Probationary Employment Standards: When Vague Job Rules Lead to Illegal Dismissal

The Supreme Court recently reminded employers that probationary employment is not a free pass to terminate workers on vague grounds. In Agustin v. Alphaland Corporation (G.R. No. 218282, September 9, 2020), the Court ruled that an employee hired on probation must be given clear, reasonable standards at the time of engagement. If the employer fails to do so, the employee is deemed regular from day one—and any dismissal without just or authorized cause is illegal.

What Happened in This Case

Redentor Agustin was hired as Executive Chef by Alphaland Corporation for its Balesin Island Club. His job offer letter stated a six-month probationary period and a monthly salary of P122,500. His contract said he was "expected to render the highest quality of professional service and to always pursue the interest of the company."

Barely four months into the job, Agustin received a Notice of Termination. The company said he failed to meet its standards for regular employment. Agustin filed a complaint for illegal dismissal, arguing that the standards were never clearly explained to him.

The Legal Issue

The central question was whether Agustin was validly dismissed during his probationary period, or whether he should be considered a regular employee because the company failed to set clear standards.

The Supreme Court's Ruling

The Court ruled in favor of Agustin, holding that he was a regular employee and that his dismissal was illegal. The ruling rested on two key points.

First, under the Labor Code's provisions on probationary employment, a probationary employee's services may be terminated when the employee fails to qualify as a regular employee in accordance with reasonable standards made known by the employer at the time of engagement. The Implementing Rules add that where no standards are made known, the employee shall be deemed a regular employee. The exact statutory text of these provisions is not reproduced in the ASG law library, but the rule is well-established in the decision itself.

The Court found that Alphaland's standards were too general. Telling an Executive Chef to render "the highest quality of professional service" did not specify what was expected. The company also failed to prove that its assessment of Agustin's performance was genuine. The affidavits supporting the dismissal were submitted only on appeal, more than a year after termination, which the Court called "an afterthought."

Second, the Court noted that Agustin had previously served as a consultant for Alphaland, performing essentially the same tasks—setting up the kitchen, preparing menus, and organizing staff. Hiring him as a "probationary" Executive Chef for the same work contradicted the ordinary course of business. The company was already fully aware of his qualifications.

Due Process Requirements

The Court also emphasized that dismissing a regular employee requires two-fold due process: substantive due process (a valid just or authorized cause under the Labor Code) and procedural due process (the twin-notice rule and opportunity to be heard). Alphaland failed on both counts. It did not prove a valid cause, and it sent only a single termination notice without giving Agustin a chance to explain.

The Remedy

Because Agustin was illegally dismissed, he was entitled to backwages from the date of dismissal until the finality of the decision, plus separation pay in lieu of reinstatement due to strained relations. The Court also awarded six percent legal interest on the monetary awards.

Practical Takeaways

• Set clear standards at the start. A probationary employee must be told, in writing and at the time of engagement, the specific standards for qualifying as a regular employee. General phrases like "render quality service" are not enough.
• Document performance assessments. Employers should conduct and record regular evaluations during the probationary period. Evidence created only after termination will likely be disregarded.
• Observe due process even for probationary employees. A valid dismissal still requires proper notice and an opportunity to be heard.
• Know the consequence of vague standards. If no reasonable standards are communicated, the law deems the employee regular from the start, making termination subject to stricter rules.
• Consistent with prior engagements. Hiring a consultant who already performed the same tasks, then placing that person on probation, may be viewed as a sham arrangement.

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