Univac Development, Inc. vs. Soriano

A probationary employee whose employer fails to make known the reasonable standards for regularization at the time of engagement is deemed a regular employee from the first day of employment, and the employer's failure to conduct a performance evaluation to justify dismissal renders the termination illegal for lack of just cause and due process. The Court of Appeals may review the factual findings of the NLRC in a certiorari proceeding under Rule 65 to determine whether the NLRC committed grave abuse of discretion, even after the NLRC decision has become final and executory.

Univac Development, Inc. hired William M. Soriano as a probationary legal assistant on August 23, 2004, at a monthly salary of ₱15,000. Probationary employment under Article 281 of the Labor Code and its Implementing Rules requires that reasonable standards for regularization be made known to the employee at the time of engagement; absent such standards, the employee is deemed regular from day one. The dispute arose from the termination of Soriano's probationary employment eight days before the end of the six-month probationary period, with the parties offering divergent accounts of the circumstances of separation.

Univac Development, Inc. hired William M. Soriano on August 23, 2004 as a probationary legal assistant with a monthly salary of ₱15,000. Soriano claimed that on February 15, 2005, eight days before the completion of his six-month probationary period, Johnny Castro, head of the engineering department, informed him that he was being terminated due to the company's cost-cutting measures. Soriano allegedly asked for a thirty-day notice but was told the termination was effective immediately, leaving him with no choice but to leave.

Petitioner presented a different account. It claimed that prior to Soriano's employment, he was informed of the standards required for regularization, including safekeeping of case folders, proper coordination with the company's lawyers, and monitoring of case status. According to petitioner, at a company meeting on January 5, 2005, Soriano expressed his intention to leave the company to review for the bar examinations and was informed of his unsatisfactory performance. When Soriano failed to report for work on February 16, 2005, petitioner assumed he had pushed through with his plan to leave, constituting abandonment.

Soriano filed a complaint for illegal dismissal before the Labor Arbiter, who dismissed it for lack of merit, finding that Soriano was informed of his unsatisfactory performance and, as a law graduate and master's degree holder, was presumed to know that his probationary employment would soon end. The Labor Arbiter awarded only eight days' backwages because the termination occurred eight days before the probationary period ended. The NLRC affirmed this decision in its entirety, crediting petitioner's claim that Soriano was apprised of his unsatisfactory performance at the company meeting and finding valid exercise of management prerogative. The NLRC resolution became final and executory on August 24, 2006 and was entered in the Book of Entries of Judgment. Soriano elevated the matter to the Court of Appeals via certiorari under Rule 65, which granted his petition, finding that petitioner failed to apprise Soriano of the standards for regularization, failed to conduct a performance evaluation, and that the hiring of a replacement on the day of the alleged abandonment negated the claim of abandonment. The CA awarded backwages, separation pay in lieu of reinstatement, and attorney's fees. Petitioner then filed the present petition for review on certiorari under Rule 45.

• Finality of NLRC Decision: Petitioner argued that the CA erred in granting respondent's petition despite the NLRC rulings having attained finality and been entered in the Book of Entries of Judgment, violating the doctrine of immutability of judgment.
• Scope of Certiorari: Petitioner contended that the CA went beyond the narrow scope of certiorari under Rule 65 by reviewing factual findings rather than limiting itself to determining grave abuse of discretion amounting to lack or excess of jurisdiction.
• Nature of Dismissal: Petitioner asserted that the CA effectively ruled on actual dismissal when the complaint filed was for constructive illegal dismissal.
• Sufficiency of Evidence: Petitioner maintained that the CA improperly reversed the NLRC findings despite substantial evidence supporting the NLRC's rulings.
• Rehabilitation Stay Order: Petitioner claimed that all claims against it should be suspended pursuant to a stay order issued by the rehabilitation court, citing PAL vs. Zamora.

• Jurisdiction of the CA over Final NLRC Decisions: Whether the Court of Appeals could properly review the NLRC's decision via certiorari under Rule 65 notwithstanding the finality of the NLRC resolution.
• Scope of CA Review: Whether the Court of Appeals exceeded its jurisdiction under Rule 65 by reviewing the factual findings and evidence of the NLRC.
• Validity of Probationary Dismissal: Whether respondent was illegally dismissed from employment, considering petitioner's failure to make known the reasonable standards for regularization and to conduct a performance evaluation.
• Effect of Rehabilitation Proceedings: Whether the stay order from the rehabilitation court should suspend all claims against petitioner.

• Jurisdiction of the CA over Final NLRC Decisions: Yes. The finality of the NLRC decision does not preclude the aggrieved party from assailing it via certiorari under Rule 65 before the CA, and then to the Supreme Court via Rule 45.
• Scope of CA Review: No error. The CA is empowered to evaluate the materiality and significance of evidence allegedly capriciously disregarded by the NLRC, including reviewing factual findings, to determine whether grave abuse of discretion was committed.
• Validity of Probationary Dismissal: Yes, the dismissal was illegal. Petitioner failed to make known the reasonable standards for regularization at the time of engagement and failed to conduct any performance evaluation, making respondent a regular employee from day one and rendering the termination without just cause and due process.
• Effect of Rehabilitation Proceedings: No. The rehabilitation petition filed by petitioner before the RTC of Baguio City had been dismissed by the Supreme Court for lack of jurisdiction in Asiatrust Development Bank vs. First Aikka Development, Inc., so petitioner could not rely on any stay order from that court.

• Jurisdiction of the CA over Final NLRC Decisions: Under Article 223 of the Labor Code, NLRC decisions become final and executory after ten calendar days from receipt. However, finality does not preclude review via certiorari under Rule 65. The Court explained that the adverse party may assail the NLRC decision before the CA and then to the Supreme Court via Rule 45. Thus, there was no violation of the doctrine of immutability of judgment when respondent elevated the matter to the CA.

• Scope of CA Review: While certiorari under Rule 65 is confined to errors of jurisdiction or grave abuse of discretion, the CA, in exercising expanded judicial review over labor cases, may grant the petition if it finds that the NLRC committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence material or decisive of the controversy. This necessarily includes looking into the evidence presented. The CA may review factual findings when they are not supported by the evidence on record, when necessary to prevent substantial wrong or do substantial justice, when the NLRC findings contradict those of the Labor Arbiter, and when necessary to arrive at a just decision. The CA was therefore empowered to review the NLRC's factual findings and the parties' evidence to determine whether grave abuse of discretion occurred.

• Validity of Probationary Dismissal: Article 281 of the Labor Code and its Implementing Rules require that reasonable standards for regularization be made known to the probationary employee at the time of engagement. Where no standards are made known, the employee is deemed a regular employee. In this case, petitioner failed to present adequate evidence that respondent was apprised of the standards; the LA and NLRC merely relied on surmises and presumptions based on respondent's educational background. Equally important, the employer must show how the standards were applied to the employee, which requires a performance evaluation. No such evaluation was shown. The power to terminate a probationary employee is subject to three limitations: the termination must accord with the contract requirements, the employer's dissatisfaction must be real and in good faith, and there must be no unlawful discrimination. Petitioner failed on all counts. Because petitioner failed to specify and prove the reasonable standards, respondent was deemed a regular employee from day one. The dismissal was without just cause and due process was not observed, entitling respondent to reinstatement and backwages. Given strained relations, separation pay was awarded in lieu of reinstatement.

• Effect of Rehabilitation Proceedings: Petitioner claimed the case was covered by a stay order from a rehabilitation court. The Court took judicial notice that in Asiatrust Development Bank vs. First Aikka Development, Inc. (G.R. No. 179558, June 1, 2011), the petition for rehabilitation filed by petitioner before the RTC of Baguio City, Branch 59, was dismissed for lack of jurisdiction. Petitioner could not, therefore, rely on any orders issued by that court relative to its alleged rehabilitation.

• Doctrine of Immutability of Judgment (Exception for Labor Cases) — While judgments that have become final and executory may no longer be modified, the doctrine does not preclude an aggrieved party from assailing an NLRC decision via certiorari under Rule 65 before the CA. Finality of an NLRC decision under Article 223 of the Labor Code does not bar subsequent judicial review for grave abuse of discretion.

• Probationary Employment Standards — Under Article 281 of the Labor Code and its Implementing Rules, an employer must make known to the probationary employee the reasonable standards for regularization at the time of engagement. Failure to do so renders the employee a regular employee from the first day of employment. The employer must also show how these standards were applied to the employee, typically through a performance evaluation. The power to terminate a probationary employee is subject to three limitations: (1) it must be exercised in accordance with the specific requirements of the contract; (2) the dissatisfaction must be real and in good faith, not feigned to circumvent the law or contract; and (3) there must be no unlawful discrimination in the dismissal.

• Expanded Judicial Review in Labor Cases — The CA, in the exercise of its original jurisdiction over petitions for certiorari under Section 9 of Batas Pambansa Blg. 129 as amended by Republic Act No. 7902, is specifically given the power to pass upon the evidence, if and when necessary, to resolve factual issues. The CA may grant a petition when the factual findings complained of are not supported by the evidence on record, when necessary to prevent a substantial wrong or do substantial justice, when the NLRC findings contradict those of the Labor Arbiter, and when necessary to arrive at a just decision.

• Reliefs for Illegal Dismissal — An illegally dismissed employee is entitled to the twin reliefs of reinstatement and backwages. Where reinstatement is no longer feasible due to strained relations, separation pay is awarded in lieu of reinstatement, equivalent to at least one month pay or one month pay for every year of service, whichever is higher, with a fraction of at least six months counted as one whole year. Attorney's fees of 10% of the monetary award are proper when the employee was forced to litigate to seek redress. Legal interest of 6% per annum is imposed on monetary awards from date of termination until full payment.

• "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, articulates the controlling rule that failure to communicate regularization standards at the time of engagement automatically converts a probationary employee into a regular employee.

• "It is primordial that at the start of the probationary period, the standards for regularization be made known to the probationary employee." — This statement establishes the essential prerequisite for valid probationary employment and the threshold requirement the employer must satisfy to justify termination for failure to qualify.

• "The power of the employer to terminate a probationary employee is subject to three limitations, namely: (1) it must be exercised in accordance with the specific requirements of the contract; (2) the dissatisfaction on the part of the employer must be real and in good faith, not feigned so as to circumvent the contract or the law; and (3) there must be no unlawful discrimination in the dismissal." — This passage sets out the canonical three-part test governing the employer's prerogative to terminate a probationary employee, frequently cited in subsequent labor jurisprudence.

• St. Martin Funeral Home vs. National Labor Relations Commission — Established that the proper vehicle for review of NLRC decisions is a special civil action for certiorari under Rule 65 filed with the Court of Appeals, in strict observance of the doctrine of hierarchy of courts.

• Tamson's Enterprises, Inc. vs. Court of Appeals, G.R. No. 192881, November 16, 2011, 660 SCRA 374 — Applied for the proposition that probationary employees enjoy security of tenure and may be dismissed only for just cause or failure to qualify under reasonable standards made known at the time of engagement; also cited for the three limitations on the employer's power to terminate a probationary employee.

• Hacienda Primera Development Corporation vs. Villegas, G.R. No. 186243, April 11, 2011, 647 SCRA 536 — Followed for the rule that failure to specify reasonable standards and prove they were made known renders the probationary employee a regular employee from day one.

• Aliling vs. Feliciano, G.R. No. 185829, April 25, 2012, 671 SCRA 186 — Applied for the requirements of just cause and due process in dismissal, the computation of backwages and separation pay, and the award of attorney's fees and legal interest.

• Asiatrust Development Bank vs. First Aikka Development, Inc., G.R. No. 179558, June 1, 2011, 650 SCRA 172 — Cited to show that petitioner's rehabilitation petition before the RTC of Baguio City had been dismissed for lack of jurisdiction, negating petitioner's reliance on a stay order.

• Article 281, Labor Code — Defines probationary employment as not exceeding six months unless covered by an apprenticeship agreement, and provides that a probationary employee may be terminated for just cause or failure to qualify as a regular employee under reasonable standards made known by the employer at the time of engagement. Applied to hold that petitioner's failure to make known such standards rendered respondent a regular employee from day one.

• Section 6, Rule I, Implementing Rules of Book VI, Labor Code — Supplements Article 281 by providing that where no standards are made known to the employee at the time of engagement, the employee shall be deemed a regular employee. Applied to the same effect as Article 281.

• Article 223, Labor Code — Provides that NLRC decisions become final and executory after ten calendar days from receipt. Applied to clarify that finality does not preclude subsequent certiorari review under Rule 65.

• Section 9, Batas Pambansa Blg. 129, as amended by Republic Act No. 7902 — Confers on the Court of Appeals original jurisdiction over petitions for certiorari, including the power to pass upon evidence to resolve factual issues. Applied to uphold the CA's authority to review the NLRC's factual findings.

• Rule 65, Rules of Court — Governs special civil actions for certiorari, confining issues to grave abuse of discretion amounting to lack or excess of jurisdiction. Applied as the proper vehicle for review of NLRC decisions before the CA.

• Rule 45, Rules of Court — Governs petitions for review on certiorari before the Supreme Court. Applied as the procedural mode by which petitioner elevated the CA decision to the Court.

Presbitero J. Velasco, Jr. (Chairperson), Roberto A. Abad, Jose Catral Mendoza, and Marvic Mario Victor F. Leonen.