Dear Attorney,

I hope this message finds you in good health and high spirits. I am writing as a concerned manager who needs clarification and legal guidance on how to properly handle an employee under my supervision whose performance has consistently fallen below the company’s standards. I want to ensure that I am in full compliance with Philippine labor laws and all relevant legal obligations in addressing this situation.

Specifically, I seek your expert advice regarding the necessary steps to evaluate poor performance, implement any corrective measures, and—if absolutely necessary—proceed with disciplinary action or termination in line with lawful processes. I am also eager to learn about the documentation required, the importance of due process, and any relevant legal precedents that I should keep in mind.

Thank you for your time and expertise. I look forward to your guidance.

Sincerely,
A Concerned Manager

LEGAL ARTICLE ON PHILIPPINE LAW: A METICULOUS DISCUSSION OF EMPLOYER OBLIGATIONS WHEN DEALING WITH POOR EMPLOYEE PERFORMANCE

In the Philippines, maintaining a productive and professional workforce is a key requirement for business continuity and success. Employers are generally accorded the right to set performance standards for their staff. However, the exercise of this right is not without corresponding obligations. The Labor Code of the Philippines, various Department of Labor and Employment (DOLE) issuances, and Supreme Court jurisprudence impose specific responsibilities upon employers when addressing poor performance. To avoid illegal dismissal claims, ensure procedural and substantive due process, and foster an environment conducive to continuous improvement, employers must observe a meticulous, legally compliant approach before imposing any disciplinary measure or effecting a termination based on unsatisfactory work performance.

Below is a comprehensive, step-by-step breakdown of the legal and practical considerations that employers must keep in mind when dealing with an employee who exhibits persistently poor or below-standard performance.

1. Setting and Communicating Performance Standards

An employer is entitled to prescribe reasonable performance metrics, especially when the nature of the industry demands a certain level of output, quality, or expertise. Philippine jurisprudence recognizes the employer’s right to set and enforce business policies and performance criteria, provided they are fair, realistic, and uniformly enforced. Employers should:

Clearly define job descriptions, deliverables, and parameters of success.
Communicate performance metrics and expectations through the employment contract, company handbook, orientation manuals, or periodic performance reviews.
Ensure that employees acknowledge these standards either through written acceptance or by signing off on relevant documents.

When dealing with a case of poor performance, it is paramount to reference these agreed-upon metrics to show the objective bases upon which the assessment is being made. This safeguards employers from potential allegations of arbitrariness or discrimination.

2. Performance Evaluation and Documentation

Performance evaluation is a critical facet in determining whether an employee is meeting or failing to meet the established standards. Employers must regularly assess the employee’s work output, productivity indices, error rates, and overall contribution to the company’s objectives. The following steps are recommended:

Documented Performance Reviews: Conduct regular reviews (e.g., monthly, quarterly, or annual evaluations). Each meeting should be accompanied by a written record of the employee’s strengths, weaknesses, and any remedial instructions given.
Constructive Feedback: Discuss both the positive and negative aspects of the employee’s performance. Encourage the employee to propose possible solutions for improvement.
Action Plans: Should areas for improvement be identified, a well-structured, time-bound action plan must be established to correct deficiencies.

It is generally advisable to preserve and organize all supporting documentation: memos, accomplishment reports, disciplinary notices, and any email communications. Proper record-keeping not only helps track progress but also serves as a crucial evidentiary tool should labor disputes arise.

3. Progressive Disciplinary Measures and Performance Improvement Plans (PIPs)

Under Philippine labor law, dismissal should be regarded as a measure of last resort. Before considering termination, employers are expected to make fair, good-faith attempts to improve the employee’s performance. This is often accomplished through progressive disciplinary measures, sometimes referred to as corrective action steps, and the implementation of a Performance Improvement Plan (PIP).

Verbal Counseling or Coaching: An initial conversation, focused on counseling and coaching, can often mitigate performance issues at an early stage. A manager’s gentle reminder emphasizing the importance of meeting targets may suffice for minor lapses.
Written Warning or Notice to Explain (NTE): If performance issues persist, the employer issues a written warning or NTE explaining the specific areas of concern and the potential consequences if there is no improvement.
Performance Improvement Plan: A PIP typically outlines the performance gaps, delineates measurable objectives, and provides a clear timeline for improvement (commonly 30, 60, or 90 days). It may include additional training, mentorship, or tools to help the employee meet targets. The plan must also spell out the disciplinary measures if the goals set forth are not achieved.

Progressive disciplinary action showcases the employer’s willingness to rehabilitate rather than simply punish. It also evidences compliance with labor law requirements, which favor retaining employment whenever reasonable.

4. Due Process for Poor Performance: Notice and Hearing Requirements

In the Philippines, due process is an essential element in lawful termination of employment. Article 297 of the Labor Code (“Just Causes” provision) and related Supreme Court decisions establish that employers must fulfill both substantive and procedural due process before terminating an employee for cause. Substantive due process means that the reason for dismissal must be valid, while procedural due process demands adherence to the “two-notice rule” as outlined below:

First Notice (Charge or Notice to Explain): The first notice must detail the specific acts or omissions that justify the disciplinary action. In a poor performance context, it must contain a thorough explanation of how the employee failed to meet established standards.
Opportunity to Respond or Be Heard: Employers should grant the employee a reasonable period—commonly from 48 to 72 hours—to provide a written explanation, gather evidence, and request a clarificatory hearing if needed. In a hearing, the employee must have the chance to present any defense or mitigating circumstances.
Second Notice (Decision to Terminate or Impose Penalty): After evaluating the employee’s response, the employer must issue a second written notice containing the decision. If management decides to impose disciplinary action or terminate the employee, it must be clearly stated and supported by factual findings and legal justification.

Failure to adhere to these due process steps could expose the employer to liability for illegal dismissal. Notably, even if the cause is valid, the termination may be deemed invalid if the procedural due process requirements were not properly satisfied.

5. Substantive Due Process: Validity of Poor Performance as a Just Cause

Under Philippine law, “gross and habitual neglect” of duties may constitute a just cause for termination. While poor performance is not explicitly listed in Article 297 of the Labor Code as “gross neglect,” it may fall under the scope of neglectful or inefficient behavior if it is willful or consistently repeated despite warnings and opportunities to improve. The law typically requires that the employee’s performance is demonstrably deficient and that the employer has done its due diligence in assisting the employee to meet performance criteria.

A single instance of failing to meet a target may not always suffice as justification for termination. The word “habitual” in the legal sense indicates repeated or continuous infractions. Additionally, the deficiency must be substantial enough to prejudice the employer’s interests. Thus, employers should document repeated performance lapses and show that these lapses amount to a significant failure to fulfill job obligations.

6. Case Law and DOLE Guidelines

The Supreme Court of the Philippines has promulgated a number of decisions providing guidance on poor performance as a ground for termination. In many cases, the Court looks for evidence of a thorough evaluation process, the employer’s earnest attempt to help the employee, and complete compliance with statutory due process. The absence of any one element often leads to a finding of illegal dismissal.

Likewise, DOLE frequently encourages using employee development programs, training, and capacity-building measures before resorting to dismissal. Philippine labor law is founded on the principle of security of tenure, thus tilting the balance in favor of the employee. Only upon a showing of legitimate cause and observance of due process can the employer properly effect a dismissal.

7. Implementing Sanctions and Final Warnings

Prior to termination, employers generally issue a final warning indicating that the employee will face termination if performance does not improve within a specified timeframe. This puts the employee on notice about the serious consequences of continued poor results and underscores that the employer has exercised fairness by offering one more opportunity for improvement.

If the employee’s performance remains subpar after the final warning’s deadline, the employer may proceed with termination provided all the evidence points to a persistent failure to meet the required standards, the employee was thoroughly informed of these standards, and all procedural requirements have been scrupulously observed.

8. Documentation and Record-Keeping

Consistent, well-organized documentation is essential. At every stage—from initial counseling and performance reviews to the final termination notice—employers must produce clear, unbiased, factual evidence. This includes:

Copies of performance appraisals, memos, and written feedback.
Records of any performance improvement initiatives extended to the employee (i.e., trainings, additional tools, revised workflows).
Notice to Explain letters, transcripts or summaries of administrative hearings, and final decisions.

If a labor dispute arises, such documentation serves as vital evidence demonstrating the employer’s compliance with legal standards, willingness to extend assistance, and adherence to due process.

9. Potential Liabilities for Improper Process

Failure to observe substantive and procedural due process can lead to significant liabilities for employers, including:

Illegal Dismissal: If termination is effected without just cause or without the required notices and hearing, the employer may be ordered by the National Labor Relations Commission (NLRC) or the courts to reinstate the employee and pay back wages from the time of dismissal.
Payment of Damages and Attorney’s Fees: In some cases, moral and exemplary damages may be awarded if the employer is found to have acted in bad faith or in a wanton, oppressive manner. Attorney’s fees can also be granted in certain instances.
Monetary Awards in Lieu of Reinstatement: If reinstatement is no longer viable due to strained relations, the labor tribunal may instead order separation pay along with back wages.

Avoiding these liabilities hinges on faithfully following both substantive and procedural requirements.

10. Best Practices and Recommendations

Considering the above discussion, here are best practices for Filipino employers:

Establish Clear Policies: Keep an updated employee handbook, including policies on performance standards, disciplinary procedures, and specific guidelines on progressive discipline.
Regularly Train Supervisors: Management personnel should receive periodic training on the proper administration of performance evaluations, handling difficult conversations, and conducting administrative investigations or hearings.
Maintain Open Communication: Foster a company culture where employees feel comfortable discussing work challenges. Open communication allows employers to address potential performance issues before they become untenable.
Act in Good Faith: Be fair and consistent. Always give employees an opportunity to correct their performance issues, and ensure that the steps to improve are communicated clearly and documented.
Seek Legal Counsel: If there is any doubt about the sufficiency of the grounds, the documentation, or the compliance with procedural requirements, consult a lawyer to ensure adherence to the law.

11. Frequently Asked Questions (FAQ)

Q1: Can an employee be immediately dismissed for failing to meet a single monthly quota?
Generally, no. One instance of failing to meet quotas may not be considered “gross and habitual neglect” or just cause for immediate dismissal. Documentation of repeated performance deficiencies is necessary, as the law frowns upon one-time or isolated offenses as justification for terminating employment.

Q2: Is poor performance automatically considered willful disobedience?
No. Willful disobedience typically refers to an employee’s deliberate refusal to comply with lawful orders relating to work. Poor performance, while it may involve negligence or lack of competence, does not necessarily equate to willful disobedience unless it includes a clear and deliberate defiance of valid company directives.

Q3: What if the employee refuses to sign the Performance Improvement Plan or other disciplinary notices?
Employers should proceed with documentation anyway. For instance, have a witness sign to attest that the employee was presented with the document but declined to affix their signature. This helps protect the employer by proving that the employee was duly informed of their performance issues.

Q4: How long should an employer retain performance-related documents?
It is prudent to maintain these records for the duration of the employee’s service and for some time after separation to ensure that any labor claims or disputes can be adequately addressed. While the law does not mandate a specific retention period for performance documents, a general rule is to keep them for at least three to five years after the employment relationship ends.

Q5: Can the employer place the employee on “floating status” for poor performance instead of terminating?
Floating status is usually employed in situations involving business reversals or lack of available work, not poor performance. In the latter scenario, the company’s primary remedy is to follow progressive discipline or due process for termination based on just cause if the employee fails to improve.

12. Further Legal Considerations and Recommendations

Confidentiality of Performance and Disciplinary Processes:
Employers should safeguard the employee’s dignity and right to privacy throughout the process. Circulating performance issues or disciplinary details beyond those who are directly responsible for evaluation and decision-making may expose the company to claims of breach of privacy or moral damages.
Avoid Discriminatory Practices:
Employers must ensure that actions taken against poor-performing employees are not influenced by the latter’s age, sex, religion, nationality, or any other protected classification under Philippine law. If an employee perceives discrimination, he or she can file a complaint before the labor tribunals or the Commission on Human Rights, if applicable.
Consider Redeployment or Lateral Transfers:
If the employee’s poor performance may be linked to a mismatch of skills and job requirements, the employer may explore other positions or functions within the company that better suit the employee’s capabilities. This approach can sometimes resolve performance gaps without resorting to dismissal.
Keep Abreast of Labor Law Updates:
The labor landscape in the Philippines can evolve through legislative changes and Supreme Court rulings. Employers should regularly consult their legal counsel or attend labor law seminars to ensure compliance with the latest requirements.
Implement Holistic Employee Engagement Strategies:
A proactive approach to employee performance often involves regular training, coaching, and mentoring, coupled with recognition programs that reward high achievers. When employees feel valued, they tend to be more motivated, thus reducing incidents of poor performance.

13. Potential Legal Remedies for Employees

Although this article focuses on the employer’s perspective, it is vital to acknowledge that employees have several remedies if they believe they were unfairly evaluated or wrongly terminated:

Filing a Complaint with the Labor Arbiter:
Employees who think they were illegally dismissed or discriminated against can file a complaint at the NLRC. If the Labor Arbiter finds for the employee, the employer may be compelled to reinstate the employee with full back wages.
Appeal to the NLRC, Court of Appeals, and Supreme Court:
Should an employer contest the Labor Arbiter’s decision, the employee can defend their position through the higher tribunals. Litigation can be lengthy and costly for both parties, underscoring the importance of diligent compliance with labor standards.
Resort to Alternative Dispute Resolution (ADR) Mechanisms:
Many disputes can be resolved through mediation or conciliation at the DOLE or during the preliminary stages at the NLRC. These processes can lead to amicable settlements without the need for a full-blown trial.

14. Conclusion and Closing Thoughts

Addressing unsatisfactory employee performance is a sensitive yet integral part of an employer’s responsibilities. Philippine law strongly safeguards employees’ security of tenure and requires employers to act in good faith, apply fairness in evaluations, and observe due process. Therefore, an employer aiming to discipline—or ultimately dismiss—an employee for failing to meet performance standards must ensure that the dismissal is grounded on a lawful cause and that all procedural steps mandated by jurisprudence and statutory enactments have been diligently observed.

By carefully setting and communicating performance standards, providing constructive feedback, implementing improvement programs, and complying with the due process requirements set forth in the Labor Code and Supreme Court rulings, employers reduce the risk of labor disputes and potential liability. Most importantly, this approach reflects a commitment to the principles of fairness and respect for employees’ rights, which in turn fosters a more cohesive and positive work environment.

Disclaimer: This article is intended to provide general legal information and does not constitute specific legal advice. For inquiries regarding a particular situation, it is always recommended to consult a lawyer specializing in Philippine labor law.

End of Article.