This article explains how “quota-based” dismissals are assessed under Philippine labor law, what employers must prove, what employees can contest, and the remedies available when termination is invalid. It is written for both employees and HR/management.

I. Core Legal Framework

1) Security of tenure and causes for termination

Employees in the Philippines enjoy security of tenure: they may be removed only for just causes (e.g., serious misconduct, willful disobedience, gross and habitual neglect of duties, fraud, willful breach of trust, commission of a crime, and analogous causes) or authorized causes (e.g., retrenchment, redundancy, closure). “Failure to meet sales quotas” is not listed as a stand-alone statutory ground, so employers typically frame quota failure as:

Just cause (analogous to inefficiency or poor performance), sometimes argued as gross and habitual neglect (which requires both grossness and habituality, not mere poor results), or
For probationary employees: failure to meet reasonable performance standards that were communicated at engagement, or
Authorized causes: e.g., retrenchment due to business losses (one of the few contexts where systemic sales underperformance can justify separations—but that’s about the business, not the individual).

2) Due process (“twin-notice” and hearing)

Even if the ground is valid, dismissal is defective without procedural due process:

First notice (notice to explain): states the specific acts/omissions and cites the rule/standard allegedly violated; gives reasonable time to respond.
Opportunity to be heard: written explanation and/or conference where the employee can rebut and present evidence.
Second notice (notice of decision): states the findings and the exact ground for dismissal.

Failure to observe due process can result in nominal damages even if the dismissal ground is ultimately upheld.

3) Burden and quantum of proof

The employer bears the burden to prove a valid ground and compliance with procedure by substantial evidence—relevant evidence a reasonable mind might accept as adequate (e.g., objective sales data, performance plans, documented coaching).

II. When “Quota Failure” Can—or Cannot—Justify Dismissal

A. Regular employees

Key rule: Poor performance must be proven as a deliberate or gross and habitual deficiency against reasonable, pre-communicated standards. One-off misses or results caused by external factors normally do not equal a just cause.

Employer must show all of the following:

Reasonable, objective, and measurable standards
- Targets must be realistic, aligned with market conditions, territory potential, product availability, and lead volumes.
- Standards should be written, specific (e.g., monthly revenue, conversion rate, activity metrics), and communicated before evaluation.
Employee knowledge and accountability
- Signed job descriptions, acknowledged KPIs, sales plans, and policy manuals; proof of training on tools/products.
Consistent, material shortfalls
- A pattern (e.g., several consecutive months/quarters substantially below quota) and not merely minor or occasional misses.
Performance management efforts
- Documented coaching, Performance Improvement Plan (PIP) with clear metrics, timelines, support (ride-alongs, training, pricing approvals), and interim reviews.
Causation and fairness
- Shortfalls must be attributable to the employee’s performance—not to impossible quotas, product stock-outs, territory shrinkage, removal of key accounts, withheld approvals, or force majeure.
- Comparable peers’ performance can be relevant; selective enforcement suggests unfairness.
Procedural due process
- Proper notices and hearing before termination.

Common employer missteps that make dismissals illegal:

Moving targets mid-period without reasonable notice;
Setting unattainable quotas (e.g., exceeding historical territory maxima);
Penalizing for company-controlled constraints (inventory unavailability, price holds, marketing cuts);
Skipping PIPs or compressing them to a token duration;
Vague notices (“underperforming” with no specifics);
Relying on subjective criteria (“lack of aggressiveness”) instead of objective data.

B. Probationary employees

A probationary employee may be terminated for failing to qualify under reasonable standards communicated at hiring (offer letter, onboarding pack, KPI brief). Even then, the employer should document coaching and provide notice and an opportunity to explain. If the standards were not clearly communicated at engagement, termination for not meeting them is typically invalid.

C. “Gross and habitual neglect” vs. poor results

“Gross and habitual neglect” requires negligence that is both gross (serious) and habitual (repeated). Mere failure to hit quota—without proof of negligent acts (e.g., ignoring leads, chronic no-shows, falsified call reports)—usually does not qualify.

D. “Loss of trust” for sales personnel

“Loss of trust” applies principally to managerial employees or those handling significant discretion (pricing, key accounts). It must be anchored on acts that betray trust (e.g., manipulating CRM data, diverting clients). Low sales alone is insufficient.

E. Authorized causes (retrenchment/closure)

If the company’s overall sales slump, it may retrench employees, but must show:

Good faith and necessity to prevent losses;
Proof of losses (e.g., audited financials);
Fair and reasonable criteria for selecting who goes;
30 days’ prior written notice to DOLE and to employees; and
Separation pay (typically half-month pay per year of service for retrenchment). This is different from firing one person for missing a quota.

F. Commission-only and “field personnel”

Even commission-based or field sales are protected by security of tenure. Compensation structure does not remove due-process requirements nor lower the burden of proof for cause.

III. Evidence That Wins (and Evidence That Fails)

A. What typically supports a valid termination

Signed job description/KPI sheet, pre-communicated quotas;
Territory/portfolio assignment letters;
PIP with dates, metrics, resources, and review notes;
CRM extracts: opportunity pipeline, call/visit logs, no-show rates, aging;
Peer benchmarks;
A paper trail of coaching memos and the employee’s written acknowledgments;
Inventory/marketing support records to rule out company-caused shortfalls;
Proper twin notices and minutes of the hearing/conference.

B. What typically undermines an employer’s case

Quotas announced after the period already began;
Inconsistent enforcement (others similarly situated not disciplined);
Sudden territory shrinkage or removal of high-value accounts immediately before evaluation;
No PIP, or a PIP that ends days before dismissal;
Bare allegations (“underperforming”) with no numbers;
Failure to present the decision-maker or underlying data.

IV. Challenging the Dismissal: Practical Playbook for Employees

Request your records. Ask (in writing) for KPI standards, territory maps, quota letters, PIP documents, coaching notes, CRM extracts, and copies of notices.
Map the timeline. When were standards communicated? When were quotas changed? What external events affected selling (stock-outs, price freezes)?
Build causation defenses. Show how shortfalls trace to factors outside your control (supply, territory reassignment, delayed approvals).
Compare with peers. If similarly situated colleagues also missed targets without sanction—or had better support—argue selective or arbitrary enforcement.
Attack procedure. Identify defects in the first notice, absence of a real hearing, or a second notice that fails to cite a valid ground.
File remedies (see Section VI) within the prescriptive periods:
- Illegal dismissal complaints are generally filed within four (4) years from dismissal.
- Money claims (unpaid commissions, 13th month, incentives) are typically three (3) years from accrual.

V. Employer Compliance Checklist (to bullet-proof decisions)

Before hiring/assignment: Written KPIs/quotas, realistic for the territory; communicate and secure acknowledgment.
During performance cycle: Regular, documented coaching; remove bottlenecks (pricing, credit, supply).
If underperformance appears: Launch a PIP (60–90 days is common) with quantified targets, support, and check-ins.
Decision stage: Evaluate fairly; consider alternatives (reassignment, extended PIP).
Due process: Issue a detailed first notice, hold a conference, and issue a reasoned decision (second notice).
Records: Preserve all data used (sales reports, CRM logs, emails); keep copies of served notices with proof of receipt.

VI. Forums, Remedies, and Potential Awards

Conciliation–Mediation (SEnA): Quick, non-adversarial avenue to settle separation pay/clearance/commission disputes.
NLRC / Labor Arbiter: File an illegal dismissal complaint seeking reinstatement with full backwages or separation pay in lieu (when reinstatement is no longer desirable due to strained relations), plus 13th month, commissions, incentives proven due.
Damages:
- Nominal damages for due-process lapses (amount varies depending on ground).
- Moral and exemplary damages when bad faith is proven (e.g., fabricated quotas, sham hearings).
- Attorney’s fees (commonly 10% of the monetary award) if successful.
Quitclaims: Not automatically binding if shown to be executed through fraud, deceit, or undue pressure, or for grossly inadequate consideration.

Backwages generally include basic pay and fixed allowances from dismissal until reinstatement or finality of judgment, typically without deduction for earnings elsewhere once illegal dismissal is established.

VII. Special Topics

1) Constructive dismissal tied to quotas

Even without a formal termination, constructive dismissal may be found where the employer makes continued employment unreasonable—e.g., impossible quotas, abrupt pay plan cuts, stripping territory, or repeated humiliation tied to quota meetings. The test is whether a reasonable person would feel compelled to resign.

2) Sales incentives and commissions after separation

Commissions already earned under the plan (i.e., the sale is booked and meets payout conditions) remain payable even if the employee is later dismissed, unless the plan clearly and lawfully says otherwise.
Final pay (including earned commissions) should be released within a reasonable time after separation; delay may justify claims for damages or penalties under company policy or advisories.

3) Fixed-term and project-based sales roles

Fixed-term arrangements still require good faith and compliance with the term’s specificity; fixed-term cannot be used to defeat security of tenure by serial renewals that mask regular employment.

4) Managerial vs rank-and-file

Managerial employees can be held to higher standards and are more susceptible to trust-based dismissals—but numbers alone typically don’t prove willful breach of trust.

5) Data privacy in evidence

When gathering proof (e.g., client lists, emails), employees should avoid violating data-privacy/confidentiality duties. Ask counsel about secure ways to subpoena or request records through the case.

VIII. Anatomy of a Solid Performance Improvement Plan (PIP)

Scope: exact metrics (monthly revenue, new logos, active pipeline value, call cadence).
Baseline: show prior three–six months of data.
Targets: realistic, time-bound (e.g., +20% to prior run-rate), not a sudden 200% jump unless justified.
Support: product training, joint calls, marketing leads, pricing/credit support, expense budget.
Checkpoints: weekly reviews with minutes; mid-point recalibration if external constraints emerge.
Outcomes: clear pass/fail criteria and next steps (reassignment vs separation).

IX. Practical Templates

A. Employee rebuttal outline (for the first notice)

Acknowledge receipt; reserve rights.
Challenge standards (unreasonable, not communicated, changed mid-stream).
Challenge causation (inventory/price/territory constraints; provide documents).
Show efforts (activity logs, client feedback, proposals submitted).
Propose PIP or extension; request specific support.
Request full copies of all evidence and minutes.

B. Employer first-notice checklist

State the specific KPI shortfalls (with periods and figures).
Cite the policy/standard breached and when/where communicated.
Attach reports; invite a written explanation and a hearing date.
Advise of possible sanctions including dismissal.

X. Quick Q&A

Q: Can one bad quarter justify dismissal? A: Rarely. Employers must show material and repeated failure and a fair PIP—plus due process.

Q: Are unattainable quotas illegal? A: If manifestly unreasonable and used to force resignations or terminations, they can support constructive-dismissal or illegal-dismissal findings.

Q: I’m on probation. Do I still get due process? A: Yes. And the standards must have been clearly explained at hiring.

Q: If my dismissal is illegal, do I automatically get separation pay? A: The primary relief is reinstatement with backwages; separation pay in lieu is awarded when reinstatement is impracticable (e.g., strained relations).

XI. Action Guide (Both Sides)

Employees: Document everything now—emails, PIP, sales reports, stock-out notices, client affidavits. File within the prescriptive periods.
Employers: Design KPIs that match territory reality; keep a meticulous trail (PIP, coaching, notices). Termination should be a last resort after genuine support.

Disclaimer

This article provides general information on Philippine labor principles applied to sales-quota terminations. Specific facts, CBAs, employment contracts, and company policies can materially change outcomes. For advice on your case, consult a Philippine labor practitioner.