In Philippine employment relations, the security of tenure enshrined in Article XIII, Section 3 of the 1987 Constitution stands as a fundamental protection for workers. Employers, however, retain the inherent right to prescribe reasonable standards of performance and to enforce discipline when those standards are not met. The Performance Improvement Plan (PIP) and the Notice to Explain (NTE) are two distinct yet interrelated instruments that must be deployed with precision to avoid illegal dismissal claims before the National Labor Relations Commission (NLRC) or the courts. This article exhaustively examines the legal bases, permissible grounds, procedural requisites, jurisprudential contours, and practical implications of issuing an NTE while an employee is actively undergoing a PIP.

Legal Framework Governing PIP and NTE

The Labor Code of the Philippines (Presidential Decree No. 442, as amended) does not expressly mandate a PIP. Its validity derives from the employer’s management prerogative under Article 211 and from the due-process requirements for termination under Article 297 (formerly Article 282). The Supreme Court has repeatedly recognized the PIP as a legitimate tool to afford an employee a fair opportunity to improve before any termination grounded on poor performance or inefficiency.

The twin-notice rule, codified in Article 297 and operationalized by Department of Labor and Employment (DOLE) Department Order No. 147-15 (Amended Rules on Termination of Employment), requires:

A first written notice (NTE) specifying the charges and giving the employee at least five calendar days to submit a written explanation; and
A second written notice (Notice of Termination) after the employee has been heard.

A PIP is essentially a structured manifestation of the “opportunity to improve” that jurisprudence demands before an employee may be dismissed for inefficiency, incompetence, or gross and habitual neglect of duties. Because the PIP itself satisfies part of the substantive due-process requirement, the subsequent issuance of an NTE during the PIP period must rest on independent or aggravated grounds; otherwise, the employer risks being seen as using the PIP merely as a formality to justify predetermined termination.

Nature and Purpose of a PIP

A valid PIP must contain the following non-negotiable elements:

Specific, measurable, attainable, relevant, and time-bound (SMART) performance deficiencies identified through prior performance appraisals;
Clear benchmarks and timelines (typically 30 to 90 days, extendable only for meritorious reasons);
Identification of the support the employer will provide (training, coaching, additional resources);
Explicit warning that failure to meet the targets may lead to disciplinary action, including termination; and
Employee acknowledgment, preferably by signature.

The PIP is rehabilitative, not punitive. It is not a disciplinary sanction. Consequently, an employer cannot lawfully issue an NTE solely because the employee “is on PIP.” There must be additional or escalated factual circumstances that independently or collectively constitute a just or authorized cause under Article 297 or Article 298.

Permissible Grounds for Issuing an NTE While a PIP Is Ongoing

The following grounds, when supported by substantial evidence, justify the issuance of an NTE even while the PIP period has not yet expired:

Willful or Gross Non-Compliance with PIP Terms
Refusal to attend mandatory coaching sessions, failure to submit required weekly progress reports without justifiable reason, or deliberate sabotage of the improvement process. Such conduct may be treated as willful disobedience of lawful orders (Article 297(a)) or gross and habitual neglect (Article 297(b)) when the PIP directives are reasonable and previously communicated.
Manifestation of Gross Inefficiency or Incompetence During the PIP Period
When the employee’s performance not only fails to improve but actually deteriorates to a level that causes material damage to the employer’s operations (e.g., repeated critical errors in financial reporting that expose the company to regulatory sanctions). The Supreme Court has held that inefficiency becomes a valid ground for termination only when it is gross and when the employee was given a reasonable chance to improve—the PIP itself supplies that chance, and continued gross failure during the plan period supplies the just cause.
Commission of a Separate Just Cause Unrelated to the Original Performance Deficiencies
Any act enumerated in Article 297 committed while the PIP is in force: serious misconduct (e.g., harassment of colleagues), fraud or willful breach of trust (e.g., falsifying sales figures submitted as part of PIP documentation), or commission of a crime against the employer. The pendency of the PIP does not grant the employee immunity from discipline for new infractions.
Falsification or Dishonesty in Connection with PIP Activities
Submitting fabricated evidence of improvement, forging signatures on coaching forms, or misrepresenting hours worked to inflate productivity metrics. This constitutes fraud or willful breach of trust under Article 297(d) and warrants immediate NTE.
Violation of Company Rules or Policies During the PIP
Breaches of attendance policy, safety regulations, data privacy rules, or conflict-of-interest policies. The fact that the employee is already under performance scrutiny does not exempt him or her from general disciplinary standards.
Abandonment of Employment or Unauthorized Absences During the PIP
Prolonged unexcused absences that prevent any meaningful participation in the improvement process may be construed as abandonment, a just cause that can be invoked through an NTE.
Analogous Causes
Any act or omission that bears a reasonable relation to the foregoing and renders continued employment untenable, provided the analogy is clearly explained in the NTE.

It is crucial to note that simple failure to meet one or two PIP milestones before the end of the agreed period does not automatically justify an NTE. The employer must wait until the PIP duration lapses unless the partial failure already amounts to gross neglect or another just cause. Premature issuance exposes the employer to findings of bad faith.

Procedural Safeguards When Issuing NTE During PIP

The NTE must:

Be in writing and served personally or by registered mail/courier with proof of receipt;
Identify the specific acts or omissions, explicitly linking them (where applicable) to the ongoing PIP;
Cite the particular paragraph of Article 297 or Article 298 relied upon;
Inform the employee of the right to submit a written explanation within at least five calendar days and the right to be heard in a conference or hearing;
Warn that failure to respond or an unsatisfactory explanation may result in disciplinary action up to and including termination; and
Be signed by an authorized officer.

The employee’s response and any clarificatory hearing must be conducted with impartiality. If the employer proceeds to termination, the second notice must state the specific ground(s) relied upon and the evidence considered. All documents—PIP, performance logs, NTE, employee’s reply, investigation report—must be preserved, as these form the core of the employer’s evidence before the NLRC.

Jurisprudential Benchmarks

The Supreme Court has consistently ruled that:

The employer bears the burden of proving both the validity of the cause and strict compliance with due process (King of Kings Transport, Inc. v. Mamac, G.R. No. 166208, 2007; later reiterated in numerous decisions).
A PIP, when properly implemented, satisfies the “opportunity to explain and improve” requirement (P.I. Manufacturing, Inc. v. NLRC, G.R. No. 167217, 2011).
Issuance of an NTE during a PIP is upheld when new misconduct occurs or when performance deterioration becomes gross (e.g., cases involving bank tellers whose cash shortages escalated during improvement periods).
Conversely, termination is declared illegal when the PIP is used as a “fishing expedition” or when the NTE is issued without new grounds merely to shortcut the improvement timeline.

Risks and Liabilities for Improper Issuance

Issuing an NTE without sufficient independent grounds or without observing due process exposes the employer to:

Declaration of illegal dismissal with orders for reinstatement and full back wages from the date of dismissal until actual reinstatement;
Payment of moral and exemplary damages when bad faith or malice is proven;
Liability for attorney’s fees; and
In extreme cases, criminal prosecution under the Labor Code for illegal recruitment or other offenses if the scheme is found to be part of a pattern of harassment.

Employees, on the other hand, may also be held to account if they abuse the PIP process through bad-faith non-cooperation, which itself can become evidence supporting a valid NTE.

Best Practices for Employers

Maintain a separate, chronological performance file for every employee on PIP.
Conduct mid-PIP reviews in writing with employee signature.
Secure legal or human-resources review before issuing any NTE during an active PIP.
Consider offering voluntary resignation with separation pay as an alternative when the case is borderline, provided the employee is not coerced.
Train supervisors on documentation standards to withstand NLRC scrutiny.

Employee Protections and Remedies

An employee who believes an NTE was issued in bad faith while on PIP may:

File a complaint for illegal dismissal or constructive dismissal;
Seek preventive mediation through the Single Entry Approach (SEnA) program of DOLE;
Invoke grievance machinery if covered by a collective bargaining agreement; or
Request inspection by DOLE Regional Office for violations of labor standards.

Conclusion

The issuance of a Notice to Explain during an ongoing Performance Improvement Plan is neither prohibited nor routine. It is legally tenable only when new or aggravated acts or omissions independently satisfy the just or authorized causes under the Labor Code and when every step of procedural due process is meticulously observed. Philippine labor jurisprudence demands that the PIP remain a genuine instrument of rehabilitation and that any NTE issued in its shadow be supported by substantial, documented evidence rather than mere dissatisfaction with progress. Employers who master this balance protect both their operational needs and their legal position; employees who understand the parameters can effectively exercise their right to explain and defend their tenure. Strict adherence to these principles upholds the constitutional command of social justice while preserving the viability of Philippine enterprises.