Enchanted Kingdom, Inc. vs. Verzo

A probationary employee may be validly terminated for failure to qualify for regularization where the employer substantially complies with the requirement of making known the reasonable standards at the time of engagement; strict day-one notice is not required, and notice and hearing are unnecessary for that ground, provided the employee is given a reasonable time and opportunity to know the standards, as where the letter and job description were received 14 days after hiring.

Enchanted Kingdom, Inc. operates a theme park in Sta. Rosa City, Laguna, and hired Miguel J. Verzo as Section Head - Mechanical & Instrumentation Maintenance on a probationary basis. The dispute concerns the Labor Code’s requirements for probationary employment, particularly the employer’s duty to make known the reasonable standards for regularization at the time of engagement. The case also involves the distinction between termination for cause, which requires notice and hearing, and non-regularization for failure to qualify, which the SC treats differently.

Miguel J. Verzo was hired by Enchanted Kingdom, Inc. on August 19, 2009 as Section Head - Mechanical & Instrumentation Maintenance for its theme park in Sta. Rosa City, Laguna, for a six-month probationary period. He was tasked to conduct mechanical and structural system assessments and to inspect and evaluate the conditions, operations and maintenance requirements of rides, facilities and buildings to ensure compliance with applicable codes, regulations and standards, and he was provided a detailed list of responsibilities. Enchanted’s letter dated August 26, 2009 placed him on probationary status from August 19, 2009 to February 18, 2010, stated that he would be responsible for those assessments and inspections, and referred to an attached Job Description; Verzo acknowledged receipt and agreed to the terms on September 2, 2009.

During the probationary period, Enchanted assessed Verzo’s performance as not up to par. On January 26, 2010, Robert M. Schoefield, a fellow section head, recommended to Rizalito M. Velesrubio, Verzo’s immediate supervisor, that Verzo not be considered for regularization. Schoefield noted that Verzo failed to replace faucets in the park’s lavatories and to ensure proper installation of proximity brackets on one ride; mishandled the submersible pump, causing sludge from the sewage treatment plant to overflow toward the parking entrance; reported that the ZORB Ball pond had sufficient water, but a patron was injured the next day due to low water level; and often used company time browsing the internet for personal use. Jun Montemayor, another section head, reported to Velesrubio that Verzo performed more like rank-and-file, lacked initiative, used company computers during office hours to search for motorcycle models and clubs, was slow to decide or act, often reported at 9:00 a.m., and was afraid to give orders to subordinates. Velesrubio reported to Nympha C. Maduli, head of Human Resources, that Verzo failed to check a lift problem for several days, forcing Velesrubio to repair it himself; delayed checking and repairing a malfunctioning water pump for several weeks; and did not know that an air-conditioning unit in one attraction had an expansion valve.

On February 3, 2010, Enchanted furnished Verzo a copy of the Cast Member Performance Appraisal for Regularization, which gave him a score of 70 out of 100 and contained the notations “Lacking in supervisory skill; Incompetent technically; Lacking in initiative/sense of responsibility.” On February 15, 2010, Enchanted formally informed Verzo that he did not qualify for regularization because his work performance for the past five months did not meet the requirements of the position of Section Head for Mechanical and Instrumentation Maintenance.

Verzo claimed that he was informed of his probationary status only after he was formally hired and was not advised of the standards for regularization. He maintained that he performed his job well, was punctual and regular in attendance, respectful to superiors, maintained good working relationships with subordinates, and introduced useful innovations in maintenance procedures. According to Verzo, the controversy began on January 5, 2010, when Schoefield told him that Enchanted had decided not to continue his employment; Velesrubio confirmed the news but gave no explanation and advised him to resign so he could receive a certificate of employment. Verzo asked Velesrubio several times for an explanation, then sought advice from Federico Juliano, Enchanted’s Executive Vice President for Operations, who told him he apparently lacked control over personnel under his supervision and also advised him to resign. After Verzo sent a letter dated January 26, 2010 to Velesrubio, a meeting was held that same day, but instead of explaining the non-regularization, Velesrubio, Schoefield, and Montemayor accused him of transgressions he was hearing for the first time and gave him no chance to explain. On February 3, 2010, when Verzo went to Maduli’s office for his performance appraisal, he was again advised to resign in exchange for a certificate of employment; Maduli showed him the appraisal and the memoranda citing his shortcomings, and Verzo asked for time to answer the allegations in writing. Before he could submit his written reply, he received the February 15, 2010 letter informing him that he was being terminated for failure to qualify for regularization.

Verzo then filed a complaint for illegal dismissal, damages, and attorney’s fees. The LA and NLRC found that Verzo had signed the employment contract and Job Description; the CA found that the performance appraisal did not specify instances of unfitness and did not indicate that the 70 out of 100 score was unsatisfactory or below the required regularization rating.

• Finality of Labor Tribunals’ Findings: Petitioner argued that the CA committed palpable error in failing to accord respect and finality to the LA and NLRC findings that it validly terminated Verzo for failure to qualify for regular employment.
• Notice of Probationary Status and Standards: Petitioner maintained that Verzo was apprised of his probationary status and the standards expected of him at the time of employment; the August 26, 2009 letter stated probationary status from August 19, 2009 to February 18, 2010, and was accompanied by a Job Description detailing his duties and responsibilities, both signed by Verzo.
• Validity of Dismissal: Petitioner argued that Verzo’s dismissal was valid because he failed to adhere to the dictates of common sense and to act in accordance with his position as SH-MIM.
• Self-Descriptive Job: Petitioner asserted that Verzo need not be informed of his specific duties and responsibilities because his job was self-descriptive.
• Bad Faith: Petitioner argued that the CA’s conclusion that Verzo was being made to resign even before his evaluation was baseless; it conducted the evaluation on January 26, 2010 and notified Verzo of its conclusion on February 15, 2010, twenty days after evaluation.

• Regular Employment: Respondent contended that he was a regular employee because he was not apprised of his probationary status at the start of his employment and was not informed of the reasonable standards for his regularization.
• Due Process: Respondent claimed that as a regular employee, he could only be dismissed for cause and only after the twin requirements of notice and hearing had been complied with.
• Performance: Respondent maintained that he performed his job well, was always punctual and regular in attendance, respectful to superiors, maintained good working relationships with subordinates, and introduced useful innovations in maintenance procedures.

• Review of Factual Findings: Whether the SC may review the factual findings of the LA and NLRC when they conflict with those of the CA.
• Probationary Status and Standards: Whether Verzo was validly placed on probationary status and was informed of the reasonable standards for regularization at the time of his engagement.
• Validity of Dismissal: Whether Enchanted validly terminated Verzo for failure to qualify as a regular employee.
• Due Process: Whether notice and hearing were required before Enchanted terminated Verzo for failure to meet the standards for regularization.
• Entitlement to Relief: Whether Verzo is entitled to reinstatement, backwages, moral damages, and attorney’s fees.

• Review of Factual Findings: Yes. The SC may review factual findings when they conflict with those of the CA, as one of the recognized exceptions to the rule that it is not a trier of facts.
• Probationary Status and Standards: Yes. Enchanted substantially complied with the requirement to make known the probationary status and reasonable regularization standards through the August 26, 2009 letter and attached Job Description; strict day-one notice is not required, and Verzo received the letter 14 days after his start date.
• Validity of Dismissal: Yes. Enchanted validly terminated Verzo for failure to qualify as a regular employee; the performance appraisal and the Schoefield, Montemayor, and Velesrubio reports detailed deficiencies showing he lacked the required competence, prudence, and diligence.
• Due Process: No. Notice and hearing are not required when a probationary employee is not retained for failure to meet reasonable standards made known at engagement; a written notice within a reasonable time from the effective date of termination is sufficient.
• Entitlement to Relief: No. Because the dismissal was valid, Verzo is not entitled to reinstatement, backwages, moral damages, or attorney’s fees, and his complaint was dismissed for lack of merit.

• Review of Factual Findings: The SC acknowledged that it is not a trier of facts and that a petition for review on certiorari under Rule 45 is limited to reviewing errors of law. It nevertheless listed exceptions, including when the findings of fact are conflicting and when the CA’s findings are contrary to those of the lower tribunal. Because the factual findings of the LA and NLRC differed from those of the CA, the SC reviewed the evidence on record to determine whether Verzo was illegally dismissed.

• Probationary Status and Standards: The SC explained that a probationary employee is observed and evaluated to determine qualification for permanent employment and enjoys security of tenure; aside from just or authorized causes, the probationary employee may be terminated for failure to qualify as a regular employee in accordance with reasonable standards made known by the employer at the time of engagement. Under Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code, if no standards are made known at that time, the employee is deemed regular. Abbott Laboratories vs. Alcaraz requires the employer to communicate the regularization standards and to do so at the time of engagement; failure in either makes the employee regular. The SC found that the August 26, 2009 letter stated Verzo’s probationary status from August 19, 2009 to February 18, 2010, identified his responsibility to conduct mechanical and structural system assessments and to inspect and evaluate conditions, operations, and maintenance requirements of rides, facilities, and buildings to ensure compliance with applicable codes, regulations, and standards, and referred to an attached Job Description detailing his duties. Verzo acknowledged receipt on September 2, 2009, only 14 days after his start date. The SC held that strict day-one compliance is not required; the true test is reasonableness, and as long as the probationary employee is given a reasonable time and opportunity to be fully aware of what is expected during the early phases of probation, the requirement is satisfied. The letter was not an afterthought, and Enchanted substantially complied. Thus, Verzo remained a probationary employee, not a regular one.

• Validity of Dismissal: The SC found that Enchanted had basis to discontinue Verzo’s services. The performance appraisal gave him 70 out of 100 and stated that he was lacking in supervisory skill, incompetent technically, and lacking in initiative/sense of responsibility; it was accompanied by the reports of Schoefield, Montemayor, and Velesrubio, which detailed his failures. Schoefield cited the faucet replacement, proximity brackets, submersible pump sludge overflow, the ZORB Ball pond incident where a patron was injured due to low water level after Verzo reported sufficient water, and personal internet use. Montemayor cited rank-and-file performance, lack of initiative, personal internet searches for motorcycle models and clubs, slow decisions, tardiness, and fear of giving orders. Velesrubio cited failure to check a lift for several days, delay in repairing a water pump for several weeks, and lack of technical knowledge about the air-conditioning expansion valve. Even if Verzo was not informed of specific duties, the SC held that his dismissal was valid because he failed to adhere to the dictates of common sense and to act in accordance with the necessary work ethics and basic skills required by his position as SH-MIM and by his profession as a licensed engineer. Under Aberdeen Court, Inc. vs. Agustin, the rule on notifying standards should not exculpate an employee who acted contrary to basic knowledge and common sense, and failure to perform duties clearly made known is a justifiable basis for non-regularization. Velesrubio’s advice to resign did not show bad faith; it was his own opinion based on supervision, and it was not a foregone conclusion that Enchanted had decided to discontinue employment. The reports of Verzo’s colleagues were detailed and credible against his self-serving theory. On punctuality, Carvajal vs. Luzon Development Bank held that punctuality is a reasonable standard and habitual tardiness may constitute gross or habitual neglect of duty. Enchanted, as an amusement enterprise, was not duty-bound to retain an employee clearly unfit, given safety risks to patrons.

• Due Process: The SC held that whether Verzo was afforded the opportunity to explain his side was of no consequence. Under Section 2, Rule I, Book VI of the Implementing Rules of the Labor Code, in probationary employment, termination for failure to qualify in accordance with the standards made known at engagement may be a ground, and if termination is brought about by failure to meet the standards, it is sufficient that a written notice is served on the employee within a reasonable time from the effective date of termination. Philippine Daily Inquirer vs. Magtibay held that notice and hearing are not required for this second ground; due process consists of making the reasonable standards expected during probation known at the time of probationary employment. Since Enchanted complied with that requirement, no notice and hearing were required.

• Entitlement to Relief: Because Verzo’s dismissal for failure to qualify was valid, the complaint for illegal dismissal, damages, and attorney’s fees lacked merit. The SC reversed and set aside the CA decision and resolution and dismissed the complaint.

• Probationary Employment — A probationary employee is one who, for a given period, is observed and evaluated to determine qualification for permanent employment; the employee enjoys security of tenure but may be terminated for just or authorized cause, or for failure to qualify as a regular employee under reasonable standards made known at the time of engagement. The SC applied this to hold that Verzo remained probationary because Enchanted made known the standards.

• Two Requirements for Valid Probationary Standards (Abbott Laboratories vs. Alcaraz) — The employer must (1) communicate the regularization standards to the probationary employee, and (2) make such communication at the time of the employee’s engagement; failure to comply with either makes the employee regular. The SC found substantial compliance because the August 26, 2009 letter and Job Description were received 14 days after Verzo’s start date.

• Substantial Compliance / Reasonableness Test — Strict day-one compliance with the notice of regularization standards is not required; the true test is reasonableness. As long as the probationary employee is given a reasonable time and opportunity to be fully aware of what is expected during the early phases of probation, the requirement is satisfied. The SC applied this to the 14-day interval between hiring and receipt of the letter.

• Self-Descriptive Job / Common Sense Exception (Aberdeen Court, Inc. vs. Agustin) — The rule requiring notice of regularization standards should not exculpate an employee who acted contrary to basic knowledge and common sense, and failure to perform duties clearly made known is a justifiable basis for non-regularization. The SC applied this to hold that even if Verzo was not informed of specific duties, his failure to meet basic work ethics and skills justified non-regularization.

• Due Process in Probationary Termination for Failure to Qualify — Notice and hearing are not required when a probationary employee is not retained for failure to meet the reasonable standards set by the employer; due process consists of making those standards known during the probationary employment, and a written notice within a reasonable time from the effective date of termination is sufficient. The SC applied this to reject Verzo’s due process claim.

• Punctuality as a Reasonable Standard — Punctuality is a reasonable standard imposed on every employee, whether in government or private sector; habitual tardiness may constitute gross or habitual neglect of duty. The SC used this to support consideration of Verzo’s tardiness as a basis for non-regularization.

• “In all cases of probationary employment, the employer shall make known to the employee the standards under which he will qualify as a regular employee at the time of his engagement. Where no standards are made known to the employee at that time, he shall be deemed a regular employee.” — The SC quoted Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code and applied it to find that Enchanted substantially complied with the notice requirement.
• “The true test of compliance with the requirements of the law is, of course, one of reasonableness.” — The SC used this to hold that strict day-one notice of regularization standards is not required and that the 14-day delay in Verzo’s receipt of the letter was reasonable.
• “Unlike under the first ground for the valid termination of probationary employment which is for cause, the second ground does not require notice and hearing.” — The SC quoted Philippine Daily Inquirer vs. Magtibay to hold that non-regularization for failure to qualify does not require notice and hearing.
• “Punctuality is a reasonable standard imposed on every employee, whether in government or private sector.” — The SC cited Carvajal vs. Luzon Development Bank to support its consideration of Verzo’s tardiness as a valid ground for non-regularization.

• Escorpizo vs. University of Baguio, 366 Phil. 166, 175-176 (1999) — Cited for the definition and purpose of probationary employment.
• Robinson’s Galleria/Robinsons Supermarket Corporation vs. Ranchez, 655 Phil. 133, 139 (2011) — Cited for the grounds for terminating probationary employment and for the self-descriptive-job exception.
• Abbott Laboratories vs. Alcaraz, G.R. No. 192571, July 23, 2013, 701 SCRA 682 — Controlling precedent on the two requirements for communicating regularization standards; followed.
• Aberdeen Court, Inc. vs. Agustin, 495 Phil. 706, 716-717 (2005) — Followed for the rule that the notice requirement should not exculpate an employee who acted contrary to basic knowledge and common sense.
• Philippine Daily Inquirer vs. Magtibay, 555 Phil. 326, 336 (2007) — Controlling precedent on the rule that notice and hearing are not required for non-regularization for failure to qualify; followed.
• Carvajal vs. Luzon Development Bank, 692 Phil. 273 (2012) — Followed for the rule that punctuality is a reasonable standard and habitual tardiness may constitute gross or habitual neglect of duty.
• Mercury Drug Corporation vs. National Labor Relations Commission, G.R. No. 75662, September 15, 1989, 177 SCRA 580, 586-587 — Cited for the principle that social justice does not require deciding every labor dispute in favor of labor and that management rights are entitled to respect.

• Article 281, Labor Code — Provides that a probationary employee may be terminated for just or authorized cause or for failure to qualify as a regular employee in accordance with reasonable standards made known by the employer at the time of engagement. The SC applied this to hold that Verzo’s non-regularization was valid.
• Section 6(d), Rule I, Book VI, Implementing Rules of the Labor Code — Requires the employer to make known the regularization standards at the time of engagement; if no standards are made known, the employee is deemed regular. The SC applied this and found substantial compliance through the August 26, 2009 letter and Job Description.
• Section 2, Rule I, Book VI, Implementing Rules of the Labor Code — Provides the due process standards for termination, including that in probationary employment, termination for failure to meet the employer’s standards requires only a written notice within a reasonable time from the effective date of termination. The SC applied this to hold that notice and hearing were not required.
• Rule 45, Rules of Court — Governs petitions for review on certiorari; the SC noted that review is generally limited to errors of law but allowed factual review because the LA and NLRC findings conflicted with those of the CA.