G.R. No. 233679 . July 06, 2022
ADSTRATWORLD HOLDINGS, INC., JUDITO B. CALLAO AND JUDITO DEI R. CALLAO, PETITIONERS, VS. CHONA A. MAGALLONES AND PAULINE JOY M. LUCINO, RESPONDENTS.

FACTS

Respondents Chona Magallones and Pauline Joy Lucino worked for petitioner Adstratworld Holdings, Inc. from January 2012 to July 15, 2013, as events marketing and logistics officers without a written contract. On July 16, 2013, they were issued probationary contracts set to expire on December 16, 2013. On January 8, 2014, they were informed of the termination of their probationary status and were no longer allowed to work. They filed a complaint for illegal dismissal, claiming they were already regular employees due to over a year of service and that the probationary contract was a ploy to circumvent security of tenure.
Petitioners countered that respondents were validly hired as probationary employees on July 16, 2013, with known performance standards. They asserted that respondents failed to meet these standards, committed several company infractions (including unauthorized distribution of company items and habitual tardiness), and were thus legally terminated upon the expiration of their probationary period for failing to qualify as regular employees.

ISSUE

The core issue is whether respondents were illegally dismissed. This hinges on two sub-issues: (1) Were respondents already regular employees at the time of their dismissal? (2) If they were merely probationary employees, was their termination for failing to qualify as regulars valid?

RULING

The Supreme Court ruled that respondents were NOT illegally dismissed. The Court reinstated the NLRC decision which affirmed the Labor Arbiter’s dismissal of the complaint.
On the first issue, the Court held that respondents were not yet regular employees. While they worked from January 2012, this period was under an oral contract with no definite period. The execution of the probationary contract on July 16, 2013, constituted a novation of their employment terms, effectively converting their status to probationary. The law permits employers to set a probationary period to test an employee’s qualifications. Respondents accepted the new contract, thereby subjecting themselves to the probationary standards.
On the validity of the termination, the Court found it legal. For a probationary employee’s termination to be valid, two requisites must concur: (a) the employee must be apprised of the reasonable standards for regularization at the time of engagement, and (b) the dismissal must be for a just cause or the employee’s failure to meet those standards. The records show respondents were informed of the performance standards. Their failure to qualify was sufficiently supported by evidence of unsatisfactory work performance evaluations and commission of specific company infractions, which constituted a just cause for termination under Article 297 of the Labor Code. Therefore, petitioners validly exercised management prerogative in not regularizing them upon the expiration of the probationary period. The individual petitioners, however, were correctly absolved from personal liability as the corporate employer, Adstratworld, has a separate juridical personality.