Terminating the employment of a probationary employee: The law, rules and applicable jurisprudence

To begin, an owner of a business enterprise is given consideration leeway in managing his business because it is deemed important to society as a whole that he should succeed. Our law, therefore, recognizes certain rights as inherent in the management of business enterprises. These rights are collectively called "management prerogatives" or acts by which one directing a business is able to control the variables thereof so as to enhance the chances of making a profit (Fernandez and Quiason, The Law on Labor Relations, 1963 ed., p.43, quoted in Chu v. NLRC, 232 SCRA 764 [1994]).

This prerogative has better application when it comes to hiring of employees as there is no question that it is within the right of an employer to hire its own employees. In the exercise of the right to select his employees, the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently (International Catholic Migration Commission v. NLRC, 169 SCRA 606 [1989]).

Probation is the period during which the employer may determine if the employee is qualified for possible inclusion in the regular force. It is prescribed, however, that the probationary period shall, as a rule, not exceed six months. This means that the probationary employee may be dismissed for cause at any time before the expiration of six months after hiring (Cielo v. NLRC, 193 SCRA 410 [1991]). Thus, if after working for less than six months, he is found to be unfit for the job, he can be dismissed. But if he continues to be employed longer than six months, he ceases to be a probationary employee and becomes a regular or permanent employee.

Article 281 of the Labor Code governs the termination of employment of a probationary employee. It states, inter alia, that "[t]he services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee." This codal provision is implemented by Rule XXIII, D.O. No. 10, Series of 1997 which states in part, thus:

Section 1. Security of Tenure – (a) In cases of regular employment, the employer shall not terminate the services of an employee except for just or authorized causes as provided by law, and subject to the requirements of due process.

(b) The foregoing shall also apply in cases of probationary employment provided, however, that in such cases, the termination of employment due to failure of the employee to qualify in accordance with the standard of the employer made known to the former at the time of engagement may also be a ground for termination of employment.

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III. If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required. If the termination is brought about by the 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.

The basis of the right of the employer to terminate the employment of a probationary employee is underscored by the following legal principle enunciated in International Catholic Migration Commission v. NLRC, et al., 169 SCRA 606 [1989], that — "It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied employment. In that sense, it within the exercise of the right to select his employees that the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him permanently. As further stated by the Supreme Court – "[A]s the law now stands, Article 281 of the Labor Code gives ample authority to the employer to terminate a probationary employer for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. There is nothing under Article 281 of the Labor Code that would preclude the employer from extending a regular or a permanent appointment to an employee once the employer finds that the employee is qualified for regular employment even before the expiration of the probationary period. Conversely, if the purpose sought by the employer is neither attained nor attainable within the said period, Article 281 of the Labor Code does not likewise preclude the employer from terminating the probationary employment on justifiable causes."

This ample authority given to the employer to determine, and conclude judgment with regard to the fitness of the employee, must therefore, be respected. This is especially true where there is no showing that the dismissal of the probationary employee is arbitrary, fanciful or whimsical. The dissatisfaction of the employer over the performance of the employee is a legitimate exercise of management prerogative to select whom to hire, or refuse employment for the success of its undertaking (Grand Motor Parts Corp. v. Minister of Labor, et al., 130 SCRA 436 — involves the termination of a branch manager who failed to qualify as a regular employee.

In Manila Electric Co. v. NLRC, 178 SCRA 198 [1989], the Supreme Court upheld the dismissal of a probationary employee who was found unfit for his position. The Court noted that despite reasonable efforts exerted by the employer to apprise the employee of the standard of performance required of him, he did not follow the same. Further, he was shown to be "uncooperative toward his co-employees," and "disrespectful to his superiors."

In the 1996 of Flores v. NLRC et al. 253 SCRA 494, the Supreme Court affirmed the dismissal of a loan processor of a bank who was placed on probationary status for a period of six months. In that case, her performance was evaluated by the management every month on the results of which depended her chances of permanent or regular appointment. On Sept. 23, 1992, prior to the lapse of the six-month probationary period, she was notified by the bank that her probationary employment was considered automatically terminated, she having failed to meet the reasonable standards imposed by the bank for a permanent employee.