I. Why “low sales performance” is a legal due-process issue

In sales organizations, performance is measurable and targets are often non-negotiable. But in Philippine labor law, disciplining or dismissing an employee for low sales performance is not simply a business decision—it is a legal act that must satisfy:

Substantive due process (a lawful and factually supported ground), and
Procedural due process (the required steps—most notably the Notice to Explain and the opportunity to be heard).

The Notice to Explain (NTE)—also commonly called a show-cause memo—is the cornerstone of procedural due process for discipline based on alleged employee fault, including poor performance that is being treated as a just cause or an analogous cause.

II. Core legal framework

A. Constitutional and statutory anchor

Philippine policy affords protection to labor and security of tenure. A regular employee may be dismissed only for just causes or authorized causes, and only after due process.

B. Key Labor Code provisions (renumbered articles commonly cited)

Just causes: Labor Code Article 297 (formerly Article 282)
Authorized causes: Labor Code Article 298 (formerly Article 283) and Article 299 (formerly Article 284)

Low sales performance generally does not fit neatly into the classic “misconduct” categories. Employers usually attempt to justify it under:

Gross and habitual neglect of duties (Art. 297), and/or
Other causes analogous to the foregoing (Art. 297), depending on facts and jurisprudence.

C. The “two-notice rule” and the right to be heard

Philippine jurisprudence requires, for termination based on just cause:

First written notice (NTE / charge sheet): specific allegations + directive to explain.
A real opportunity to be heard (written explanation and, when appropriate, a conference/hearing).
Second written notice (decision notice): results, basis, and penalty.

Courts have repeatedly emphasized that procedural due process is not technical theater—it must be a genuine chance to respond.

III. Understanding poor performance as a ground for discipline or dismissal

A. Poor performance vs. misconduct

Low sales is usually not a moral failing; it is typically framed as:

Failure to meet reasonable standards of work,
Inefficiency / incompetence, or
Neglect (if persistent and unjustified).

Because it is often capability- or results-based, employers must be careful not to “force-fit” poor performance into misconduct language unless the facts truly support it (e.g., falsified sales reports, client poaching, fraud—those are different cases).

B. Regular employees: the higher threshold

For regular employees, dismissal for performance requires stronger proof because security of tenure is robust. A defensible case usually shows:

Clear performance standards (e.g., quotas/KPIs) that were communicated;
Fair measurement system (documented, consistent, job-related);
Meaningful support (training, coaching, tools, territory alignment, leads/assignments where applicable);
Sustained failure over time, not an isolated bad month; and
Progressive discipline (often expected in practice for performance issues), including warnings and a chance to improve.

Many illegal dismissal findings arise not because targets exist, but because employers cannot prove that the targets were reasonable, communicated, consistently applied, and that the employee was given a real chance to improve.

C. Probationary employees: different standard, still with due process

For probationary employees, the employer may terminate for failure to meet reasonable standards made known at the time of engagement. However:

Standards must be communicated (offer letter, job description, KPI sheet, onboarding materials acknowledged in writing).
The decision must be based on a fair evaluation.
Procedural fairness (notice and opportunity to respond) remains important; courts disfavor abrupt, unexplained dismissals.

D. When low sales is not a valid ground

Low sales performance becomes legally vulnerable when it is tied to:

Unreasonable or impossible quotas,
Moving goalposts without notice,
Inconsistent application (others similarly situated are not disciplined),
Territory reassignment or product shortages that sabotage performance,
Market shocks ignored by management while still imposing identical targets, or
Pretext for discrimination or retaliation (union activity, pregnancy, protected complaints).

IV. The Notice to Explain (NTE): purpose, function, and legal requirements

A. What the NTE is (and is not)

The NTE is not the penalty. It is the charge and the employee’s formal chance to respond. A defective NTE can taint the entire disciplinary process.

B. Essential characteristics of a legally sound NTE

A good NTE for low sales performance should include:

Specific facts, not conclusions
- Identify the metrics and the period: e.g., “January–March 2026 quota attainment: 42%, 38%, 45%.”
- Compare against the standard: “required minimum: 80% monthly attainment” (if that is the standard).
The rule/standard violated
- Cite the relevant policy: sales performance policy, KPI guidelines, performance management policy, employment contract clause, code of conduct provision on performance, etc.
Prior interventions (if any)
- Coaching dates, Performance Improvement Plan (PIP) start, written reminders, performance reviews.
Directive to explain within a reasonable time
- Philippine doctrine commonly recognizes that employees must be given a reasonable period to explain; many employers follow at least five (5) calendar days from receipt as the safest practice in just-cause termination contexts.
Notice of a conference/hearing (or that one may be scheduled)
- Especially where facts are disputed, a conference is prudent.
Neutral tone
- Avoid declaring guilt (“you are incompetent”); use “you are required to explain why no disciplinary action should be taken.”

C. Typical mistakes that weaken an NTE

Vague accusations: “You have low sales. Explain.”
No timeframe, no data, no standard.
No reference to expectations previously communicated.
“Already decided” language: “This serves as notice of your termination unless you resign.”
Unreasonable deadlines (“respond within 24 hours”) unless exceptional circumstances justify it.
Mixing issues (low sales + unrelated misconduct) without clarity and separate factual bases.

V. Substantive due process: proving that discipline is justified

Low performance cases are won or lost on documentation and fairness.

A. What evidence usually matters

For a sales-performance NTE and any subsequent decision, employers typically rely on:

KPI sheets and quota tables (with clear definitions),
CRM reports, pipeline reports, call/activity logs (if activity metrics matter),
Sales ranking and territory assignment records,
Written coaching notes and meeting minutes,
Emails/memos on targets and strategies,
PIP documents with measurable milestones,
Comparative data showing consistent application across similarly situated employees,
Proof of tools/training provided and the employee’s participation.

B. The “reasonableness” of targets

Targets should be demonstrably job-related and realistic. Courts look more favorably on standards that are:

Set in good faith and aligned with the role,
Based on historical data or market segmentation,
Consistent with how other sales roles are measured,
Not weaponized midstream to force attrition.

C. “Gross and habitual neglect” angle (when used)

Where employers treat persistent non-performance as neglect, they must show:

Habitual: repeated over time, not isolated; and
Gross: substantial, serious failure—not minor shortfalls.

It helps if the employee repeatedly fails despite warnings, coaching, and a clear PIP, and if the employee cannot provide credible external factors or employer-side impediments explaining the shortfall.

VI. Procedural due process: the steps after the NTE

A defensible disciplinary process for low sales performance typically follows this sequence:

Step 1: Serve the NTE properly

Personal service with acknowledgment, or
Registered mail / reputable courier with proof of delivery, or
Company email if policy recognizes it (best paired with read receipt and policy acknowledgment).

Step 2: Receive and evaluate the employee’s written explanation

Common defenses employees raise include:

Territory is smaller or less viable than peers;
Product supply issues, pricing constraints, delayed approvals;
Leads are withheld or reassigned;
KPI computation errors;
Market downturn;
Lack of training or tools;
Health issues (which may trigger other legal considerations).

The employer must actually evaluate these, not merely file them away.

Step 3: Conduct an administrative conference/hearing (when appropriate)

While not always a full-blown trial, a conference is strongly advisable when:

Facts are disputed,
The contemplated penalty is severe (suspension, demotion, termination),
The employee requests a hearing, or
Policy/CBA requires it.

Basic fairness markers:

Inform the employee of the schedule and purpose,
Allow the employee to speak and present documents,
Permit a representative if company policy or practice allows,
Prepare minutes and have them acknowledged.

Step 4: Issue the decision notice

The second notice should state:

Findings of fact,
Evidence relied upon,
The rule/standard and how it was breached,
The penalty and effectivity date (if termination),
Any pay/clearance instructions (ideally in a separate HR memo to keep the decision legally focused).

VII. Choosing the proper disciplinary action for low sales

A. Progressive discipline is often the safest structure

Even if not explicitly mandated by statute for every situation, progressive discipline helps demonstrate good faith:

Coaching / counseling memo
Written warning(s)
PIP with measurable milestones and support
Final warning / NTE for failure to improve
Termination (only if facts justify)

B. Penalties must be proportionate and consistent

Discipline should be:

Proportionate to the severity and duration of underperformance,
Consistent with how others were treated,
Aligned with company policy.

Abrupt termination for modest shortfalls without prior intervention is commonly attacked as arbitrary.

VIII. Special situations and common pitfalls

A. Sales roles with commissions

Commission structure does not remove employee status. Due process still applies. Also watch for:

Misclassification (e.g., calling someone an “agent” when they are effectively an employee),
Wage and commission disputes intertwined with performance discipline.

B. Demotion or pay reduction as “performance management”

Unilateral demotion or pay reduction can be attacked as:

A disciplinary penalty requiring due process, and/or
Constructive dismissal if it is drastic, humiliating, or unreasonable.

If considering role changes for performance, document consent and follow policy.

C. Preventive suspension

Preventive suspension is usually justified only when the employee’s continued presence poses a serious and imminent threat to life or property or could compromise the investigation. Low sales performance rarely fits that rationale.

D. Forced resignation / “resign or be terminated”

Coerced resignation is a frequent basis for findings of illegal dismissal. If an employee resigns, voluntariness must be clear and provable.

E. Data privacy

Performance data is personal information. Keep it:

Access-controlled,
Used only for legitimate business purposes,
Disclosed internally on a need-to-know basis, and
Retained according to policy.

IX. Liabilities when due process is defective

Where dismissal is found illegal, exposure can include:

Reinstatement (or separation pay in lieu in some circumstances),
Full backwages,
Attorney’s fees in appropriate cases,
Damages where warranted.

Where substantive cause exists but procedural due process was not observed, jurisprudence has imposed nominal damages (the amount depends on circumstances and evolving case law), reflecting the employer’s failure to observe required procedure even if the dismissal ground is valid.

X. Practical guidance: drafting an NTE for low sales performance

A. Before issuing the NTE (minimum checklist)

Confirm the employee’s status (probationary/regular) and applicable policy/CBA.
Ensure standards were communicated and acknowledged.
Validate the numbers (avoid KPI math errors).
Gather supporting documents (CRM extracts, target sheets, coaching notes).
Check consistency with peer treatment.
Confirm management support actions (training, tools, territory alignment).

B. What the NTE should contain (recommended structure)

1) Heading and case reference

“NOTICE TO EXPLAIN – Sales Performance (Period: ___)”
Date, employee name, position, department

2) Statement of facts (specific and measurable)

Targets, actual results, attainment %, rankings (if used), and the covered period
Identify the KPI definitions (what counts as “closed,” “qualified leads,” etc.)

3) Standards and expectations

Cite the policy/contract/KPI agreement or performance standards document
Mention prior coaching/PIP and dates (attach if needed)

4) Directive to explain

Require a written explanation within a reasonable period
Ask for supporting documents if the employee claims external impediments

5) Notice of conference

Provide schedule or advise that HR will set it, and invite attendance

6) Neutral closing

“Your explanation will be evaluated to determine whether disciplinary action is warranted.”

XI. Sample Notice to Explain (template)

NOTICE TO EXPLAIN Re: Low Sales Performance – [Month/Quarter/Period]

Date: ____________

To: [Employee Name] Position: [Position Title] Department: [Department]

This Notice is issued in relation to your sales performance for the period [start date] to [end date]. Based on the Company’s records and KPI standards for your role, your performance results are as follows:

Sales Target / Quota: [e.g., ₱____ per month / ____ accounts / ____ closed deals]

Actual Sales Achieved:

[Month 1]: Target [] / Actual [] / Attainment [__%]

[Month 2]: Target [] / Actual [] / Attainment [__%]

[Month 3]: Target [] / Actual [] / Attainment [__%]

Required Standard: The minimum performance standard for your position is [e.g., 80% monthly quota attainment] as provided in [policy/document name, date], which you acknowledged on [date].

The above results indicate that you did not meet the required standard during the covered period. Records further show the following performance management interventions: [coaching sessions / PIP / written reminders] on [dates] (copies attached, if applicable).

In view of the foregoing, you are hereby required to submit a written explanation within five (5) calendar days from receipt of this Notice, stating why no disciplinary action should be taken regarding your failure to meet the required sales performance standards. You may attach documents or other evidence you wish the Company to consider (e.g., client communications, pipeline reports, territory/lead assignments, or other relevant records).

You are also directed to appear at an administrative conference on [date] at [time] at [location / online link] to discuss this matter and to allow you to present your side.

Please be reminded that the Company will evaluate your explanation and all available records to determine the appropriate action consistent with Company policy and applicable law.

Issued by: _______________________ [Name / Title]

Received by: ______________________ [Employee Name / Date]

Note: The exact timing and conference mechanics should match company policy/CBA and the factual needs of the case.

XII. A disciplined employer process: best practices that withstand scrutiny

Make standards explicit early
- Offer letter attachments, job description, KPI scorecards, onboarding acknowledgments.
Use a real PIP for performance, not punishment
- Clear metrics, weekly check-ins, documented coaching, defined support, fixed duration.
Document context
- Territory changes, product shortages, pricing constraints, marketing support levels, lead assignments.
Separate performance from misconduct
- Don’t label low sales as “misconduct” unless there is actual wrongdoing.
Write NTEs like a fact memo
- Precise data, specific period, cited standards, neutral tone.
Apply standards consistently
- Similar shortfalls should trigger similar interventions, unless distinctions are documented.
Avoid shortcuts
- “Resign or be terminated” tactics and rushed timelines often backfire.

XIII. Key takeaways

Low sales performance can justify discipline—and in severe, sustained, and well-documented cases, termination—but it demands careful alignment with substantive and procedural due process.
The Notice to Explain must be specific, anchored on communicated standards, and must provide a genuine opportunity to respond.
Performance-based cases are documentation-heavy; fairness, consistency, and reasonableness are the difference between a valid management action and an illegal dismissal finding.