Mitsubishi Motors Philippines Corporation vs. Chrysler Philippines Labor Union and Nelson Paras

A probationary employee who is allowed to work beyond the six-month probationary period becomes a regular employee, and his dismissal must be based on just or authorized causes under the Labor Code and after due notice. The six-month probationary period is computed as 180 days under Article 13 of the Civil Code, with the first day excluded and the last day included.

Mitsubishi Motors Philippines Corporation (MMPC) is a domestic corporation engaged in the assembly and distribution of Mitsubishi motor vehicles. Chrysler Philippines Labor Union (CPLU) is the duly certified bargaining agent of MMPC's hourly-paid regular rank and file employees. Nelson Paras was a member of CPLU, and his wife, Cecille Paras, was the President of the Chrysler Philippines Salaried Employees Union (CPSU). The case involves the termination of a probationary employee and the application of Article 281 of the Labor Code on probationary employment, which requires that the probationary period not exceed six months and that the employee be informed of the standards for regularization at the start of employment.

Nelson Paras was first employed by MMPC as a shuttle bus driver on March 19, 1976, and resigned on June 16, 1982. He worked in Saudi Arabia from 1982 to 1993, then returned to the Philippines and was re-hired as a welder-fabricator at the MMPC tooling shop from October 3, 1994 to October 31, 1994, with his contract renewed from November 1, 1994 up to March 3, 1995. Sometime in May of 1996, Paras was re-hired on a probationary basis as a manufacturing trainee at the Plant Engineering Maintenance Department. He and the new and re-hired employees were given an orientation on May 15, 1996 by Emma P. Aninipot, respecting the company's history, corporate philosophy, organizational structure, and company rules and regulations, including the company standards for regularization, code of conduct and company-provided benefits.

Paras started reporting for work on May 27, 1996, assigned at the paint ovens, air make-up and conveyors. As part of MMPC's policy, Paras was evaluated by his immediate supervisors Lito R. Lacambacal and Wilfredo J. Lopez after six months and received an average rating. Lacambacal informed Paras that based on his performance rating, he would be regularized. However, the Department and Division Managers, A.C. Velando and H.T. Victoria, including Mr. Dante Ong, reviewed the performance evaluation and unanimously agreed, along with Paras' immediate supervisors, that his performance was unsatisfactory. As a consequence, Paras was not considered for regularization. On November 26, 1996, he received a Notice of Termination dated November 25, 1996, informing him that his services were terminated effective the said date since he failed to meet the required company standards for regularization.

Utilizing the grievance machinery in the collective bargaining agreement, the CPLU demanded settlement of the dispute arising from Paras' termination. The dispute was submitted for voluntary arbitration. CPLU posited that Paras was dismissed on his one hundred eighty-third day of employment, or three days after the expiration of the probationary period of six months, and that he was already a regular employee on the date of termination. According to CPLU and Paras, the dismissal was an offshoot of a heated argument during CBA negotiations between MMPC Labor Relations Manager Atty. Carlos S. Cao and Cecille Paras, the President of CPSU and Paras' wife. The Voluntary Arbitrator found the dismissal valid, ruling that MMPC had complied with the requirement of apprising Paras of the standards of performance evaluation and regularization, and that the termination was effected prior to the expiration of the six-month probationary period.

The Court of Appeals reversed, holding that six months is equivalent to 180 days and that computed from May 27, 1996, the period expired on November 23, 1996. When Paras received the termination letter on November 26, 1996, it was served on the 183rd day, after the expiration of the probationary period, making him a regular employee. The appellate court concluded that for MMPC's failure to show that Paras was duly notified of the cause of his dismissal, he was illegally dismissed. MMPC moved for reconsideration, alleging that reinstatement had become moot because it had retrenched approximately seven hundred employees as a result of financial losses in 1997, and that backwages should be computed only up to February 1998, the date of the first phase of retrenchment. The CA denied the motion.

• Computation of Probationary Period: The petitioner argued that under Article 13 of the New Civil Code, the six-month probationary period should be computed by counting the actual days in each month, so that the period commencing May 27, 1996 would expire on November 27, 1996, and since the termination letter was served on November 26, 1996, Paras was still a probationary employee.
• Mootness of Reinstatement: The petitioner contended that even assuming Paras was a regular employee when dismissed, his reinstatement had become moot and academic because of the retrenchment program effected as a result of business losses suffered in 1997, and that Paras would have been included in the first batch of employees retrenched in February 1998 under the "last in first out policy" in the CBA.
• Limitation of Backwages: The petitioner argued that Paras' backwages should be computed only up to February 1998, the date when MMPC effected the first phase of its retrenchment program.

• Regularization After 180 Days: The respondents argued that the CA was correct in concluding that the termination letter was served on Paras' one hundred eighty-third day of employment, asserting that six months is equivalent to 180 days, and since Paras was employed on May 27, 1996, the 180th day fell on November 23, 1996, making him a regular employee when the termination letter was served.
• Prohibition on New Allegations: The respondents contended that the petitioner cannot raise new and unsubstantiated allegations in its petition, particularly regarding financial reverses and retrenchment, which were not raised before the Court of Appeals and the Voluntary Arbitrator.

• Regularization: Whether respondent Paras was already a regular employee on November 26, 1996.
• Legality of Dismissal: Whether respondent Paras was legally dismissed.
• Mootness of Reinstatement: Whether respondent Paras' reinstatement had been rendered moot and academic.
• Computation of Backwages: Whether respondent Paras' backwages should be computed only up to February of 1998.

• Regularization: Yes. Paras became a regular employee on November 24, 1996, the day after the expiration of his six-month probationary period, which was computed as 180 days under Article 13 of the Civil Code, with the first day excluded and the last day included.
• Legality of Dismissal: No. Paras was illegally dismissed because the employer failed to prove just or authorized cause under Article 282 of the Labor Code, and the alleged unsatisfactory rating did not amount to gross and habitual neglect of duties.
• Mootness of Reinstatement: Yes. Reinstatement was rendered moot because MMPC validly retrenched approximately seven hundred employees due to serious and actual business reverses, and Paras would have been included in the retrenchment under the "last in first out policy."
• Computation of Backwages: Yes, but only up to March 25, 1998. Paras should be paid full backwages from the date of his illegal dismissal up to March 25, 1998, when the retrenchment would have taken effect, plus separation pay under Article 283 of the Labor Code.

• Regularization: The Court applied Article 13 of the Civil Code, which provides that months not designated by their names shall be understood as consisting of thirty days each, and that in computing a period, the first day shall be excluded and the last day included. The six-month probationary period thus consisted of 180 days, commencing on May 27, 1996 and ending on November 23, 1996. Since the termination letter was served on Paras only at 3:00 a.m. of November 26, 1996, he was already a regular employee under Article 281 of the Labor Code, which provides that an employee who is allowed to work beyond the probationary period becomes a regular employee.

• Legality of Dismissal: The Court noted that an employee cannot be dismissed except for just or authorized cause as found in the Labor Code and after due process. Under Article 282, an unsatisfactory rating can be a just cause for dismissal only if it amounts to gross and habitual neglect of duties, defined as the want or absence of even slight care or diligence as to amount to a reckless disregard of the safety of person or property. The records did not show that Paras was grossly negligent. His immediate supervisor gave him an average performance rating and found him fit for regularization, but the department and division heads made a "complete turn around" and unanimously agreed his performance was unsatisfactory. There was no showing that Paras was informed of the basis for the volte face of the management group, and his immediate supervisor even told him he had garnered a satisfactory rating and was qualified for regularization. The employer has the burden of proving the lawfulness of the dismissal, and the termination based on alleged unsatisfactory performance was effected merely to cover up and "deodorize" the illegality of the dismissal.

• Mootness of Reinstatement: The Court held that business reverses or losses are recognized by law as an authorized cause for termination of employment, but the alleged losses must be proven convincingly. The petitioner submitted its financial statements for 1996, 1997 and 1998, showing a net income of ₱467,744,285 in 1996, a net loss of ₱29,253,511 in 1997, and a net loss of ₱8,156,585 in 1998. The continuity of losses was further illustrated in the figures on retained earnings, which decreased from ₱1,838,098,175 in 1996 to ₱994,942,628 in 1997 and further to ₱592,614,548 in 1998. The Court found that the serious and actual business reverses suffered by the petitioner justified its resort to retrenchment of seven hundred employees. Since Paras had just been regularized on November 24, 1996, he would have been included among those retrenched under the "last in first out policy" in the CBA.

• Computation of Backwages: The Court held that the unfavorable financial conditions of the petitioner may not justify reinstatement, but they are not a sufficient ground to deny backwages to an illegally dismissed employee. Since notices of retrenchment were mailed on February 25, 1998 and made effective one month therefrom, Paras should be paid full backwages from the date of his illegal dismissal up to March 25, 1998. Pursuant to Article 283 of the Labor Code, he should also be paid separation pay equivalent to one month salary, or to at least one-half month pay for every year of service, whichever is higher, with a fraction of at least six months considered as one year.

• Probationary Employment and Regularization — Under Article 281 of the Labor Code, a probationary employee who is allowed to work beyond the six-month probationary period becomes a regular employee. The employer must inform the employee of the standards for regularization at the start of the probationary period, and the employee's services may be terminated for just cause or for failure to qualify based on reasonable standards made known to him. In this case, Paras became a regular employee when his six-month probationary period expired on November 23, 1996, before the termination notice was served on November 26, 1996.

• Computation of Periods Under Article 13 of the Civil Code — Months not designated by their names shall be understood as consisting of thirty days each, and in computing a period, the first day shall be excluded and the last day included. The Court applied this rule to compute the six-month probationary period as 180 days, commencing on May 27, 1996 and ending on November 23, 1996.

• Burden of Proof in Illegal Dismissal Cases — The employer has the burden of proving the lawfulness of the employee's dismissal, and the validity of the charge must be clearly established in a manner consistent with due process. An unsatisfactory rating can be a just cause for dismissal only if it amounts to gross and habitual neglect of duties, defined as the want or absence of even slight care or diligence as to amount to a reckless disregard of the safety of person or property.

• Retrenchment as Authorized Cause — Business reverses or losses are recognized by law as an authorized cause for termination of employment, but the alleged losses must be proven convincingly. Otherwise, such ground for termination would be susceptible to abuse by scheming employers who might be merely feigning business losses to ease out employees. The purpose of retrenchment is to save a financially ailing business establishment from eventually collapsing.

• "As clearly provided for in the last paragraph of Article 13, in computing a period, the first day shall be excluded and the last day included. Thus, the one hundred eighty (180) days commenced on May 27, 1996, and ended on November 23, 1996. The termination letter dated November 25, 1996 was served on respondent Paras only at 3:00 a.m. of November 26, 1996. He was, by then, already a regular employee of the petitioner under Article 281 of the Labor Code." — This passage states the ratio decidendi on the computation of the probationary period and the resulting regularization of Paras.

• "Under Article 282 of the Labor Code, an unsatisfactory rating can be a just cause for dismissal only if it amounts to gross and habitual neglect of duties. Gross negligence has been defined to be the want or absence of even slight care or diligence as to amount to a reckless disregard of the safety of person or property. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them." — This passage defines the standard for when an unsatisfactory rating justifies dismissal, which the Court applied to find the dismissal illegal.

• "Considering that respondent Paras was not dismissed for a just or authorized cause, his dismissal from employment was illegal. Furthermore, the petitioner's failure to inform him of any charges against him deprived him of due process. Clearly, the termination of his employment based on his alleged unsatisfactory performance rating was effected merely to cover up and 'deodorize' the illegality of his dismissal." — This passage articulates the Court's conclusion on the illegality of the dismissal and the due process violation.

• "The unfavorable financial conditions of the petitioner may not justify reinstatement. However, it is not a sufficient ground to deny backwages to respondent Paras who was illegally dismissed." — This passage states the principle that financial losses may render reinstatement moot but do not defeat the right to backwages of an illegally dismissed employee.

• Republic vs. National Labor Relations Commission, 318 SCRA 459 (1999) — Cited as authority for the computation of the six-month probationary period as 180 days under Article 13 of the Civil Code.
• Bolinao Security and Investigation Service, Inc. vs. Arsenio M. Toston, G.R. No. 139135, January 29, 2004 — Cited for the doctrine that an employee cannot be dismissed except for just or authorized cause and after due process, and that the employer has the burden of proving the lawfulness of the dismissal.
• Metro Transit Organization, Inc. vs. NLRC, 263 SCRA 313 (1996) — Cited for the definition of gross negligence as the want or absence of even slight care or diligence amounting to a reckless disregard of the safety of person or property.
• J.A.T. General Services and Jesusa Torubu vs. National Labor Relations Commission and Jose F. Mascarinas, G.R. No. 148340, January 26, 2004 — Cited for the doctrine that business losses must be proven convincingly to justify retrenchment, and that the purpose of retrenchment is to save a financially ailing business from collapsing.
• Columbian Rope Co. of the Philippines vs. Tacloban Association of Laborers and Employees, 6 SCRA 424 (1962) — Cited for the principle that unfavorable financial conditions may not justify reinstatement but are not a sufficient ground to deny backwages to an illegally dismissed employee.
• Tomas Claudio Memorial College, Inc. vs. Court of Appeals and Pedro Natividad, G.R. No. 152568, February 16, 2004 — Cited for the doctrine that the normal consequences of illegal dismissal are reinstatement without loss of seniority rights and the payment of backwages computed from the time the employee's compensation was withheld.

• Article 13, Civil Code — Provides that months not designated by their names shall be understood as consisting of thirty days each, and that in computing a period, the first day shall be excluded and the last day included. The Court applied this provision to compute the six-month probationary period as 180 days.
• Article 281, Labor Code — Provides that the probationary period shall not exceed six months from the date the employee started working, and that an employee who is allowed to work beyond the probationary period becomes a regular employee. The Court applied this provision to find that Paras became a regular employee when his probationary period expired.
• Article 282, Labor Code — Enumerates the just causes for termination of employment, including serious misconduct, gross and habitual neglect of duties, fraud, commission of a crime, and other analogous causes. The Court applied this provision to determine that Paras' dismissal was not for a just cause.
• Article 283, Labor Code — Provides for the payment of separation pay in cases of authorized causes of termination, equivalent to one month salary or at least one-half month pay for every year of service, whichever is higher. The Court applied this provision to award separation pay to Paras.

Puno, Quisumbing, Austria-Martinez (on leave), and Tinga, JJ., concurred.