment

An employee who is allowed to work after a probationary period shall be considered a regular employee. (Article 296, Labor Code)

“It is an elementary rule in the law on labor relations that a probationary employee who is engaged to work beyond the probationary period of six months, as provided under Art. 281 of the Labor Code, as amended, or for any length of time set forth by the employer, shall be considered a regular employee.” (Phil. Federation of Credit Cooperatives, Inc. (PCFI) v. NLRC, April, G.R. No. 121071, 11 December 1998)

Probationary period, extensions

The Labor Code expressly provides in black and white that the probationary period should not exceed 6 months, which have been interpreted as 180 calendar days. The said law further states that a probationary employee who is allowed to work beyond the probationary period becomes a regular employee.

Notwithstanding these provisions, in one case involving an extension of a 6-month probation to an additional 3 months, the Supreme Court decided that the same was valid, thus:

“By voluntarily agreeing to an extension of the probationary period, [the employee] in effect waived any benefit attaching to the completion of said period if he still failed to make the grade during the period of extension. The Court finds nothing in the law which by any fair interpretation prohibits such a waiver. And no public policy protecting the employee and the security of his tenure is served by prescribing voluntary agreements which, by reasonably extending the period of probation, actually improve and further a probationary employee’s prospects of demonstrating his fitness for regular employment.” (Mariwasa Manufacturing, Inc. v. Leogardo, Jr., Dequila, G.R. No. 74246, 26 January 1989)

(NOTICE: Take the Mariwasa Case with a grain of salt in view of the Labor Code provisions discussed and a litany of Supreme Court Decisions affirming these rules.)

Standards/criteria

“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. (Section 6 [d] of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code)

In one case, the employer was held liable for illegal dismissal after letting go of an employee though to be a probationary employee when he was actually a regular employee due to not being informed of the standards/criteria for regular employment, applying the provision in the Omnibus Rules Implementing the Labor Code. “To repeat, the labor arbiter, NLRC and the CA are agreed, on the basis of documentary evidence adduced, that respondent WWWEC did not inform

[the employee]

of the reasonable standards by which his probation would be measured against at the time of his engagement. The Court is loathed to interfere with this factual determination.” (Aliling v. Felicano, Wide World Express Corporation, G.R. No. 185829, 25 April 2012)

“[The Company alleged] that [the Company President’s] email dated July 16, 2004 shows that the standards for his regularization were made known to [the employee] at the time of his engagement. To recall, in that email message, [the President] reminded [the employee] of the sales quota he ought to meet as a condition for his continued employment, i.e., that the GX trucks should already be 80% full by August 5, 2004. Contrary to [the Company’s] contention, [the President’s] email cannot support their allegation on [the employee] being informed of the standards for his continued employment, such as the sales quota, at the time of his engagement. As it were, the email message was sent to [the employee] more than a month after he signed his employment contract with WWWEC… Section 6 of the Implementing Rules of Book VI, Rule VIII-A of the Code specifically requires the employer to inform the probationary employee of such reasonable standards at the time of his engagement, not at any time later; else, the latter shall be considered a regular employee. Thus, pursuant to the explicit provision of Article 281 of the Labor Code, Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code and settled jurisprudence, [the employee] is deemed a regular employee as of June 11, 2004, the date of his employment contract.” (Aliling v. Felicano, Wide World Express Corporation, G.R. No. 185829, 25 April 2012)

“… Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code provides that if the employer fails to inform the probationary employee of the reasonable standards upon which the regularization would be based on at the time of the engagement, then the said employee shall be deemed a regular employee.” (Abbott Laboratories, Philippines v. Alacaraz, G.R. No. 192571, 23 July 2013)

“The law is clear that 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. The standards under which she would qualify as a regular employee not having been communicated to her at the start of her probationary period, Sy qualified as a regular employee.” (Tamson’s Enterprises, Inc. v. Court of Appeals, Sy, G.R. No. 192881, 16 November 2011)

Standards/criteria, if none – a regular employee from day one

“In this case, petitioner Hacienda fails to specify the reasonable standards by which respondent’s alleged poor performance was evaluated, much less to prove that such standards were made known to him at the start of his employment. Thus, he is deemed to have been hired from day one as a regular employee. Due process dictates that an employee be apprised beforehand of the condition of his employment and of the terms of advancement therein.” (Hacienda Primera Development Corporation v. Villegas, G.R. No. 186243, 11 April 2011)

Standards/criteria, proof of their application required

“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 xxx 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, too, 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.” (Mercado v. AMA Computer College-Paranaque City, Inc., G.R. No. 183572, 13 April 13, 2010)

“In this case, the justification given by the petitioners for Sy’s dismissal was her alleged failure to qualify by the company’s standard. Other than the general allegation that said standards were made known to her at the time of her employment, however, no evidence, documentary or otherwise, was presented to substantiate the same. Neither was there any performance evaluation presented to prove that indeed hers was unsatisfactory.” (Tamson’s Enterprises, Inc. v. Court of Appeals, Sy, G.R. No. 192881, 16 November 2011)

“One of the conditions before an employer can terminate a probationary employee is dissatisfaction on the part of the employer which must be real and in good faith, not feigned so as to circumvent the contract or the law. In the case at bar, absent any proof showing that the work performance of petitioner was unsatisfactory, We cannot conclude that petitioner failed to meet the standards of performance set by private respondents. This absence of proof, in fact, leads Us to infer that their dissatisfaction with her work performance was contrived so as not to regularize her employment.” (Tamson’s Enterprises, Inc. v. Court of Appeals, Sy, G.R. No. 192881, 16 November 2011)

Standards/criteria, substantial compliance

“Keeping with these rules, 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. This goes without saying that the employee is sufficiently made aware of his probationary status as well as the length of time of the probation.” (Abbott Laboratories, Philippines v. Alacaraz, G.R. No. 192571, 23 July 2013)

Standards/criteria, exceptions

The exception to the foregoing is when the job is self-descriptive in nature, for instance, in the case of maids, cooks, drivers, or messengers. Also, in Aberdeen Court, Inc. v. Agustin, it has been held that the rule on notifying a probationary employee of the standards of regularization should not be used to exculpate an employee who acts in a manner contrary to basic knowledge and common sense in regard to which there is no need to spell out a policy or standard to be met. In the same light, an employee’s failure to perform the duties and responsibilities which have been clearly made known to him constitutes a justifiable basis for a probationary employee’s non-regularization.” (Abbott Laboratories, Philippines v. Alacaraz, G.R. No. 192571, 23 July 2013)

“A punctilious examination of the records reveals that Abbott had indeed complied with the above-stated requirements. This conclusion is largely impelled by the fact that Abbott clearly conveyed to Alcaraz her duties and responsibilities as Regulatory Affairs Manager prior to, during the time of her engagement, and the incipient stages of her employment. On this score, the Court finds it apt to detail not only the incidents which point out to the efforts made by Abbott but also those circumstances which would show that Alcaraz was well-apprised of her employer’s expectations that would, in turn, determine her regularization:

(a) On June 27, 2004, Abbott caused the publication in a major broadsheet newspaper of its need for a Regulatory Affairs Manager, indicating therein the job description for as well as the duties and responsibilities attendant to the aforesaid position; this prompted Alcaraz to submit her application to Abbott on October 4, 2004;

(b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was to be employed on a probationary status;

(c) On February 12, 2005, Alcaraz signed an employment contract which specifically stated, inter alia, that she was to be placed on probation for a period of six (6) months beginning February 15, 2005 to August 14, 2005;

(d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent her copies of Abbott’s organizational structure and her job description through e-mail;

(e) Alcaraz was made to undergo a pre-employment orientation where Almazar informed her that she had to implement Abbott’s Code of Conduct and office policies on human resources and finance and that she would be reporting directly to Walsh;

(f) Alcaraz was also required to undergo a training program as part of her orientation;

(g) Alcaraz received copies of Abbott’s Code of Conduct and Performance Modules from Misa who explained to her the procedure for evaluating the performance of probationary employees; she was further notified that Abbott had only one evaluation system for all of its employees; and

(h) Moreover, Alcaraz had previously worked for another pharmaceutical company and had admitted to have an “extensive training and background” to acquire the necessary skills for her job.63

Considering the totality of the above-stated circumstances, it cannot, therefore, be doubted that Alcaraz was well-aware that her regularization would depend on her ability and capacity to fulfill the requirements of her position as Regulatory Affairs Manager and that her failure to perform such would give Abbott a valid cause to terminate her probationary employment.

Verily, basic knowledge and common sense dictate that the adequate performance of one’s duties is, by and of itself, an inherent and implied standard for a probationary employee to be regularized; such is a regularization standard which need not be literally spelled out or mapped into technical indicators in every case. In this regard, it must be observed that the assessment of adequate duty performance is in the nature of a management prerogative which when reasonably exercised – as Abbott did in this case – should be respected. This is especially true of a managerial employee like Alcaraz who was tasked with the vital responsibility of handling the personnel and important matters of her department.” (Abbott Laboratories, Philippines v. Alacaraz, G.R. No. 192571, 23 July 2013)

Standard/criteria, for teaching personnel in the private sector

“In this case, glaringly absent from petitioners’ evidence are the reasonable standards that respondent was expected to meet that could have served as proper guidelines for purposes of evaluating his performance. Nowhere in the Teacher’s Contract44 could such standards be found. Neither was it mentioned that the same were ever conveyed to respondent. Even assuming that respondent failed to meet the standards set forth by CSR and made known to the former at the time he was engaged as a teacher on probationary status, still, the termination was flawed for failure to give the required notice to respondent.” (Colegio Del Santisimo  Rosario v. Rojo, G.R. No. 170388, 04 September 2013)

“Curiously, despite the absence of standards, Mofada mentioned the existence of alleged performance evaluations47 in respondent’s case. We are, however, in a quandary as to what could have been the basis of such evaluation, as no evidence were adduced to show the reasonable standards with which respondent’s performance was to be assessed or that he was informed thereof. Notably too, none of the supposed performance evaluations were presented. These flaws violated respondent’s right to due process. As such, his dismissal is, for all intents and purposes, illegal.

As a matter of due process, teachers on probationary employment, just like all probationary employees, have the right to know whether they have met the standards against which their performance was evaluated. Should they fail, they also have the right to know the reasons therefor.

It should be pointed out that absent any showing of unsatisfactory performance on the part of respondent, it can be presumed that his performance was satisfactory, especially taking into consideration the fact that even while he was still more than a year into his probationary employment, he was already designated Prefect of Discipline. In such capacity, he was able to uncover the existence of a drug syndicate within the school and lessen the incidence of drug use therein. Yet despite respondent’s substantial contribution to the school, petitioners chose to disregard the same and instead terminated his services; while most of those who were involved in drug activities within the school were punished with a slap on the wrist as they were merely made to write letters promising that the incident will not happen again.48

Mofada would also have us believe that respondent chose to resign as he feared for his life, thus, the school’s decision not to renew his contract. However, no resignation letter was presented. Besides, this is contrary to respondent’s act of immediately filing the instant case against petitioners.” (Colegio Del Santisimo Rosario v. Rojo, G.R. No. 170388, 04 September 2013)

Probationary employees enjoy security of tenure

“A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of probationary employment, aside from just or authorized causes of termination, an additional ground is provided under Article 295 of the Labor Code, i.e., the probationary employee may also be terminated for failure to qualify as a regular employee in accordance with the reasonable standards made known by the employer to the employee at the time of the engagement. Thus, the services of an employee who has been engaged on probationary basis may be terminated for any of the following: (a) a just or (b) an authorized cause; and (c) when he fails to qualify as a regular employee in accordance with reasonable standards prescribed by the employer.” (Abbott Laboratories, Philippines v. Alacaraz, G.R. No. 192571, 23 July 2013; Carvajal v. Luzon Development Bank, G.R. No. 186169, 01 August 2012)

“It is settled that even if probationary employees do not enjoy permanent status, they are accorded the constitutional protection of security of tenure. This means they may only be terminated for just cause or when they otherwise fail to qualify as regular employees in accordance with reasonable standards made known to them by the employer at the time of their engagement.” (Alcira v. NLRC, Middleby Philippines Corporation, G.R. No. 149859, 09 June 2004)

“This constitutional protection, however, ends upon the expiration of the period provided for in their probationary contract of employment. Thereafter, the parties are free to renew the contract or not.” (Manlimos v. NLRC, Super Mahogany Plywood Corporation, G.R. No. 113337, 02 March 1995)

Termination of employment, grounds

“It is settled that even if probationary employees do not enjoy permanent status, they are accorded the constitutional protection of security of tenure. This means they may only be terminated for a just cause or when they otherwise fail to qualify as regular employees in accordance with reasonable standards made known to them by the employer at the time of their engagement.” (Tamson’s Enterprises, Inc. v. Court of Appeals, Sy, G.R. No. 192881, 16 November 2011)

Termination of employment, based on just causes

“In sum, [the employee] was validly dismissed from probationary employment before the expiration of her 6-montb probationary employment contract. If the termination is for cause, it may be done anytime during the probation; the employer docs not have to wait until the probation period is over.” (Carvajal v. Luzon Development Bank, G.R. No. 186169, 01 August 2012)

“… a probationary employee can be legally terminated either: (1) for a just cause; or (2) when the employee fails to qualify as a regular employee in accordance with the reasonable standards made known to him by the employer at the start of the employment. Nonetheless, the power of the employer to terminate an employee on probation is not without limitations. First, this power must be exercised in accordance with the specific requirements of the contract. Second, the dissatisfaction on the part of the employer must be real and in good faith, not feigned so as to circumvent the contract or the law; and third, there must be no unlawful discrimination in the dismissal. In termination cases, the burden of proving just or valid cause for dismissing an employee rests on the employer.” (Dusit Hotel Nikko v. Gatbonton, G.R. No. 161654, 05 May 5 2006)

Termination of employment, based on authorized causes

As with any other employees, a probationary employee may be separated from employment for authorized causes.

Termination of employment, failure to qualify for regular employment

“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.’” (Abbott Laboratories, Philippines v. Alacaraz, G.R. No. 192571, 23 July 2013)

Written notice required

“If the termination is brought about by the completion of a contract or phase thereof, or by failure of an employee to meet the standards of the employer in the 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.” (Section 2, Rule I, Book VI of the Implementing Rules)

“In this case, the [Company] failed to comply with the requirement of a written notice. Notably, [the employee] was merely verbally informed that her employment would be terminated on February 28, 2007, as admitted by the [Company]. Considering that the [Company] failed to observe due process in dismissing her, the dismissal had no legal sanction. It bears stressing that a worker’s employment is property in the constitutional sense.” (Tamson’s Enterprises, Inc. v. Court of Appeals, Sy, G.R. No. 192881, 16 November 2011)   

Balancing interests of employer and the employee

“The provision on employment on probationary status under the Labor Code is a primary example of the fine balancing of interests between labor and management that the Code has institutionalized pursuant to the underlying intent of the Constitution.

On the one hand, employment on probationary status affords management the chance to fully scrutinize the true worth of hired personnel before the full force of the security of tenure guarantee of the Constitution comes into play. Based on the standards set at the start of the probationary period, management is given the widest opportunity during the probationary period to reject hires who fail to meet its own adopted but reasonable standards. These standards, together with the just and authorized causes for termination of employment [which] the Labor Code expressly provides, are the grounds available to terminate the employment of a teacher on probationary status. x x x

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 teachers on probationary status at the start of their probationary period, or at the very least under the circumstances of the present case, at the start of the semester or the trimester during which the probationary standards are to be applied. Of critical importance in invoking a failure to meet the probationary standards, is that the school 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, too, 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.” (Mercado v. AMA Computer College-Parañaque City, Inc., G.R. No. 183572, 13 April 2010)

Burden of proof on the employer

When the validity of the employment arrangement is challenged, the burden of proof is on the employer.

When in doubt, interpreted in favor of the employee

“In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.” (Article 1702, Civil Code)

References

  • Presidential Decree No. 442, a.k.a. Labor Code;
  • Omnibus Rules Implementing the Labor Code; and
  • Supreme Court Decisions (cited in the body)