In the Philippines, the relationship between an employer and an employee is not merely a contractual agreement but a matter of public interest protected by the Constitution and the Labor Code of the Philippines.
If you are a sales professional or a business owner wondering whether "low sales" is a valid ground for termination, the answer is: Yes, but it must follow strict legal standards. Under Philippine law, termination cannot be arbitrary. It must fall under either Just Causes or Authorized Causes.
1. Termination for Just Cause: Poor Performance
If a company terminates a contract because an employee consistently fails to meet sales quotas, it usually falls under Gross and Habitual Neglect of Duties (Article 297 of the Labor Code).
The "Reasonableness" Test
For "low sales" to justify firing someone, the employer must prove:
- Knowledge: The employee was informed of the sales targets upon hiring or at the start of the relevant period.
- Reasonableness: The targets were achievable and realistic (not "impossible" quotas designed to force someone out).
- Habitual Nature: A single month of bad sales is rarely enough. The failure must be repeated or persistent over a period of time.
- Failure to Improve: The employer should ideally show they gave the employee a chance to improve (e.g., coaching, performance improvement plans, or warnings).
2. Termination for Authorized Cause: Redundancy and Retrenchment
Sometimes, a company ends a contract not because the employee is "bad" at their job, but because the company’s financial health is failing or the position is no longer needed. This falls under Authorized Causes (Article 298).
- Retrenchment to Prevent Losses: If low sales across the entire company are leading to serious financial losses, the company may downsize to save the business.
- Redundancy: If the company changes its sales model (e.g., moving from door-to-door sales to purely online), the old sales positions may be declared redundant.
Note: In these cases, the termination is not the employee's fault, so the law requires the payment of Separation Pay.
3. The Due Process Requirement
Even if there is a valid reason to end a contract, the employer must follow the "Twin Notice Rule." Failure to do so can make the dismissal "illegal" in the eyes of the National Labor Relations Commission (NLRC), even if the sales were truly low.
For Just Cause (Performance-based):
- First Written Notice: Detailing the specific instances of poor performance and giving the employee a chance to explain (the "Show Cause" order).
- Hearing/Conference: A chance for the employee to defend themselves, often with a representative.
- Second Written Notice: The final decision of termination.
For Authorized Cause (Economic-based):
- 30-Day Notice: A written notice must be served to both the employee and the Department of Labor and Employment (DOLE) at least 30 days before the intended date of termination.
4. Separation Pay: Who Gets It?
Whether an employee receives money upon leaving depends on the reason for the termination:
| Reason for Termination | Is Separation Pay Required? |
|---|---|
| Gross Neglect (Poor Sales) | No. This is a Just Cause. The employee usually gets only their "Final Pay" (pro-rated 13th month, unused leaves). |
| Retrenchment/Redundancy | Yes. Usually 1 month's pay or 1/2 month's pay for every year of service, whichever is higher (Redundancy is often 1 full month per year). |
| Resignation | No. Unless stipulated in the employment contract or company policy. |
5. Summary of Employee Rights
If you are facing termination due to low sales, remember these three pillars of Philippine Labor Law:
- Security of Tenure: You cannot be dismissed without a valid cause provided by law.
- Right to Due Process: You must be given a fair chance to explain or a proper 30-day notice for economic layoffs.
- Substantial Evidence: The burden of proof lies with the employer. They must prove with actual data and documentation that your sales were low enough to warrant dismissal or that the company is truly losing money.
Illegal Dismissal
If a company fires an employee for "low sales" without proving the quotas were reasonable or without following the notice rules, the employee can file a case for Illegal Dismissal. If successful, the employee may be entitled to reinstatement (getting their job back) and full backwages (pay from the time they were fired until the case is settled).
Would you like me to draft a sample "Show Cause" response or a formal letter requesting a computation of separation pay based on these Philippine laws?