Dusit Hotel Nikko vs. Gatbonton

A probationary employee engaged for a fixed three-month period becomes a regular employee upon expiration of that period where the employer proves neither a timely evaluation nor a valid extension of probation. Without an evaluation showing failure to meet reasonable standards made known at engagement, and without a duly established extension, termination after the stipulated probation period is illegal and entitles the employee to reinstatement and full backwages.

On November 21, 1998, Renato M. Gatbonton was hired by Dusit Hotel Nikko as Chief Steward in its Food and Beverage Department. He signed a three-month probationary employment contract until February 21, 1999, with a monthly salary of P25,000. At the start of employment, the standards by which he would be assessed to qualify for regular employment were explained to him.

The hotel claimed that at the end of the probation period, Ingo Rauber, Director of the Food and Beverage Department, observed that Gatbonton failed to meet the qualification standards for Chief Steward and recommended a two-month extension of probation until April 22, 1999. On March 24, 1999, at the end of the fourth month, Rauber informed Gatbonton that he had poor ratings on staff supervision, productivity, quantity of work, and overall efficiency and did not qualify as Chief Steward. Gatbonton requested another month until April 22, 1999 to improve, to which Rauber allegedly agreed, but Gatbonton refused to sign the Performance Evaluation Form and the Memorandum on the extension.

On March 31, 1999, a notice of termination of probationary employment effective April 9, 1999 on the above grounds was served on Gatbonton. On April 12, 1999, he filed a complaint for illegal dismissal and non-payment of wages, praying for reinstatement, full backwages, damages, and attorney's fees. The Labor Arbiter found that Gatbonton was already regular at termination and had not been assessed or evaluated during the three-month probation, while the NLRC reversed upon finding that a Personnel Action Form extended probation from February 24 to April 22, 1999, such that termination on April 9, 1999 occurred while still on probation.

• Probationary Status: Petitioner maintained that respondent was still a probationary employee at dismissal because his three-month probation had been extended for two months, or until April 22, 1999, upon recommendation of the Food and Beverage Director, as shown by the Personnel Action Forms.
• Valid Dismissal for Failure to Meet Standards: Petitioner argued that respondent was validly dismissed for failure to qualify as regular Chief Steward under reasonable standards made known at engagement, citing poor ratings on staff supervision, productivity, quantity of work, and overall efficiency.
• Non-Entitlement to Reinstatement, Backwages and Attorney's Fees: Petitioner contended that respondent was not entitled to reinstatement, backwages, and attorney's fees, his termination as a probationary employee being legal.
• Payment of Remaining Salaries: Petitioner argued that respondent had been paid his remaining unpaid salaries, presenting Check No. 0000200953 and the corresponding voucher in the amount of P6,095.19 dated May 26, 1999.

• Lack of Proof of Extension: Respondent maintained that petitioner failed to establish with substantial evidence that his probationary employment was extended.
• Lack of Formal Communication: Respondent maintained that petitioner failed to establish that the alleged extension was formally communicated to him during his probationary employment.
• Invalidity of Alleged Extension: Respondent maintained that petitioner failed to establish that the alleged extension was valid and legal.

• Regular vs. Probationary Status: Whether respondent was still a probationary employee at the time of his dismissal on April 9, 1999.
• Validity of Termination: Whether respondent was validly dismissed on the ground of failure to meet the standards of satisfactory performance made known to him at the time of his engagement.
• Entitlement to Reinstatement, Backwages and Attorney's Fees: Whether respondent is entitled to reinstatement, backwages, and attorney's fees.
• Payment of Remaining Salaries: Whether respondent has been paid his remaining salaries.

• Regular vs. Probationary Status: No. Respondent had become a regular employee upon expiration of the stipulated three-month probation, there being no evaluation and no valid extension proved.
• Validity of Termination: No. The termination was illegal, the employer having failed to prove failure to meet reasonable standards made known at engagement or any just or authorized cause.
• Entitlement to Reinstatement, Backwages and Attorney's Fees: Yes. Illegal dismissal entitles the employee to reinstatement without loss of seniority rights and to full backwages, plus 10% attorney's fees as awarded below.
• Payment of Remaining Salaries: Yes. Payment of the remaining unpaid salaries in the amount of P6,095.19 was sufficiently proved and unrefuted, so the order therefor was deleted.

• Regular vs. Probationary Status: Under Article 281, an employee allowed to work after the probationary period — whether the six-month statutory maximum or any shorter period set by the employer, here three months — is considered regular. No proof was presented that respondent was evaluated from November 21, 1998 to February 21, 1999, nor that probation was validly extended. The March 31, 1999 Personnel Action Form recommended termination effective April 9, 1999, not extension, while the March 2, 1999 form was inconclusive for lack of evaluation results, non-presentation of the referenced attached memo, and absence of respondent's signature.
• Validity of Termination: A probationary employee may be terminated only for just cause or for failure to qualify under reasonable standards made known at engagement, with the burden of proving valid cause on the employer and the power to dismiss limited by contract requirements, real good-faith dissatisfaction, and absence of unlawful discrimination. In the absence of any evaluation or valid extension, failure to meet performance standards could not be concluded, and no just or authorized cause was shown; disharmony between Labor Arbiter and NLRC findings justified review of the facts and rejection of the NLRC's reliance on the inconclusive forms.
• Entitlement to Reinstatement, Backwages and Attorney's Fees: Since respondent was regular and not dismissed for just or authorized cause, the dismissal was illegal, entailing reinstatement without loss of seniority rights and other privileges plus full backwages inclusive of allowances and other benefits or their monetary equivalent from withholding of compensation until actual reinstatement, consistent with the Labor Arbiter's award as reinstated by the Court of Appeals.
• Payment of Remaining Salaries: Copies of the check and voucher for P6,095.19 were presented to prove payment of remaining unpaid salaries on May 26, 1999. The payment stood unrefuted before the Court of Appeals and the Supreme Court, warranting deletion of the separate order for payment of unpaid salaries while otherwise affirming the appellate decision.

• Probationary employment; regularization after probation — A probationary employee engaged to work beyond the probationary period of six months under Article 281 of the Labor Code, or for any length of time set by the employer, in this case three months, shall be considered a regular employee. Applied here, expiration of the stipulated three-month period without a proved valid extension converted respondent to regular status, and circumvention of this rule would defeat State protection for labor.
• Termination of probationary employment — The services of a probationary employee may be terminated only for just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer at the start of employment. Applied here, the absence of any evaluation during probation precluded a finding that respondent failed to meet the hotel's standards for Chief Steward.
• Limitations on employer's power to dismiss probationary employees; burden of proof — The power must be exercised in accordance with contract requirements, dissatisfaction must be real and in good faith and not feigned to circumvent contract or law, there must be no unlawful discrimination, and the burden of proving just or valid cause rests on the employer. Applied here, the employer failed to discharge that burden where evaluation, extension memo, and employee conformity were missing.

• "An employee who is allowed to work after a probationary period shall be considered a regular employee." — States the controlling last sentence of Article 281 under which expiration of the stipulated three-month probation without valid extension made respondent regular.
• "The 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." — Defines the only two lawful grounds for terminating probation, neither of which was proved here.
• "In termination cases, the burden of proving just or valid cause for dismissing an employee rests on the employer." — States the burden rule that the hotel failed to satisfy for lack of evaluation and inconclusive extension documents.

• Aberdeen Court, Inc. vs. Agustin, Jr., G.R. No. 149371, April 13, 2005, 456 SCRA 32, 41 — Cited as authority for the two lawful grounds for terminating probationary employment under Article 281.
• Sameer Overseas Placement Agency, Inc. vs. NLRC, G.R. No. 132564, October 20, 1999, 317 SCRA 120, 124-125 — Cited as authority for the limitations on the employer's power to terminate probation and the employer's burden to prove just or valid cause.
• Phil. Federation of Credit Cooperatives, Inc. vs. NLRC, G.R. No. 121071, December 11, 1998, 300 SCRA 72, 74-75 — Cited as authority that a probationary employee allowed to work beyond the probationary period, including an employer-fixed shorter period, becomes a regular employee.

• Article 281, Labor Code — Governs probationary employment: caps probation at six months absent apprenticeship agreement; allows termination only for just cause or failure to qualify under reasonable standards made known at engagement; deems an employee allowed to work after probation as regular. Applied to hold that the three-month hires became regular absent proved evaluation and valid extension, making dismissal without just or authorized cause illegal with reinstatement and backwages.

Antonio T. Carpio, Associate Justice; Conchita Carpio Morales, Associate Justice; Dante O. Tinga, Associate Justice; Presbitero J. Velasco, Jr., Associate Justice.