Aliling vs. Feliciano

An employee hired on a probationary basis is deemed a regular employee from the date of engagement if the employer fails to make known the reasonable standards for regularization at the time of engagement. Furthermore, an illegally dismissed regular employee is entitled to backwages and separation pay in lieu of reinstatement when strained relations exist, but moral and exemplary damages require clear and convincing proof of bad faith.

Armando Aliling was hired by Wide Wide World Express Corporation (WWWEC) as an Account Executive. The dispute centers on whether Aliling was a probationary or regular employee and the validity of his dismissal based on alleged non-compliance with sales quotas. The case involves the application of the Labor Code provisions on probationary employment, just causes for dismissal, and the procedural due process requirements for terminating employment.

Via a letter dated June 2, 2004, respondent Wide Wide World Express Corporation (WWWEC) offered to employ petitioner Armando Aliling as "Account Executive (Seafreight Sales)," with a monthly salary of PhP 13,000, transportation allowance of PhP 3,000, clothing allowance of PhP 800, cost of living allowance of PhP 500, and a 14th month pay. The offer came with a six-month probationary period, stating that performance during the probationary period would be the basis for confirmation to Regular or Permanent Status. On June 11, 2004, Aliling and WWWEC signed an Employment Contract stating that conversion to regular status would be determined based on work performance and that employment services may be terminated for just cause or in accordance with standards defined at the time of engagement. The letter of appointment also stated that Aliling and his immediate superior were required to jointly define his objectives compared with the job requirements, and that performance would be reviewed on the 3rd and 5th months.

Training started, but instead of a Seafreight Sales assignment, WWWEC asked Aliling to handle Ground Express (GX), a new domestic cargo forwarding service for Luzon launched on June 18, 2004. Barely a month after, Manuel F. San Mateo III, WWWEC Sales and Marketing Director, emailed Aliling expressing dissatisfaction with his performance, expecting GX Shuttles to be 80% full by August 5. Thereafter, in a letter dated September 25, 2004, Joseph R. Lariosa, Human Resources Manager, asked Aliling to explain his absence without leave from September 20, 2004. Aliling responded two days later, denying being absent and attaching his timesheet showing he worked from September 20 to 24, 2004. He also queried the withholding of his salary for September 11 to 25, 2004.

In a separate letter dated September 27, 2004, Aliling wrote San Mateo tendering his resignation effective October 15, 2004, pursuant to an instruction allegedly given on September 20. While WWWEC took no action on his tender, Aliling demanded reinstatement and a written apology, claiming San Mateo forced him to resign. Lariosa informed Aliling that his case was still being evaluated. On October 6, 2004, Lariosa advised Aliling of the termination of his services effective that date due to "non-satisfactory performance" during his probationary period. Aliling was paid his outstanding salary. On October 4, 2004, Aliling filed a Complaint for illegal dismissal due to forced resignation, nonpayment of salaries, and damages with the NLRC. In his affidavit, he stated that respondents did not make known to him the standards under which he would qualify as a regular employee. WWWEC countered that Aliling was informed of the standards and that he failed to meet the 80% load factor target for GX Shuttles, but Aliling denied receiving the September 20, 2004 memo supposedly informing him of the sales quota.

• Reinstatement: Petitioner argued that the CA's failure to order reinstatement despite finding illegal dismissal was contrary to law and jurisprudence.
• Backwages: Petitioner argued that the CA's failure to award backwages, even without ordering reinstatement, was contrary to law and jurisprudence.
• Moral and Exemplary Damages: Petitioner argued that the CA's failure to award moral and exemplary damages, despite finding he was dismissed to prevent acquisition of regular status, was contrary to law and jurisprudence.

• Probationary Status: Respondents reiterated their position that WWWEC hired petitioner on a probationary basis and fired him before he became a regular employee.
• Notification of Standards: Respondents contended that they put Aliling on notice that he would be evaluated on the 3rd and 5th months of his probationary employment, which they argued substantially complied with the rule on notification of standards.

• Employment Status: Whether petitioner was a probationary or regular employee during the period material.
• Validity of Dismissal: Whether petitioner was illegally dismissed for lack of just cause and procedural due process.
• Reliefs Due: Whether petitioner is entitled to backwages, separation pay, nominal damages, moral and exemplary damages, and attorney's fees.
• Solidary Liability: Whether the individual corporate officers of WWWEC can be held jointly and severally liable with the company.

• Employment Status: Yes. Petitioner was deemed a regular employee from June 11, 2004, because reasonable standards for regularization were not made known to him at the time of his engagement.
• Validity of Dismissal: Yes. Petitioner was illegally dismissed, as there was no just cause and procedural due process was violated.
• Reliefs Due: Yes, partly. Petitioner is entitled to backwages, separation pay in lieu of reinstatement, nominal damages, and attorney's fees, but not moral and exemplary damages.
• Solidary Liability: No. The individual corporate officers cannot be held jointly and severally liable absent proof of bad faith or malice in effecting the termination.

• Employment Status: The Court affirmed the CA's ruling that Aliling was a regular employee from the outset. Under Article 281 of the Labor Code and Section 6(d) of its Implementing Rules, an employer must make known to the probationary employee the reasonable standards for regularization at the time of engagement. The letter-offer itself stated that objectives were still to be jointly defined, and no agreement was reached. Furthermore, Aliling was assigned to GX sales, an entirely different activity from the Seafreight Sales he was originally hired for, making it impossible for standards relative to GX to have been communicated at the time of engagement. San Mateo's email imposing an 80% quota was sent more than a month after the contract was signed, failing the "at the time of engagement" requirement.
• Validity of Dismissal: The dismissal lacked just cause because WWWEC failed to prove the reasonableness and good faith of the quota imposition. The GX service was experimental, and even WWWEC's sales manager could not quantify Aliling's performance. The dismissal also violated procedural due process. The September 20, 2004 memo that would have served as the first notice was not proven to have been received by Aliling. No hearing or conference was conducted, and the notice of termination did not specify the circumstances justifying severance.
• Reliefs Due: As a regular employee illegally dismissed, Aliling is entitled to backwages from October 6, 2004 until the finality of the decision. Reinstatement is no longer viable due to strained relations, warranting separation pay of one month salary for every year of service. He is also entitled to PhP 30,000 as nominal damages for the violation of procedural due process and 10% attorney's fees. However, moral and exemplary damages were denied because Aliling failed to present clear and convincing evidence of bad faith on the part of WWWEC; illegal dismissal alone does not automatically entitle an employee to such damages.
• Solidary Liability: The Court reversed the CA's ruling on the solidary liability of corporate officers. Under Alba vs. Yupangco and MAM Realty Development Corporation vs. NLRC, solidary liability of corporate officers requires proof of bad faith, malice, or gross negligence. Absent such proof, the obligations are the direct accountabilities of the corporation.

• Probationary Employment and Regularization Standards — Probationary employment shall not exceed six months, and the employer must make known the reasonable standards for regularization at the time of engagement. Where no standards are made known at that time, the employee is deemed a regular employee from day one. The Court applied this by finding that since WWWEC failed to communicate the standards at the time of Aliling's engagement, he was deemed a regular employee.
• Two-Notice Rule in Termination — To effect a legal dismissal, the employer must serve a first written notice specifying the grounds for termination and giving the employee an opportunity to explain, conduct a hearing or conference, and serve a second written notice of termination. The Court applied this by finding that WWWEC failed to prove receipt of the first notice and did not conduct any hearing.
• Strained Relations Doctrine — Separation pay may be awarded in lieu of reinstatement when reinstatement is no longer viable or desirable due to strained relations between the employer and employee. The Court applied this by awarding separation pay instead of reinstatement, given the animosity generated by the arbitrary dismissal and the short stint of employment.
• Solidary Liability of Corporate Officers — Corporate officers are not personally liable for the corporation's obligations unless they acted in bad faith, with malice, or with gross negligence. The Court applied this by absolving the individual officers of WWWEC from solidary liability due to lack of proof of bad faith.

• "Where no standards are made known to the employee at that time, he shall be deemed a regular employee." — This passage, quoting the Implementing Rules of the Labor Code, establishes the controlling rule that failure to communicate regularization standards at the time of engagement automatically regularizes the probationary employee.
• "An employee’s failure to meet sales or work quotas falls under the concept of gross inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for dismissal under Article 282 of the Code. However, in order for the quota imposed to be considered a valid productivity standard and thereby validate a dismissal, management’s prerogative of fixing the quota must be exercised in good faith for the advancement of its interest." — This clarifies that while failure to meet quotas can be a just cause, the employer bears the burden of proving the quota was imposed in good faith and is reasonable.
• "A dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle the dismissed employee to moral damages. The award of moral and exemplary damages cannot be justified solely upon the premise that the employer dismissed his employee without authorized cause and due process." — This delineates the boundary between illegal dismissal and the bad faith required for moral and exemplary damages.

• Alcira vs. National Labor Relations Commission — Distinguished. The Court distinguished this case because in Alcira, the employee was duly informed of the standards during engagement, unlike Aliling.
• King of Kings Transport, Inc. vs. Mamac — Followed. Used to expound on the procedural requirements of the two-notice rule in termination cases.
• Javellana vs. Belen — Followed. Cited to support the award of backwages computed from the time of illegal dismissal until the finality of the decision when reinstatement is no longer possible.
• Alba vs. Yupangco — Followed. Cited to reverse the solidary liability of corporate officers, requiring proof of bad faith or malice.

• Article 281, Labor Code — Governs probationary employment, requiring reasonable standards for regularization to be made known at the time of engagement. Applied to declare Aliling a regular employee.
• Section 6(d), Implementing Rules of Book VI, Rule VIII-A of the Labor Code — Reiterates that where no standards are made known at the time of engagement, the employee is deemed a regular employee. Applied to support the finding of regular employment.
• Article 282, Labor Code — Enumerates just causes for termination of employment. Applied to determine if Aliling's failure to meet quotas constituted gross inefficiency analogous to gross neglect.
• Article 279, Labor Code — Provides for security of tenure and the entitlement to reinstatement and full backwages for unjustly dismissed employees. Applied to award backwages and separation pay in lieu of reinstatement.
• Section 2 (III), Rule XXIII, Book V, Omnibus Rules Implementing the Labor Code — Sets the standard of due process and the two-notice rule for termination based on just causes. Applied to find that procedural due process was violated.

Diosdado M. Peralta, Roberto A. Abad, Jose Catral Mendoza, Estela M. Perlas-Bernabe.