“No sale, No More Work?”: A Brief Discussion on Employee’s Gross Neglect of Duties

Related article: Dismissal due to gross and habitual neglect of duty

One of the grounds for dismissal of an employee is Gross and habitual neglect of duties. Said ground is found under Article 297 on Termination by Employer of the Labor Code of the Philippines, paragraph (b) thereof states:

“Article 297 (282) Termination by Employer. – An employer may terminate an employment for any of the following causes:

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   (b) Gross and habitual neglect by the employee of his duties;”

            Under the established jurisprudence, neglect of duty, to be a ground for dismissal, must be both gross and habitual. Gross negligence connotes want of care in the performance of one’s duties. Habitual neglect implies repeated failure to perform one’s duties for a period of time, depending upon the circumstances. A single or isolated act of negligence does not constitute a just cause for the dismissal of the employee (St. Luke’s Medical Center, Inc. vs. Notario 634 SCRA 67, October 20, 2010).

            In Lim v. National Labor Relations Commission (G.R. No. 118434, July 26, 1996, 259 SCRA 485), the Supreme Court considered inefficiency as an analogous just cause for termination of employment under Article 297 (282) paragraph (b) of the Labor Code. Portion of the ruling of the Supreme Court reads:

“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 297 (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.”

The Supreme Court also reiterated its ruling in Leonardo v. National Labor Relations Commission (G.R. No. 125303 June 16, 2000, 333 SCRA 589), 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, the 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 light of the above-mentioned pronouncement of the Supreme Court, employers may now acknowledge gross inefficiency as just cause for termination from employment. However, is it considered as gross inefficiency if the employee with a rank of a sales agent or sales manager did not meet his or her assigned sales target or quota? The answer is described through the following cases referred below:

In Puncia vs. Toyota Shaw/Pasig, Inc. 795 SCRA 32, June 28, 2016, the employee, Puncia, was appointed as Marketing Professional tasked to sell seven (7) vehicles as monthly quota. However, Puncia failed to comply and sold only one (1) vehicle for the month of July and none for August. However, he was dismissed from service on the ground of insubordination for his failure to attend the scheduled hearing and justify his absence. Puncia became suspicious that the real ground for his termination was his failure to meet his quota. Believing that his failure to meet the sales quota is the real ground for his dismissal and that such ground is not amongst the valid causes for dismissal, he filed an illegal dismissal case. The Supreme Court took notice of the glaring inefficiency of the employee in his official duties and further ruled that, Puncia miserably failed in satisfying his monthly sales quota. He only sold a measly five (5) vehicles out of the thirty-four (34) he was required to sell over the course of said period. Verily, Puncia’s repeated failure to perform his duties – i.e., reaching his monthly sales quota – for such a period of time falls under the concept of gross inefficiency.

On the same case, the Supreme Court reiterated that, case law instructs that “gross inefficiency” is analogous to “gross neglect of duty,” a just cause of dismissal under Article 297 of the Labor Code, for both involve specific acts of omission on the part of the employee resulting in damage to the employer or to his business. The Court also emphasized that an employer is entitled to impose productivity standards for its employees, and the latter’s non-compliance therewith can lead to his termination from work.

The practice of a company in laying off workers because they failed to make the work quota has been recognized in this jurisdiction. The employee’s failure to meet the sales quota assigned to him or her constitute a just cause of his or her dismissal, regardless of the permanent or probationary status of his or her 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 (Aliling vs. Feliciano 671 SCRA 186, April 25, 2012). Thus, in this regard, when there is no sale, there can be no more work.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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