Productivity Standards

Can you dismiss an employee on the basis of failure to meet sales or work quotas? The Supreme Court answered this question in the affirmative in ARMANDO ALILING, Petitioner, vs. JOSE B. FELICIANO, MANUEL F. SAN MATEO III, JOSEPH R. LARIOSA, and WIDE WIDE WORLD EXPRESS CORPORATION, Respondents. (G.R. No. 185829; April 25, 2012).

In Lim v. National Labor Relations Commission,35 the Court considered inefficiency as an analogous just cause for termination of employment under Article 282 of the Labor Code:

We cannot but agree with PEPSI that “gross inefficiency” falls within the purview of “other causes analogous to the foregoing,” this constitutes, therefore, just cause to terminate an employee under Article 282 of the Labor Code. One is analogous to another if it is susceptible of comparison with the latter either in general or in some specific detail; or has a close relationship with the latter. “Gross inefficiency” is closely related to “gross neglect,” for both involve specific acts of omission on the part of the employee resulting in damage to the employer or to his business. In Buiser vs. Leogardo, this Court ruled that failure to observed prescribed standards to inefficiency may constitute just cause for dismissal. (Emphasis supplied.)

It did so anew in Leonardo v. National Labor Relations Commission36 on the following rationale:

An employer is entitled to impose productivity standards for its workers, and in fact, non-compliance may be visited with a penalty even more severe than demotion. Thus,

 [t]he practice of a company in laying off workers because they failed to make the work quota has been recognized in this jurisdiction. (Philippine American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners’ failure to meet the sales quota assigned to each of them constitute a just cause of their dismissal, regardless of the permanent or probationary status of their employment. Failure to observe prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal. Such inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the same within the allotted reasonable period, or by producing unsatisfactory results. This management prerogative of requiring standards may be availed of so long as they are exercised in good faith for the advancement of the employer’s interest. (Emphasis supplied.)

 In fine, an employee’s failure to meet sales or work quotas falls under the concept of gross inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for dismissal under Article 282 of the Code. However, in order for the quota imposed to be considered a valid productivity standard and thereby validate a dismissal, management’s prerogative of fixing the quota must be exercised in good faith for the advancement of its interest.

Worth reiterating is the employer’s duty to prove that it exercised its prerogative of fixing the quota in good faith; otherwise, it might not be able to successfully claim that the dismissal was legal.