Due Process and Valid Ground

1) Why “performance metrics” terminations are legally sensitive

In the Philippines, an employee enjoys security of tenure: they may be dismissed only for a lawful cause and with observance of due process. Performance metrics (KPIs, quotas, scorecards, quality standards, attendance/throughput targets, SLA compliance, error rates, customer ratings, etc.) are common and legitimate business tools—but missing a target is not automatically a lawful ground for dismissal. Employers must still fit the situation into recognized just causes (employee fault) or authorized causes (business reasons), and must prove it with substantial evidence.

Performance-based terminations most often fall under just cause: the employer alleges the employee’s continued failure shows gross inefficiency, incompetence, or gross and habitual neglect, or (in some contexts) conduct tied to loss of trust and confidence for positions of trust. Courts and labor tribunals treat these cases carefully because metrics can be unfairly designed, poorly communicated, inconsistently enforced, or used as pretext.

2) Governing legal framework

Key pillars in the Philippine context:

Constitutional and statutory security of tenure (implemented through the Labor Code and jurisprudence).
Labor Code provisions on termination (renumbered articles commonly cited with old equivalents):
- Just causes (fault-based): Article 297 (formerly 282)
- Authorized causes (business-based): Article 298 (formerly 283), Article 299 (formerly 284)
Implementing rules and administrative guidance from Department of Labor and Employment on procedural due process for dismissals.
Extensive jurisprudence from the Supreme Court of the Philippines (often via labor cases appealed from the NLRC).

Two separate requirements always matter:

Substantive due process – there must be a valid cause recognized by law and supported by evidence.
Procedural due process – the employer must follow the required process (notices and opportunity to be heard).

Failure in either can result in illegal dismissal (if cause is invalid/unproven) or liability for damages (if cause exists but procedure is defective).

3) Mapping “poor performance” to legally recognized grounds

A. The common misconception: “Underperformance” is not listed verbatim

“Poor performance” or “failure to meet KPIs” is not expressly enumerated as a standalone just cause in the Labor Code. It becomes legally actionable only when it fits into recognized categories—most commonly:

Gross and habitual neglect of duties (Article 297)
Other causes analogous to the foregoing (Article 297) — where jurisprudence has treated gross inefficiency/incompetence as analogous in proper cases
Loss of trust and confidence (Article 297) — limited to employees who hold positions of trust, and where the performance issue is tied to trust-related duties (accuracy, integrity, fiduciary handling, sensitive compliance roles), not merely low sales

The safest legal framing depends on facts and role.

4) When performance metrics can support a just cause dismissal

A. Gross and habitual neglect (and related “inefficiency/incompetence” theories)

A KPI miss becomes a legally defensible cause when the employer can show the employee’s performance demonstrates serious, repeated failure to do what the job fundamentally requires, despite fair standards and reasonable support.

Typical indicators tribunals look for:

Habituality: repeated failures over time (not a one-off bad month).
Gravity: failures substantially affect the business or role outcomes (quality failures, repeated critical errors, severe productivity deficits, repeated missed essential deliverables).
Fair standards: the metrics are reasonable, job-related, and not arbitrary.
Knowledge and coaching: the employee knew the standards and received feedback/opportunity to improve.
Comparability: the standards are applied consistently across similarly situated employees, or the employer can explain differences objectively (territory, account mix, seasonality, resource constraints).

What usually fails in disputes:

Only one evaluation cycle or a single incident is used.
The KPI was new, not communicated clearly, or changed midstream without transition.
The metric is impossible or structurally biased (unbalanced scorecards, unattainable quotas, no control over inputs).
The employer cannot show contemporaneous documentation (only prepares papers after termination).

B. Loss of trust and confidence (when metrics are tied to trust functions)

This ground is not for “low numbers” alone. It is more defensible when the “performance” issue is actually trust-related—e.g., repeated critical compliance breaches, inaccurate financial reporting, mishandling confidential data, repeated audit failures attributable to the employee, repeated operational lapses in a fiduciary role—especially for:

Managerial employees; or
Employees who, while not managerial, occupy a clearly defined position of trust (cash handling, audit-sensitive functions, access to trade secrets, key compliance roles).

Even then, tribunals generally require:

A reasonable basis for loss of trust (not speculation),
Proof by substantial evidence, and
That the ground is not a pretext for arbitrary dismissal.

5) Performance metrics and probationary employment

Probationary employees have a different—but still regulated—framework.

Core rule: A probationary employee may be terminated for failure to meet reasonable standards made known to the employee at the time of engagement. If standards were not properly communicated at hiring, the employee may be treated as regular for security-of-tenure purposes.

For probationary KPI-based termination, best-supported situations involve:

Written job offer/contract stating the probationary status and performance standards;
Onboarding materials (scorecards, KPIs, quality standards) acknowledged by the employee;
Periodic coaching/feedback during probation; and
Written notice of termination citing the specific standards not met.

Procedural fairness still matters: while probationary termination practice can be less elaborate than just-cause cases, employers are still expected to provide notice and a fair chance to respond, especially where the termination reason is contested or disciplinary in nature.

6) Regular employees and “management prerogative” limits

Employers do have management prerogative to set targets, evaluate performance, and impose discipline. But in termination cases, tribunals balance prerogative against:

Security of tenure,
Good faith and fairness,
Non-discrimination and equal protection,
Reasonableness of standards, and
Proof and due process.

A lawful evaluation system is not enough; the employer must prove the employee’s actual performance failures and connect them to a recognized ground.

7) Substantial evidence: what employers must prove (and what employees typically challenge)

A. What “substantial evidence” means

Labor cases do not require proof beyond reasonable doubt. The employer must present such relevant evidence as a reasonable mind might accept as adequate to support the conclusion that a valid cause exists.

B. Strong evidence in KPI-based cases

Written, dated KPI policies/scorecards; role description linking duties to metrics
Proof the employee received and understood metrics (acknowledgment, training logs)
Objective reports (system-generated productivity/quality dashboards) with integrity controls
Performance appraisals and calibration notes (with consistent methodology)
Coaching memos, written feedback, corrective action plans
Performance Improvement Plan (PIP) with clear targets, timeframe, support measures
Records showing comparators and context (territory assignments, workload normalization)

C. Common employee defenses (often effective if supported)

KPI was not communicated or kept changing without notice
KPI is unreasonable/unattainable; lack of tools/training/support
Metric is not within employee control (leads quality, pricing, staffing, system downtime)
Disparate treatment: others with similar results were not disciplined
Data accuracy issues (wrong reports, manipulated numbers, inconsistent measurement)
Retaliation/pretext (dismissal used to mask other motives)

8) The required procedural due process for just-cause terminations (the “two-notice rule”)

For a regular employee dismissed for a fault-based ground (typical in KPI cases), Philippine practice requires:

First written notice (Notice to Explain / Charge Sheet)
- States the specific acts/omissions complained of (e.g., repeated failures to meet defined performance standards)
- Cites the rule/policy and the possible penalty (including dismissal)
- Gives the employee a reasonable opportunity to submit a written explanation (commonly at least 5 calendar days in standard guidance)
Opportunity to be heard
- A hearing is not always a full trial-type proceeding, but there must be a meaningful chance to respond.
- A conference/meeting where the employee can explain, present evidence, and rebut the employer’s claims is often advisable—especially if dismissal is contemplated.
Second written notice (Notice of Decision)
- Informs the employee of the employer’s decision after considering the explanation and evidence
- States the reasons and the effective date of termination

Practical point in KPI cases: Because performance disputes often involve context (market conditions, workload, tools, training, team dependencies), the “opportunity to be heard” is not a mere formality. A process that looks “paper-only” and predetermined is more vulnerable.

9) Authorized causes vs. KPI issues: don’t misclassify

Sometimes KPI failure is really a symptom of business downturn, restructuring, or redundancy. If the employer’s real reason is business-related, it may fall under authorized causes (e.g., redundancy, retrenchment), not just cause.

Authorized causes generally require:

Written notice to the employee and DOLE at least 30 days before effectivity, and
Separation pay at statutory rates (varies by ground).

Mislabeling a business-driven headcount reduction as “poor performance” can expose the employer to illegal dismissal findings.

10) Performance Improvement Plans (PIPs): not legally required, but often decisive

Philippine law does not universally mandate a PIP before dismissal. However, in KPI-based cases, a well-implemented PIP often becomes the most persuasive evidence of fairness and good faith, because it demonstrates:

Clear standards,
Notice of deficiency,
Reasonable time to improve,
Support and coaching,
Documentation of continued failure despite intervention.

A strong PIP is:

Specific: identifies which KPIs are deficient and by how much
Time-bound: realistic improvement window
Supported: training, coaching, tools, workload adjustments where appropriate
Measurable: defines what “pass” looks like
Documented: signed or at least served with acknowledgment/refusal noted

A weak PIP (vague, unattainable, inconsistent, or merely a paper trail) can backfire.

11) Special considerations by role and industry

A. Sales and quota-based roles

Sales terminations are commonly litigated because targets can be affected by:

Territory potential, account assignments, pricing authority
Lead pipeline quality and marketing support
Seasonality and macroeconomic conditions

Employers do better when they normalize expectations (territory segmentation, ramp-up periods, pipeline metrics) and show consistent application.

B. BPO/contact center scorecards (AHT, QA, CSAT)

These are often system-generated and seemingly objective, but disputes arise from:

System downtime or tooling issues
Queue/interaction complexity differences
QA sampling bias and calibration inconsistencies
Coaching adequacy

Calibration records, QA guidelines, and coaching logs are critical.

C. Safety-critical or regulated functions

In aviation, healthcare, finance, security, and compliance-heavy roles, performance issues may overlap with risk management. Employers still must show fair standards and due process, but gravity can be easier to establish when errors are risk-significant.

12) Consequences of non-compliance

A. If there is no valid cause (or it’s not proven)

Dismissal is typically illegal, exposing the employer to remedies that may include:

Reinstatement (or separation pay in lieu, depending on circumstances),
Full backwages from dismissal to finality of judgment (subject to jurisprudential rules),
Possible damages and attorney’s fees in appropriate cases.

B. If there is valid cause but procedure was defective

Philippine jurisprudence has recognized that the dismissal may be upheld for cause, but the employer may be ordered to pay nominal damages for failure to observe procedural due process (with amounts depending on case type and jurisprudential guidance).

13) Compliance blueprint: building a defensible KPI-based termination

A. Before any disciplinary route

Ensure KPIs are job-related, reasonable, and documented.
Communicate metrics at onboarding and whenever modified.
Train supervisors on consistent evaluation and documentation.
Ensure measurement integrity (system controls, calibration).

B. When underperformance appears

Provide timely feedback and coaching.
Document specific gaps with dates and data.
Offer a structured improvement period (often via PIP).
Address legitimate obstacles (tools, training, workload allocation).

C. When dismissal becomes a consideration

Make sure the factual pattern supports a recognized just cause (habituality + gravity).
Prepare the first notice with clear particulars and supporting references.
Give real opportunity to respond; consider a conference.
Decide based on records, not assumptions.
Issue the decision notice with reasons grounded in evidence.

14) Common pitfalls that lead to illegal dismissal findings

Treating “didn’t meet quota” as automatically terminable without showing gravity/habituality
Relying on subjective impressions instead of documented, validated metrics
Retroactively creating documents after the decision to terminate
Inconsistent enforcement (selective discipline)
Using KPI dismissal as substitute for authorized-cause downsizing
Skipping the two notices or providing a sham opportunity to be heard
Terminating a probationary employee without having made standards known at engagement

15) Bottom line

In the Philippines, termination for performance metrics is lawful only when (1) the performance failure fits a legally recognized ground and is proven by substantial evidence, and (2) procedural due process is observed. Metrics are powerful evidence only if they are reasonable, clearly communicated, consistently applied, and backed by good-faith performance management—not merely used as a numeric pretext for dismissal.