EMPLOYMENT CONTRACT EXTENDING PROBATIONARY STATUS EXECUTED BEYOND THE AGREED PERIOD IS NOT VALID

Employment contract extending probationary period is recognized by the Supreme Court. However, this remains to be the exception rather than the rule.

Thus, the SC held in the following case as follows:

Maria Carmela P. Umali vs. Hobbywing Solutions, Inc.
G.R. No. 221356, March 14, 2018

Facts:

Petitioner Maria Carmela Umali (Umali) alleged that she started working for Hobbywing Solutions, Inc. (Hobbywing), an online casino gaming establishment, on June 19, 2012, as a Pitboss Supervisor. Her main duties and responsibilities involve, among others, supervising online casino dealers as well as the operations of the entire gaming area or studio of Hobbywing company.

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She, however, never signed any employment contract before the commencement of her service but regularly received her salary every month. Sometime in January 2013, after seven (7) months since she started working for Hobbywing, Umali was asked to sign two employment contracts. The first employment contract was for a period of five (5) months, specifically from June 19, 2012 to November 19, 2012. On the other hand, the second contract was for a period of three (3) months, running from November 19, 2012 to February 18, 2013. She signed both contracts as directed.

On February 18, 2013, however, Umali was informed by Hobbywing that her employment has already ended and was told to just wait for advice whether she will be rehired or regularized. She was also required to sign an exit clearance from the company apparently to clear her from accountabilities. She was no longer allowed to work thereafter. Thus, the filing of a complaint for illegal dismissal against the Hobbywing.

Hobbywing admitted that it hired Umali as Pitboss Supervisor on probationary basis beginning June 19, 2012 to November 18, 2012. With the conformity of Umali, the probationary period was extended for three (3) months from November 19, 2012 to February 18, 2013. Hobbywing claimed that the engagement of Umali’s service as a probationary employee and the extension of the period of probation were both covered by separate employment contracts duly signed by the parties.

See Sample Contract of Extension of Probationary Employment in Filipino here

After receiving a commendable rating by the end of the extended probationary period, Umali was advised that the company will be retaining her services as Pitboss Supervisor. Surprisingly, Umali declined the offer for the reason that a fellow employee, her best friend, will not be retained by the company. Thereafter, on February 18, 2013, she processed her exit clearance to clear herself of any accountability and for the purpose of processing her remaining claims from the company. As a sign of good will, the company signed and issued a Waiver of Non-Competition Agreement in her favor and a Certificate of Employment, indicating that she demonstrated a commendable performance during her stint. Thus, Hobbywing was surprised to receive the summons pertaining to the complaint for illegal dismissal filed by Umali.

LA Ruling:

The LA rendered a Decision dismissing the complaint for lack of merit.

The LA ruled that Umali failed to substantiate her claim that she was dismissed from employment. As it is, she opted not to continue with her work out of her own volition. Further, it noted that Hobbywing did not commit any overt act to sever employer-employee relations with Umali as, in fact, it even offered Umali a regular employment but she turned it down.

Unyielding, Umali filed an appeal with the National Labor Relations Commission (NLRC), reiterating her claim of illegal dismissal.

NLRC Ruling:

The NLRC rendered a Decision,11 holding that Umali was illegally dismissed.

The NLRC held that Umali attained the status of a regular employee by operation of law when she was allowed to work beyond the probationary period of employment. From that point, she enjoys security of tenure and may not be terminated except on just or authorized causes.   Hobbywing’s claim that Umali’s probationary period of employment was extended cannot be given credence since the records are bereft of proof that the latter’s performance was ever evaluated based on reasonable standards during the probationary period and that there was a need to extend the same.

Hobbywing filed a motion for reconsideration but the NLRC denied the same in its Resolution14 dated April 30, 2014. Dissatisfied, Hobbywing filed a petition for certiorari with the CA, imputing grave abuse of discretion on the part of the NLRC for ruling that there was an illegal dismissal. It argued that Umali did not become a regular employee by operation of law since the probationary period of her employment was extended by agreement of the parties so as to give her a chance to improve her performance.

There was also no illegal dismissal since Umali was never terminated since she was the one who refused to accept the offer of the company to retain her services. It pointed out that Umali even processed her Exit Clearance Form and requested for a Certificate of Employment and Waiver of the Non-Competition Agreement.

CA Ruling:

The CA rendered a Decision, reversing the decision of the NLRC.

The CA agreed with the LA that Umali failed to prove the fact of her dismissal. It held that aside from bare allegations, no evidence was ever submitted by Umali that she was refused or was not allowed to work after the period of extension. There was no letter of termination given to Umali but only an exit clearance form which she personally processed, which therefore proved that the severance of her employment was her choice.

Umali filed a motion for reconsideration but the CA denied the same. Hence, the petition before the SC

Issue/s:

Whether or not the extension of probationary status beyond the period agreed upon by the party is valid

Whether or not the burden to prove validity of extension of probationary status lies with the employer

Whether or not extension of probationary status is valid despite the fact that the employee earned “commendable performance” in the evaluation

SC Ruling:

The SC found the petition meritorious.

It is beyond dispute that Umali started working for Hobbywing on June 19, 2012 as a probationary employee and that there were two (2) employment contracts signed by the parties. The parties, however, held conflicting claims with respect to the time when the contracts were signed. Umali is claiming that there was no contract before the commencement of her employment and that she was only asked to sign two employment contracts on January 19, 2013, after having rendered seven months of service.

On the other hand, Hobbywing maintains that there was a contract of probationary employment signed at the beginning of Umali’s service and another one signed on November 18, 2012, extending the probationary period purportedly to give Umali a chance to improve her performance and qualify for regular employment.

The SC held that while the first contract was undated, the Probation Extension Letter was dated January 10, 2013, which was way beyond the end of the supposed probationary period of employment on November 18, 2013, therefore validating Umali’s claim that she had already worked for more than six months when she was asked to sign an employment contract and its purported extension. Surprisingly, Hobbywing never explained the disparity in the dates on the actual copies of the contracts which were submitted as annexes and that alleged in its position paper as the time they were signed by Umali.

Contradicting Hobbywing’s claim, Umali consistently reiterates that she was made to sign two contracts of probationary employment, one covering the period from June 19, 2012 to November 18, 2012, and the other purportedly extending the probationary employment from November 19, 2012 to February 18, 2013, only on January 19, 2013.

To support Umali’s claim, she alleged that she was able to note the actual date when she signed the contracts, right beside her signature. And indeed, attached with the position paper submitted by Hobbywing itself, copies of the two contracts of employment signed by Umali clearly indicates the date “01.19.13” beside her signature. This substantiates Umali’s claim that the documents were signed on the same day, that is, on January 19, 2013.

Further, while the first contract was undated, the Probation Extension Letter was dated January 10, 2013, which was way beyond the end of the supposed probationary period of employment on November 18, 2013, therefore validating Umali’s claim that she had already worked for more than six months when she was asked to sign an employment contract and its purported extension. Respondent never explained the disparity in the dates on the actual copies of the contracts which were submitted as annexes and that alleged in its position paper as the time they were signed by Umali.

This brings to the conclusion that the contracts were only made up to create a semblance of legality in the employment and severance of Umali. The significant details left unexplained only validated Umali’s claim that she had served way beyond the allowable period for probationary employment and therefore has attained the status of regular employment.

Article 281 of the Labor Code is pertinent. Umali commenced working for Hobbywing on June 19, 2012 until February 18, 2013. By that time, however, she has already become a regular employee, a status which accorded her protection from arbitrary termination.

Sample Contract of Probationary Employment

In Mariwasa vs. Leogardo, the Court upheld as valid the extension of the probationary period for another three (3) months in order to give the employee a chance to improve his performance and qualify for regular employment, upon agreement of the parties. Upon conclusion of the period of extension, however, the employee still failed to live up to the work standards of the company and was thereafter terminated.

Learn the rules on probationary employment and its mutual extension

The mentioned case, however, finds no application in the instant case for two reasons: (1) there was no evaluation upon the expiration of the period of probationary employment; (2) the supposed extension of the probationary period was made after the lapse of the original period agreed by the parties.

Based on the evidence on record, Hobbywing only evaluated the performance of Umali for the period of June 2012 to November 2013 on February 1, 2013, wherein she garnered a rating of 88.3%, which translates to a satisfactory performance according to company standards. At the time of the evaluation, the original period of probationary employment had already lapsed on November 18, 2012 and Umali was allowed to continuously render service without being advised that she failed to qualify for regular employment. Clearly then, there is no reason to justify the extension since Umali had a commendable rating and, apart from this, there is no more period to be extended since the probationary period had already lapsed.

While in a few instances the Court recognized as valid the extension of the probationary period, still the general rule remains that an employee who was suffered to work for more than the legal period of six (6) months of probationary employment or less shall, by operation of law, become a regular employee. In Buiser vs. Leogardo, the Court stated that generally, the probationary period of employment is limited to six (6) months. The exception to this general rule is when the parties to an employment contract may agree otherwise, such as when the same is established by company policy or when the same is required by the nature of work to be performed by the employee.

Since extension of the period is the exception, rather than the rule, the employer has the burden of proof to show that the extension is warranted and not simply a stratagem to preclude the worker’s attainment of regular status. Without a valid ground, any extension of the probationary period shall be taken against the employer especially since it thwarts the attainment of a fundamental right, that is, security of tenure.

ln the instant case, there was no valid extension of the probationary period since the same had lapsed long before the company thought of extending the same. More significantly, there is no justifiable reason for the extension since, on the basis of the Performance Evaluation dated February 1, 2013, Umali had a commendable performance all throughout the probationary period.

Having rendered service even after the lapse of the probationary period, Umali had attained regular employment, with all the rights and privileges pertaining thereto. Clothed with security of tenure, she may not be terminated from employment without just or authorized cause and without the benefit of procedural due process. Since Umali’s case lacks both, she is entitled to reinstatement with payment of full backwages, as correctly held by the NLRC.