Illegal Dismissal of Probationary Employee: When Performance Ratings Are a Subterfuge

The Supreme Court recently affirmed the illegal dismissal of a probationary employee whose unsatisfactory performance rating was later admitted by his own supervisor to be false and unfounded. The case of Skyway O & M Corporation v. Reinante (G.R. No. 222233, August 28, 2019) serves as a reminder that employers cannot use performance evaluations as a cover for terminating workers for unlawful reasons—and that even probationary employees enjoy security of tenure.

The Facts

Wilfredo Reinante was hired by Skyway O & M Corporation as an Intelligence Officer for a fixed period from June to November 2008. Immediately after, Skyway renewed his services and appointed him as a probationary employee. In May 2009, Reinante took a vacation leave and filed a sick leave application due to hypertension. Skyway disapproved his leave and directed him to report for work.

On May 21, 2009, Reinante received a pre-termination notice for allegedly failing to meet performance standards, based on a Performance Appraisal Report submitted by his supervisor, Augusto Alcantara. On May 25, 2009—his last day as a probationary employee—he was dismissed.

Earlier, Reinante had filed administrative complaints against Alcantara and Skyway for hiring unqualified security officers. The parties entered into a compromise agreement where Reinante agreed to withdraw the cases. When Skyway failed to comply with the settlement, Reinante filed a complaint for constructive dismissal and other monetary claims.

The Issue

The central question was whether Reinante was illegally dismissed when Skyway terminated him for failing to meet performance standards during his probationary period.

The Ruling

The Supreme Court denied Skyway's petition and affirmed the rulings of the Labor Arbiter, the NLRC, and the Court of Appeals, all of which found Reinante illegally dismissed.

The Court emphasized three key points.

First, the determination of illegal dismissal is essentially a factual question. The Court is not a trier of facts and will not re-examine evidence already passed upon by the labor tribunals and the CA, especially when their findings coincide.

Second, while a probationary employee may be terminated for failing to qualify under reasonable standards made known at the time of engagement, the employer bears the burden of proving that the dismissal was valid. Here, Skyway failed this test.

The Court noted that Reinante's supervisor, Alcantara, admitted in an affidavit that he rendered an unmeritorious rating against Reinante and that, in truth and in fact, Reinante should not have been dismissed. Another employee corroborated this admission. The termination was effected merely as a subterfuge after Reinante discovered Skyway's hiring of unqualified security officers.

Third, Skyway's argument that the compromise agreement constituted a valid waiver failed. The Court reiterated that waivers and quitclaims are looked upon with disfavor and are contrary to public policy. The employer must prove that the waiver was voluntarily executed with full understanding and reasonable consideration. Here, the parties could not even agree on the terms of the settlement—Reinante claimed it included suspension of certain employees and a security officer position, while Skyway maintained the only consideration was P100,000.00. There was no meeting of the minds.

The Monetary Awards

The Court ordered Skyway to pay Reinante:

• Full backwages from the time of illegal dismissal until the finality of the decision;
• Separation pay of one month salary for every year of service (fraction of at least six months considered one whole year), in lieu of reinstatement due to strained relations;
• Moral damages of P20,000.00 and exemplary damages of P10,000.00, as the dismissal was orchestrated as retaliation;
• Attorney's fees equivalent to 10% of the total monetary award.

All amounts earn legal interest at 6% per annum from finality of the decision until fully paid.

Practical Takeaways

• Probationary employees have security of tenure. They may be dismissed for just or authorized causes, or for failure to meet reasonable performance standards made known at the time of engagement—but the employer must prove these grounds with substantial evidence.
• Performance ratings must be honest and well-documented. A rating that is later admitted to be false or retaliatory will not justify dismissal and may expose the employer to backwages, separation pay, and damages.
• Quitclaims and waivers are not automatic shields. Employers must prove that any waiver was voluntarily executed with full understanding and reasonable consideration. A vague settlement with unclear terms will not bar an employee from filing an illegal dismissal case.
• Employers should maintain clear, objective performance standards communicated to probationary employees at the start of employment, and should document any deficiencies through proper processes.
• Retaliatory dismissal is costly. Using termination as a weapon against employees who report company irregularities can result in significant monetary liability, including moral and exemplary damages.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.