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Can You Be Demoted for Low Productivity in the Philippines?

Greg de la Cruz works in the tech industry and is the author of two published titles on Amazon.

Worker productivity continues to be a hot issue in the age of remote work.

Worker productivity continues to be a hot issue in the age of remote work.

Labour Laws and Productivity

Ever been worried about your productivity not meeting company standards? Apparently, there is a rule in the Philippine legal system that protects the interest of the employer when it comes to demoting an employee for not being able to meet desired productivity levels.

Having rammed both ends of my laptop shut —my cue for a concluded workday when working from home—I came across an interesting labour case as I lounged on my couch and scrolled mindlessly on my phone. What was interesting to me about this case was that it involved a worker who got demoted because of low productivity.

When it comes to labour laws, it’s not always the worker who gets the upper hand despite social justice and compassionate judges being on the salaryman’s side. The employer has its own rights to protect, too. And at the end of the day, these Supreme Court decisions may leave a bad taste in your mouth while making perfect logical sense.

Sitting here and wrapping up my day, I wonder if I was in the worker’s shoes, would I really feel like I was treated unfairly? Or would I have easily seen it coming as a result of my lack of “hustle?” Thankfully, my current job doesn’t involve reaching daily, weekly, or monthly quotas.

As great as the arrangement of profit-sharing sounds to any person’s ear, not everyone can take the pressure. For Aurelio Fuerte, the pressure must have gotten to him bad, or he may have just been in a slump. Let’s review what happened in this case of Fuerte v. Reynaldo’s Marketing Corporation (G.R. No. 125303).

Fuerte v. Reynaldo’s Marketing Corporation

In 1981, Fuerte worked as a muffler specialist for Reynaldo’s Marketing Corporation, with a daily salary of 45 pesos (roughly 1 USD). Seven years later, he was promoted to the position of supervisor, and his daily compensation was increased to 122 pesos as a result. If you ask me, that wage increase probably didn’t mean much because of inflation.

It was great, though, that the company provided a weekly supervisor’s allowance of 600 pesos. This allowance doubled his take-home pay and was probably fitting since his job was in sales, and it was sales that drove the company’s revenue.

Four years later, in 1992—which would make it his 11th year working for the same company—he was instructed to report at the company’s main office. He was told he would be transferred to another area because he failed to meet his sales quota.

At the same time and for the same reason, his supervisor’s allowance was withdrawn. Fuerte still reported to his new assigned workplace, but he eventually grew weary and he sued the company for illegal termination.

Fostering Competition Between Workers

Reading the case with the above facts alone, you might think that Fuerte was treated unfairly, or you might side with the company and say that he had it coming because of his subpar performance. Nonetheless, you’d think about the fact that this employee had been with the company for more than a decade—didn’t he deserve better treatment?

We have to hear the company’s side before making a conclusion on unfair treatment. For Reynaldo’s Marketing Corporation, there was a company policy intended to “foster competition among its employees.” Under this scheme, employees were required to comply with a monthly sales quota.

Should a supervisor such as Fuerte fail to meet his quota for a certain number of consecutive months, they would be demoted, whereupon their supervisor’s allowance would be withdrawn and be given to the individual who takes their place. Additionally, if the employee were to succeed in meeting the quota again, they would be reappointed to supervisor, and their allowance would be restored.

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In Fuerte’s case, that’s exactly what happened, except that he didn’t really get reinstated.

An employer is entitled to impose productivity standards for its workers.

An employer is entitled to impose productivity standards for its workers.

Did the Employee's Transfer Amount to Constructive Dismissal?

Fuerte did not appreciate his transfer at all, and he definitely resented the fact that his supervisor’s allowance was stripped. He sued the company for illegal dismissal; an issue brought before the Supreme Court to decide on.

The Court ruled that Fuerte was not constructively dismissed. The Court defined constructive dismissal as:

"An involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee."

While, indeed, Fuerte was demoted from his supervisor position, there was more to it than just that. In the words of the Court, the instinctive conclusion would be that his transfer was actually a constructive dismissal; however, it should be borne in mind that the right to demote an employee also falls within the category of management prerogative.

The Court said:

"The arrangement appears to us to be an allowable exercise of company rights. An employer is entitled to impose productivity standards for its workers, and in fact, non-compliance may be visited with a penalty even more severe than demotion."

An Allowable Exercise of Company Rights

The Court’s decision established that the right to demote falls within the wide area of “management prerogative,” the trusted executioner companies rely on when they want the axe to fall on somebody (legally).

The Supreme Court elaborated further on this precedent regarding demotion, saying:

"The practice of a company laying off workers because they failed to make the work quota has been recognized in this jurisdiction… In the case at bar, the petitioner’s failure to meet the sales quota assigned to each of them constitute a just cause of their dismissal, regardless of the permanent or probationary status of their employment. Failure to observe prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal. Such inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the same within the allotted reasonable period, or by producing unsatisfactory results . . ."

What Does The Fuerte Ruling Mean for the Modern Worker?

If you’ve caught yourself slacking on your job, then you’re probably starting to worry. While yes, the modern employer cares for your well-being and your mental health, it can also take away your job (or at least demote you) at any time if you don’t hit your targets.

So much for “pacing yourself” during the age of self-directed, remote work. Be very careful, and remember that the “remote” excuse for low productivity doesn’t always work in your favour.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

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