ENCHANTED KINGDOM, INC., PETITIONER, VS. MIGUEL J. VERZO, RESPONDENT.

Enchanted Kingdom versus Verzo

The Case

This is a labor case about the probationary employee. Enchanted Kingdom, Incorporated, the operator of a theme park in Santa Rosa City, Laguna, hired Miguel Verzo as Section Head for Mechanical and Instrumentation Maintenance on a probationary status. When the company decided not to regularize him, Verzo filed a complaint for illegal dismissal, damages, and attorney's fees. The case matters because it draws the exact boundary of the employer's duty to inform a probationary employee of the standards for regularization, and it tells us when the failure to qualify under those standards is a valid ground for separation.

Procedural History

Verzo filed his complaint for illegal dismissal, damages, and attorney's fees before the Labor Arbiter. The Labor Arbiter dismissed the complaint for lack of merit, reasoning that a probationary employment may be terminated before the end of the probationary period. Verzo appealed to the National Labor Relations Commission, which denied the appeal and affirmed that he was validly terminated for failing to meet the company's standards. Verzo moved for reconsideration, but the Commission denied it.

Verzo then went to the Court of Appeals on a petition for certiorari. The Court of Appeals reversed the Commission. It held that the probationary contract failed to set the standards for regularization, so Verzo should be considered a regular employee, and that in any event his termination was tainted with bad faith. The company sought reconsideration, which was denied. Enchanted Kingdom then filed a petition for review on certiorari before the Supreme Court.

Facts

On August 19, 2009, Enchanted Kingdom hired Verzo as Section Head for Mechanical and Instrumentation Maintenance for a period of six months on probationary status. By letter dated August 26, 2009, the company welcomed him as a cast member effective August 19, 2009, stated that he would be on probationary status from August 19, 2009 to February 18, 2010, described his responsibilities, and attached a detailed Job Description. Verzo acknowledged receipt of the letter and agreed to all its terms. He received the letter about fourteen days after he started work.

During the probationary period, his superiors observed shortcomings. A fellow section head recommended that he not be regularized, citing unaddressed repairs, a mishandled submersible pump that caused sludge to overflow toward the parking entrance, a report that a pond had sufficient water when a patron was later injured due to low water level, and personal use of company time on the internet. Another section head noted lack of initiative, slow decision-making, tardiness, and reluctance to give orders. His immediate supervisor reported that Verzo failed to check a lift and a malfunctioning water pump despite instructions, and that he did not even know an air-conditioning unit had an expansion valve.

On February 3, 2010, the company furnished Verzo a copy of the Cast Member Performance Appraisal for Regularization, showing a score of 70 out of 100 and notations that he was lacking in supervisory skill, incompetent technically, and lacking in initiative and sense of responsibility. On February 15, 2010, the company formally informed him that he did not qualify for regularization. Verzo claimed that even before the appraisal, his supervisor had told him he would not be regularized and advised him to resign, and that he was never given a chance to explain the allegations against him.

Issues

• Whether or not Verzo was validly terminated as a probationary employee for failing to qualify for regularization under the reasonable standards made known to him by the employer.
• Whether or not the employer substantially complied with the requirement of informing the probationary employee of the standards for regularization at the time of his engagement.
• Whether or not the failure to qualify for regularization was sufficiently established by the evidence, including the performance appraisal and the reports of his superiors.

Applicable Provisions

Article 281 of the Labor Code, as cited in the decision, provides:

Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.

This is the core provision: it allows termination for failure to qualify, but only against reasonable standards made known at the time of engagement.

Section 6, paragraph d, Rule I, Book VI of the Implementing Rules of the Labor Code provides:

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.

This supplies the consequence of silence: the employee becomes regular by operation of law.

Ruling

On the first issue, the Court held that Verzo was a probationary employee and was validly terminated for failing to qualify for regularization. A probationary employee enjoys security of tenure, but may be terminated for a just cause, an authorized cause, or for failure to qualify as a regular employee in accordance with the reasonable standards made known by the employer at the time of engagement.

On the second issue, the Court held that the company substantially complied with the notice requirement. The August 26, 2009 letter stated the probationary status, its duration, the benefits upon regularization, and the standard he must meet: 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. The Court ruled that strict compliance from day one is not required; the true test is reasonableness, and fourteen days was a reasonable time for him to be made aware of what was expected.

On the third issue, the Court found that the company had basis not to regularize him. The performance appraisal was accompanied by the reports of his superiors detailing his failures, which compromised the safety of patrons. Even granting that he was not informed of specific duties, his dismissal was valid because he failed to adhere to the dictates of common sense required by his position and his profession as a licensed engineer. The advice to resign was not proof of bad faith; it was merely his supervisor's own opinion.

Doctrine

A probationary employee may be terminated for a just cause, an authorized cause, or for failure to qualify as a regular employee in accordance with the reasonable standards made known by the employer at the time of engagement. The employer must communicate the regularization standards and must do so at the time of engagement; if it fails on either point, the employee is deemed regular. The exception is when the job is self-descriptive, or when the employee's conduct violates basic knowledge and common sense, in which case no spelled-out standard is needed. Substantial compliance, measured by reasonableness, satisfies the notice requirement.

Disposition

The Supreme Court granted the petition, reversed the Court of Appeals, and upheld the finding that Verzo was validly terminated as a probationary employee who failed to qualify for regularization.

Remember This

Memorize this line: the employer must make known the reasonable standards for regularization at the time of engagement, and if it does not, the employee is deemed regular. Examiners use this case to test the notice requirement for probationary employees and the exception for self-descriptive jobs and violations of common sense.