Philippine National Oil Company-Energy Development Corporation vs. Buenviaje

An employee is deemed a regular, not probationary, employee where the appointment letter expressly grants regular status and the employer fails to inform the employee of the reasonable standards for regularization at the time of engagement; mere attachment of a job description listing duties, without qualitative or quantitative performance measures, does not satisfy the notice requirement. Dismissal for unsatisfactory performance that does not amount to gross and habitual neglect or gross inefficiency, and that is effected without the requisite twin written notices and hearing, is illegal.

Amelyn Buenviaje was initially employed by Philippine National Oil Company-Energy Development Corporation (PNOC-EDC) as Assistant to the then Chairman/President and CEO, her father, under a co-terminous contract. While serving in that capacity, she assumed the functions of Marketing Division Manager upon the division’s creation in August 2003. On February 2, 2004, the new PNOC-EDC President, Paul Aquino, issued an appointment letter appointing her Senior Manager for the Marketing Division effective February 1, 2004. The letter instructed the Human Resources Management Division to amend her employment status from co-terminus to regular, with regular status retroactive to July 1, 2001, and stated that the appointment was subject to confirmation by her immediate superior based on her performance during the next six months. Buenviaje signed the letter acknowledging its contents. She underwent two performance appraisals using a form designed for permanent managerial employees. The first appraisal, covering February to April 2004, yielded a satisfactory rating; the second, covering May to June 2004, gave an unsatisfactory rating. PNOC-EDC then informed Buenviaje that she did not qualify for regular employment and separated her from the company effective July 31, 2004.

• Nature of Employment: Buenviaje was first hired as Assistant to the Chairman/President on a co-terminous basis, her tenure linked to that of her father. In August 2003, the Marketing Division was created, and she began performing the functions of Marketing Division Manager.

• The February 2004 Appointment: On February 2, 2004, new PNOC-EDC President Paul Aquino issued an appointment letter to Buenviaje for the position of Senior Manager for Marketing Division, effective February 1, 2004. The letter directed the HRMD to amend her employment status “from your present position as Assistant to the President (co-terminus) to regular status” and declared her regular status retroactive to July 1, 2001. It also stated that the appointment was “subject to confirmation by your immediate superior based on your performance during the next six months.” Buenviaje signed the letter to signify her understanding.

• Performance Appraisals: PNOC-EDC used a performance appraisal form designed for permanent managerial employees. Buenviaje’s first appraisal covering February 1 to April 30, 2004 yielded a satisfactory rating of three (3). Her second appraisal covering May 1 to June 30, 2004 resulted in an unsatisfactory rating of four (4).

• Dismissal: Vice President Ester Guerzon informed Buenviaje that she did not qualify for regular employment and communicated her separation effective July 31, 2004. PNOC-EDC sent letters reiterating the non-confirmation and instructed her to prepare a turnover report. Buenviaje submitted written comments on the second appraisal, but the company maintained her termination.

• The Labor Arbiter’s Findings: The Labor Arbiter found that Buenviaje was a regular employee, the appointment letter being clear, and that reasonable standards were not explained at the time of engagement. The second evaluation did not bear Aquino’s signature and approval, and PNOC-EDC failed to rebut the allegation of bad faith.

• The NLRC’s Findings: The NLRC agreed Buenviaje was a regular employee but held she did not yet enjoy security of tenure because of the confirmation clause; her non-confirmation was thus not an illegal dismissal.

• The CA’s Findings: The CA ruled Buenviaje was a regular employee entitled to security of tenure; the confirmation clause did not divest her of that right, and her dismissal lacked just or authorized cause.

• PNOC-EDC, Aquino, and Guerzon (G.R. Nos. 183200-01):

  • Nature of Employment: Petitioner maintained that Buenviaje was a probationary employee. The clause making her appointment “subject to confirmation” based on performance during the next six months showed that regularization was conditional. Her unsatisfactory rating meant she failed to qualify, and non-confirmation was a valid exercise of management prerogative.
  • Validity of Dismissal: Petitioner argued that dismissal was lawful because Buenviaje did not meet the reasonable standards for the position. The standards were discussed with her, and the job description attached to the appointment letter apprised her of what was expected.
  • Damages and Solidary Liability: Petitioner contested the awards of moral and exemplary damages and attorney’s fees, asserting there was no bad faith. Aquino and Guerzon contended they could not be held solidarily liable as they acted within the scope of their corporate duties and without malice.

• Buenviaje (G.R. Nos. 183253 & 183257):

  • Nature of Employment and Dismissal: Buenviaje insisted she was a permanent employee from the start because the appointment letter explicitly granted regular status. She argued she was not informed of the standards for regularization at the time of engagement and that her dismissal was illegal.
  • Damages: Buenviaje sought moral and exemplary damages, claiming manifest bad faith—PNOC-EDC evaluated her using the form and standards for regular employees while dismissing her as a probationary employee.
  • Solidary Liability: She argued that Aquino and Guerzon conspired to terminate her illegally and should be held jointly and severally liable.

• PNOC-EDC, Aquino, and Guerzon (as respondents to Buenviaje’s petition):

  • Damages and Liability: Respondents countered that no bad faith attended the dismissal; the use of the regular employee evaluation form was merely procedural and did not indicate malice. They maintained that Aquino and Guerzon could not be held solidarily liable absent clear proof of personal ill-will.

• Buenviaje (as respondent to PNOC-EDC’s petition):

  • Employment Status: Buenviaje reiterated that the appointment letter’s plain language and the retroactive grant of regular status, coupled with the employer’s failure to communicate probationary standards at the time of engagement, conclusively established her status as a permanent employee.
  • Illegal Dismissal: She argued that her dismissal based on a single unsatisfactory appraisal, without the statutorily required notices specifying the acts or omissions and without a meaningful hearing, was illegal whether she was treated as regular or probationary.

• Nature of Employment: Whether Buenviaje was a permanent employee or a probationary employee.
• Validity of Dismissal: Whether Buenviaje was illegally dismissed.
• Moral and Exemplary Damages: Whether Buenviaje is entitled to moral and exemplary damages, and if so, in what amounts.
• Separation Pay in Lieu of Reinstatement: Whether separation pay should be awarded in lieu of reinstatement.
• Solidary Liability of Corporate Officers: Whether Paul Aquino and Ester Guerzon should be held jointly and severally liable with PNOC-EDC.

• Nature of Employment: Buenviaje was a permanent employee from the moment her appointment took effect. The appointment letter unequivocally directed the amendment of her status from co-terminus to regular, with retroactive effect to July 1, 2001, and contained no language indicating probationary employment. The clause stating the appointment was subject to confirmation based on performance was construed as a notification of forthcoming performance evaluation, not a condition precedent to regularization; any ambiguity was resolved in favor of labor. Moreover, the requisites of probationary employment were not satisfied. PNOC-EDC failed to inform Buenviaje of the reasonable standards by which her performance would be gauged at the time of her engagement. The job description attached to the appointment letter merely enumerated duties and responsibilities without specifying the qualitative or quantitative metrics against which performance would be measured—unlike the performance appraisal form that was actually used, which contained such standards. The appraisal form itself was never provided to Buenviaje before or during the early stages of her employment. This failure rendered her a regular employee by operation of law.

• Validity of Dismissal: The dismissal was illegal. As a permanent employee, Buenviaje could be terminated only for a just or authorized cause under Articles 297 and 298 of the Labor Code, and only after the employer furnished her with two written notices—one specifying the acts or omissions constituting the ground for dismissal, and another communicating the decision to dismiss—and afforded her an opportunity to be heard. PNOC-EDC, acting on the mistaken premise that Buenviaje was probationary, dismissed her for non-confirmation rather than for a statutory just or authorized cause. Even assuming arguendo that she was a probationary employee, her dismissal still failed because the employer did not inform her of the reasonable standards for regularization at the time of engagement, in violation of the due process required for probationary employment. Furthermore, the unsatisfactory rating did not rise to the level of a just cause. Her performance, while rated as needing improvement in the second appraisal, did not constitute gross and habitual neglect of duties or gross inefficiency; a single unsatisfactory appraisal following a satisfactory one does not establish habitual failure, and gross negligence requires a want of even slight care, which was not demonstrated. Finally, the letters PNOC-EDC sent to Buenviaje failed to comply with the twin-notice rule: the first letter merely stated her performance fell below minimum requirements without detailing the specific acts or omissions, and she was consequently denied a reasonable opportunity to respond to the charges against her.

• Moral and Exemplary Damages: Buenviaje was entitled to moral and exemplary damages, but in reduced amounts. Manifest bad faith attended the dismissal because PNOC-EDC deliberately used the performance appraisal form and standards designed for regular employees in evaluating Buenviaje, yet treated her as a probationary employee when terminating her services. This contradictory treatment indicated a conscious design to effect her dismissal without just cause. However, the claims that Aquino did not sign the second evaluation and that the evaluation was conducted without her knowledge did not establish additional malice. The Labor Arbiter’s awards of P1,000,000 in moral damages and P500,000 in exemplary damages were excessive in the absence of evidence proving the degree of moral suffering or injury. Consistent with prevailing jurisprudence, the awards were reduced to P30,000 as moral damages and P25,000 as exemplary damages.

• Separation Pay in Lieu of Reinstatement: Separation pay in lieu of reinstatement was proper. The relationship between Buenviaje and PNOC-EDC had become irreparably strained, rendering reinstatement no longer a viable remedy. Accordingly, she was entitled to separation pay equivalent to one-half month’s pay for every year of service, with full backwages inclusive of allowances and other benefits computed from the time compensation was withheld up to the finality of the decision.

• Solidary Liability of Corporate Officers: Aquino and Guerzon were not solidarily liable with PNOC-EDC. While the complaint alleged bad faith and conspiracy, Buenviaje failed to present clear and convincing evidence that the two officers were motivated by personal ill-will or acted with malice in effecting her dismissal. Corporate officers may be held solidarily liable for illegal termination only upon proof that they assented to patently unlawful acts or were guilty of gross negligence or bad faith; such proof was lacking in this case.

• Probationary Employment — Standards Requirement — For a probationary employee to be validly dismissed on the ground of failure to qualify, the employer must, at the time of engagement, inform the employee of the reasonable standards that will be used as the basis for regularization. The standards must indicate how performance will be measured, specifying qualitative or quantitative metrics, and not merely enumerate the duties and responsibilities of the position. Failure to communicate such standards renders the employee a regular employee.

• Security of Tenure of Probationary Employees — A probationary employee enjoys security of tenure, though not identical to that of a permanent employee. Dismissal for failure to meet the employer’s standards requires that the standards were made known at the time of engagement; otherwise, the dismissal is illegal. The employer must still serve a written notice stating the cause of termination within a reasonable time from the effective date of termination.

• Gross and Habitual Neglect / Gross Inefficiency — An employee’s poor or unsatisfactory performance, standing alone, does not amount to gross and habitual neglect of duties or gross inefficiency. Gross neglect connotes a want of even slight care or a thoughtless disregard of consequences, while habitual neglect requires repeated failure over a period of time. A single unsatisfactory performance rating, particularly when preceded by a satisfactory one, does not satisfy the requisites for a just cause of dismissal.

• Moral and Exemplary Damages in Illegal Dismissal — Moral damages are recoverable in illegal dismissal cases only upon proof that the dismissal was attended by bad faith, fraud, or oppression, or was done in a manner contrary to morals, good customs, or public policy, and that such conduct caused emotional injury. Bad faith must be established by clear and convincing evidence. Using regular employee evaluation standards in appraising an employee while dismissing her as a probationary employee constitutes manifest bad faith. Exemplary damages may be awarded when the dismissal is wanton, oppressive, or malevolent.

• Solidary Liability of Corporate Officers — A corporate officer may be held solidarily liable with the corporation for illegal dismissal only when it is alleged in the complaint and proven by clear and convincing evidence that the officer assented to patently unlawful acts or acted with gross negligence or bad faith. Mere allegation, without such proof, is insufficient.

• “A probationary employee is defined as one who is on trial by an employer during which the employer determines whether or not he is qualified for permanent employment. … It is also indispensable in probationary employment that the employer informs the employee of the reasonable standards that will be used as a basis for his or her regularization at the time of his or her engagement. If the employer fails to comply with this, then the employee is considered a regular employee.”

• “The job description attached to Buenviaje’s appointment letter merely answers the question: ‘what duties and responsibilities does the position entail?’, but fails to provide the answer/s to the question: ‘how would the employer gauge the performance of the probationary employee?’. … A comparison of the job description and the standards in the appraisal form reveals that they are distinct.”

• “The fact that an employee’s performance is found to be poor or unsatisfactory does not necessarily mean that the employee is grossly and habitually negligent of or inefficient in his duties. … A single or isolated act of negligence, as was shown here, does not constitute a just cause for the dismissal of the employee.”

• “Bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity. … We agree that there was manifest bad faith when Buenviaje was evaluated using the standards and performance appraisal form for regular employees, yet, in dismissing her, she was treated as a probationary employee.”

• Abbott Laboratories, Philippines v. Alcaraz, G.R. No. 192571, July 23, 2013 — Distinguished. In Abbott, the employee’s offer sheet and employment contract expressly stated she was being hired on probationary status, and the totality of circumstances showed she had been informed of the performance standards. Here, no such express probationary designation existed, and the appraisal form—unlike in Abbott—was never provided to the employee at the time of engagement.

• Robinsons Galleria/Robinsons Supermarket Corporation v. Ranchez, G.R. No. 177937, January 19, 2011 — Relied upon for the principle that the right to security of tenure attaches at the time of hiring, and that a job description which merely lists duties without qualitative standards is insufficient to satisfy the requirement of informing a probationary employee of the standards for regularization.

• Magsaysay Maritime Corporation v. Chin, Jr., G.R. No. 199022, April 7, 2014 — Applied as the basis for fixing the amount of moral damages at P30,000 and exemplary damages at P25,000, considering the absence of proof of severe emotional suffering and the need to deter socially deleterious acts without unjust enrichment.

• Bank of Lubao, Inc. v. Manabat, G.R. No. 188722, February 1, 2012 — Cited for the rule that separation pay in lieu of reinstatement is proper when the employer-employee relationship has become strained, as it releases the employee from an oppressive environment and the employer from maintaining an untrusted worker.

• Peñaflor v. Outdoor Clothing Manufacturing Corporation, G.R. No. 177114, January 21, 2010 — Used to support the requirement that clear and convincing proof of bad faith is necessary to hold corporate officers solidarily liable for illegal dismissal.

• Article 296 (formerly Article 281), Labor Code — Governs probationary employment; employees who are not informed of the reasonable standards for regularization at the time of engagement are deemed regular. The Court applied this provision to conclude that Buenviaje became a regular employee due to the employer’s failure to communicate such standards.

• Article 297 (formerly Article 282), Labor Code — Enumerates the just causes for termination of employment, including gross and habitual neglect of duties. The Court ruled that Buenviaje’s unsatisfactory rating did not satisfy the elements of gross and habitual neglect.

• Article 298 (formerly Article 283), Labor Code — Enumerates authorized causes for termination; no authorized cause was invoked or proved in Buenviaje’s dismissal.

• Article 294 (formerly Article 279), Labor Code — Mandates reinstatement and full backwages for illegally dismissed employees; the Court substituted separation pay due to the impracticality of reinstatement.

• Article 111, Labor Code — Allows attorney’s fees equivalent to ten percent of the amount of wages recovered; awarded in favor of Buenviaje as she was compelled to litigate to protect her rights.

Presbitero J. Velasco, Jr. (Chairperson), Diosdado M. Peralta, Jose Portugal Perez, and Bienvenido L. Reyes.

None.