Terminating the employment of a

probationary employee: The law, rules

and applicable jurisprudence
POINT OF LAW By POINT OF LAW Jefferson M. Marquez | Updated December 17, 2002 - 12:00am
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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 coemployees," 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.