Abbott Laboratories v. Alcaraz (2013): Standards for Probation

In 2004 Abbott Laboratories advertised in a newspaper for a Medical and Regulatory Affairs Manager, listing the job's duties. Pearlie Ann Alcaraz, then a regulatory affairs manager at another pharmaceutical company, applied. Abbott's offer sheet said she would be employed on a probationary basis. When she accepted, the recruitment officer emailed her the organizational chart and her job description.

On February 12, 2005, she signed a contract placing her on probation for six months, from February 15 to August 14, 2005, at a basic salary of ₱110,000 a month. At a pre-employment orientation, a manager briefed her on her duties. The human resources director later explained by email how probationary employees were evaluated and gave her Abbott's Code of Conduct and performance modules.

Abbott's own procedure required that a probationary employee's performance be formally reviewed and discussed at least twice, in the third and fifth months, with a performance improvement plan at the third-month review if needed, and a signed evaluation form sent to human resources.

On May 16, 2005, she was told she had failed to meet the standards for regularization and was asked to resign or be terminated. She was told not to report for work. On May 23, 2005, she was handed a letter ending her employment effective May 19, 2005. It said she had not managed her time well, had not gained her staff's trust, had not trained her staff effectively, and lacked the judgment her work required.

She filed a complaint for illegal dismissal and damages against Abbott and several of its officers. She argued she should be deemed a regular employee because the standards for regularization were not made known to her when she was hired. The Labor Arbiter dismissed her complaint. The NLRC reversed, found illegal dismissal, and ordered reinstatement, backwages and damages. The Court of Appeals affirmed the NLRC. Abbott went to the Supreme Court.

Was Pearlie Ann informed of reasonable standards for regularization at the time she was hired? Was she validly dismissed? Are the individual officers liable? (The Court also rejected a claim of forum shopping.)

The Supreme Court granted Abbott's petition, reversed the Court of Appeals and reinstated the Labor Arbiter's decision, with an added award of nominal damages.

Probationary employees and the extra ground. A probationary employee, like a regular one, has security of tenure. Besides just and authorized causes, a probationary employee may be dismissed for failing to qualify as a regular employee under reasonable standards made known at the time of engagement. The decision cited the provision under the numbering then in use; today it is Article 296 [281] of the Labor Code.

Two requirements. The implementing rules say that if no standards are made known to the employee at the time of engagement, the employee "shall be deemed a regular employee." The Court explained that the employer must (1) communicate the regularization standards and (2) do so at the time of engagement. Failing either makes the employee regular. The rule does not apply to self-descriptive jobs, such as maids, cooks, drivers or messengers.

The standards were made known. The Court listed what Abbott did: the advertisement with the job's duties, the offer sheet and contract stating probation and its length, the job description, the orientation, the training and the evaluation materials. It added that she had worked in a similar post before. The Court said that "adequate performance of one's duties is, by and of itself, an inherent and implied standard for a probationary employee to be regularized." She was a probationary employee, and her dismissal stood.

Notice for a failed probation. The Court said "the usual two-notice rule does not govern." For failure to meet the standards, the rules require only a written notice served within a reasonable time from the effective date of termination. Abbott's letter met that requirement.

Breach of the company's own procedure. A company policy is like an implied contract that binds both sides. Abbott did not hold the third-month and fifth-month reviews, did not complete or submit the evaluation form, and did not prepare a performance improvement plan. That made the dismissal procedurally infirm. Applying the reasoning of Agabon v. NLRC and Jaka Food Processing v. Pacot, the Court ordered Abbott to pay ₱30,000 in nominal damages, the amount in Agabon, because the dismissal began with something attributable to the employee, as in a dismissal for a just cause.

Officers not liable. Corporate officers are personally liable only in limited cases, such as bad faith. Pearlie Ann did not prove bad faith, so no moral or exemplary damages were awarded and the officers were not held liable.

Justice Brion dissented, and Justice Leonen joined his dissent. Justice Mendoza concurred but agreed with Justice Brion on the procedural aspect.

A probationary employee may be dismissed for failing to meet reasonable standards for regularization that the employer made known at the time of engagement; adequate performance of one's duties is an inherent standard; only a written notice within a reasonable time is required; and an employer that breaks its own evaluation procedure pays nominal damages even though the dismissal is valid.

Abbott sets out what "standards made known at the time of engagement" means in practice. It favors employers on the main question, since a job description, orientation and evaluation materials can be enough. But it also holds employers to their own written procedures. An employer that promises reviews and improvement plans and then skips them may have to pay nominal damages.

Here is a made-up illustration, with invented names. Ces is hired as a probationary sales supervisor. Her contract states six months of probation, and on her first day she receives a written list of sales targets and the company's evaluation form. Near the end of the period she is given a written notice that she did not meet the targets. Under the reasoning in Abbott, the standards were made known at engagement and a written notice can be enough. If her contract said only "probationary" and nobody ever told her what she had to achieve, and her job was not self-descriptive, she may be deemed regular.

For a plain answer, read Can a probationary employee be terminated?. For a case of your own, see where to find legal help.