Probationary Employment: Employers Must Disclose Regularization Standards

Probationary Employment: Employers Must Disclose Regularization Standards

Probationary employment is a trial period that allows employers to determine whether a new hire is fit for regular employment. But this period is not a free pass to terminate at will. In Univac Development, Inc. v. Soriano (G.R. No. 182072, June 19, 2013), the Supreme Court reminded employers that failing to disclose the standards for regularization at the time of engagement can convert a probationary employee into a regular employee from day one.

Facts of the Case

William Soriano was hired on August 23, 2004 as a probationary legal assistant by Univac Development, Inc. with a monthly salary of P15,000.00. His probationary period was six months. Eight days before its completion, Soriano claimed he was told he was being terminated due to cost-cutting measures.

Univac, however, claimed that Soriano abandoned his job. It said Soriano had expressed an intention to leave to review for the bar examinations, and that he had been informed of unsatisfactory performance during a company meeting.

The Labor Arbiter and the National Labor Relations Commission (NLRC) sided with the employer, relying partly on Soriano's educational background as a law graduate to presume he knew the standards for regularization. The Court of Appeals reversed, ruling that Univac failed to inform Soriano of the standards for regularization and failed to conduct a performance evaluation. The Supreme Court affirmed the CA's ruling.

The Issue

The central question was whether Soriano was illegally dismissed. This required the Court to examine whether Univac complied with the requirements for terminating a probationary employee.

The Ruling

The Supreme Court denied Univac's petition and affirmed the finding of illegal dismissal. The Court emphasized that probationary employees enjoy the constitutional protection of security of tenure. They may be dismissed only for a just cause or when they fail to qualify as regular employees in accordance with reasonable standards made known to them at the time of engagement.

Key Rules on Probationary Employment

Article 281 of the Labor Code and its Implementing Rules set clear guidelines. The employer must make known to the probationary employee the standards under which he or she will qualify as a regular employee at the time of engagement. If no standards are made known at that time, the employee is deemed a regular employee.

The Court stressed two essential obligations:

1. Disclosure of standards at the start. The standards for regularization must be communicated at the beginning of the probationary period, not later. The employer cannot rely on presumptions, such as the employee's educational background, to argue that the employee "should have known" the standards.
2. Application of standards. To invoke failure to meet probationary standards as a justification for dismissal, the employer must show how these standards were applied to the employee. A performance evaluation must be conducted to demonstrate unsatisfactory performance.

The employer's power to terminate a probationary employee is also subject to three limitations: (1) it must be exercised in accordance with the specific requirements of the contract; (2) the dissatisfaction must be real and in good faith, not feigned to circumvent the contract or the law; and (3) there must be no unlawful discrimination in the dismissal.

Consequences of Non-Compliance

Because Univac failed to specify the reasonable standards and failed to prove these were made known to Soriano at the start of his employment, Soriano was deemed a regular employee from day one. His dismissal without just cause and without due process was illegal.

The Court awarded Soriano backwages from the date of dismissal until the finality of the decision, separation pay in lieu of reinstatement due to strained relations, attorney's fees equivalent to 10% of the monetary awards, and legal interest at 6% per annum.

Practical Takeaways

• Disclose standards in writing. Employers should provide probationary employees with clear, written regularization standards at the time of engagement. A signed acknowledgment is best practice.
• Conduct and document performance evaluations. Regular, documented assessments during the probationary period protect the employer's right to terminate for failure to meet standards.
• Do not rely on assumptions. Presuming an employee knows the standards because of educational background or experience is not enough. The law requires actual disclosure.
• Terminate only for valid reasons. Probationary employees cannot be dismissed arbitrarily. Just cause or failure to meet disclosed standards, with due process, is required.
• Act before the period ends. If the employer allows the employee to work beyond the probationary period, the employee becomes a regular employee.

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