Quitclaims, waivers, and releases
1. Concept
Quitclaims, waivers, releases (collectively referred herein as “quitclaims”) are legal documents signed by employees who absolve their employers from all liability including:
1) Monetary claims; and/or
2) Illegal dismissal – only if signed in connection with a formal labor case before DOLE officers or mediators, Labor Arbiter/NLRC, Voluntary Arbitrators/NCMB.
Quitclaims are contracts in the nature of a compromise where parties make concessions, a lawful device to avoid litigation. It is a valid and binding agreement between the parties, provided that it constitutes a credible and reasonable settlement and the one accomplishing it has done so voluntarily and with a full understanding of its import. (F.F. Cruz & Co. Inc. v. Galandez, G.R. No. 236496, 08 July 2019)
In so doing, the parties adjust their difficulties in the manner they have agreed upon, disregarding the possible gain in litigation and keeping in mind that such gain is balanced by the danger of losing. (Ibid.)
a. Doctrinal policy
As a matter of doctrinal policy, the Supreme Court upholds the validity of quitclaims provided the requisites are present.
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CASE STUDY
Land and Housing Development Corporation v. Esquillo
G.R. No. 152012, 30 September 2005
In Periquet v. NLRC, this Court set the guidelines and the current doctrinal policy regarding quitclaims and waivers, as follows:
“Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wrangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking.”
Hence, quitclaims in which employees voluntarily accept a reasonable amount or consideration as settlement are deemed valid. These agreements cannot be set aside merely because the parties have subsequently changed their minds. Consistent with this doctrine, a tribunal has the duty of scrutinizing quitclaims brought to its attention by either party, in order to determine their validity.
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“Generally, [the Supreme Court] looks with disfavor at quitclaims executed by employees for being contrary to public policy. Where the person making the waiver, however, has done so voluntarily, with a full understanding of its terms and with the payment of credible and reasonable consideration, [the Court has] no option but to recognize the transaction to be valid and binding.” (Poseidon International Maritime Services, Inc. v. Tamala, G.R. No. 186475, 26 June 2013)
b. Frowned upon
“Quitclaims are commonly frowned upon as contrary to public policy and they are ineffective to bar claims for the full measure of the workers’ legal rights… The reason for this is because the employer and the employee do not stand on the same footing, such that quitclaims usually take the form of contracts of adherence, not of choice…” (Wyeth-Suaco Laboratories, Inc. v. NLRC, Santos, G.R. No. 100658, 02 March 1993)
2. When valid
The validity of quitclaims executed by laborers has long been recognized in this jurisdiction. (Philippine Carpet Employees Association v. Philippine Carpet Manufacturing Corporation, G.R. No. 140269-70, 14 September 2000)
“In Periquet vs. National Labor Relations Commission, this Court ruled that not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement of the claims of the employee, it is binding on the parties and may not later be disowned simply because of a change of mind. Such legitimate waivers resulting from voluntary settlements of laborer’s claims should be treated and upheld as the law between the parties. (Ibid.)
a. Requisites
To be valid, a deed of release, waiver or quitclaim must meet the following requirements:
1) That there was no fraud or deceit on the part of any of the parties;
2) That the consideration for the quitclaim is sufficient and reasonable; and,
3) That the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law. (Arlo Aluminum, Inc. v. Pinon, G.R. No. 215874, 05 July 2017)
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CASE STUDY
Radio Mindanao Network, Inc. v. Amurao III
G.R. No. 167225, 22 October 2014
[The employee was a radio broadcaster and production manager hired by the employer, a radio broadcasting company, for its radio station. Years later, the employer implemented a reformatting and restructuring of the programming of the radio station. This resulted in separating the employee and his co-workers via retirement. The employee signed a quitclaim in exchange for ₱311,922.00 as full settlement for all monetary claims, including retirement benefits. Five months after receiving his benefits, the employee filed for illegal dismissal with money claims.]
[RESOLUTION]
In our view, the requisites for the validity of [the employee’s] quitclaim were satisfied. [The Supreme Court] explain[s].
Firstly, [the employee] acknowledged in his quitclaim that he had read and thoroughly understood the terms of his quitclaim and signed it of his own volition. Being a radio broadcaster and production manager, he occupied a highly responsible position in the company. It would be implausible to hold, therefore, that he could be easily duped into simply signing away his rights. Besides, the language and content of the quitclaim were clear and uncomplicated such that he could not claim that he did not understand what he was signing.
Secondly, the settlement pay of ₱311,922.00 was credible and reasonable considering that [the employee] did not even assail such amount as unconscionably low, or even state that he was entitled to a higher amount.
Thirdly, that he was required to sign the quitclaim as a condition to the release of the settlement pay did not prove that its execution was coerced. Having agreed to part with a substantial amount of money, [The employer] took steps to protect its interest and obtain its release from all obligations once it paid [the employee] his settlement pay, which it did in this case.
And, lastly, that he signed the quitclaim out of fear of not being able to provide for the needs of his family and for the schooling of his children did not immediately indicate that he had been forced to sign the same. Dire necessity should not necessarily be an acceptable ground for annulling the quitclaim, especially because it was not at all shown that he had been forced to execute it. Nor was it even proven that the consideration for the quitclaim was unconscionably low, and that he had been tricked into accepting the consideration.
With the quitclaim having been freely and voluntarily signed, [the employer] was released and absolved from any liability in favor of [the employee]. Suffice it to say that the quitclaim is ineffective in barring recovery of the full measure of an employee’s rights only when the transaction is shown to be questionable and the consideration is scandalously low and inequitable. Such is not true here.
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CASE STUDY
Arlo Aluminum, Inc. v. Pinon
G.R. No. 215874, 05 July 2017
[The complainant’s son was hired as a glass and aluminum installer by EMP Glazing (Subcontractor), who was a subcontractor of Arlo Aluminum (Contractor), who in turn was engaged by Eton Properties (Client). The employee died of a work-related accident when the gondola he and his co-workers were riding on fell from the 32nd floor. A week after the death, the complainant signed a quitclaim in exchange for a Php150,000.00 full settlement. Learning of unpaid wages, the complainant filed a monetary claim. By way of defense, the employer presented the quitclaim.]
[The Court of Appeals invalidated the quitclaim.] It held that the deed of release, waiver and quitclaim was invalid because it was signed only a week after the death of [the complainant’s son]. The CA opined that Eton Properties (Client) and Arlo Aluminum (Principal) took advantage of Vicente’s overwrought state when it offered the financial assistance. It was invalid also because it covered all the claims that Vicente might have against Eton Properties and Ario Aluminum.
The CA added that EMP Glazing (Employer/Subcontractor) was a labor-only contractor because Arlo Aluminum failed to show that the former had sufficient capital and investments to conduct its undertaking. It also held that Arlo Aluminum remained to be in control of the project because it still coordinated with the project managers and it monitored the utilization of materials by EMP Glazing. Thus, the appellate court concluded that it was proper to hold Eton Properties, Ario Aluminum, and EMP Glazing jointly and severally liable to pay [the complainant son’s] unpaid wages and benefits.]
[RESOLUTION]
In this case, the [Supreme Court] is of the view that the deed of release, waiver and quitclaim signed by Vicente was valid.
First, the consideration given to Vicente in the amount of ₱l50,000.00 was reasonable and sufficient to cover the labor claims. It must be noted that the present case involves underpayment of wages and non-payment of benefits by Arlo Aluminum and Eton Properties and it was concluded by the LA that Vicente was entitled to the amount of ₱145,276.22. The said amount was determined by the LA – the body mandated by the rules to determine the proper computation of judgment awards to the employees. A fortiori, the said monetary award was affirmed by the NLRC in its decision. Evidently, the consideration given in the quitclaim sufficiently covers the liability of Arlo Aluminum and Eton Properties to Vicente for the labor claims. Thus, it cannot be said that the quitclaim had insufficient consideration.
Moreover, it was expressly provided in the quitclaim that the consideration received by Vicente in the quitclaim was for the purpose of compensating the unpaid salaries and benefits of Vic Edward. Indeed, it was unequivocally stated therein that the consideration was “bahagi na ang lahat ng sahod at mga benepisyong tinatakda ng batas, polisiya at kaugalian, at kaugnay sa paglilingkod ni VIC EDWARD PINON.” Thus, insofar as the labor claims of Vicente is concerned, the compensation given by Arlo Aluminum and Eton Properties was satisfactory. Likewise, the LA, the NLRC and the CA uniformly found that the ₱150,000.00 was accepted and received by Vicente.
Second, Arlo Aluminum did not procure the quitclaim with fraud or deceit. Neither was there proof that it employed force or duress to compel Vicente to sign the quitclaim. Aside from giving the sufficient consideration under labor laws, it provided benefits such as funeral and death benefits, and it also paid for the SSS contributions of Vic Edward. The mere fact that the said quitclaim was signed during the wake of Vic Edward does not conclusively show that Arlo Aluminum and Eton Properties took advantage of Vicente’s weak state.
Even if Vicente accepted the compensation due to dire economic needs, the quitclaim cannot be invalidated on that ground alone. “Dire necessity” may be an acceptable ground to annul quitclaims if the consideration is unconscionably low and the employee was tricked into accepting it. It, however, does not justify the annulment of a quitclaim when it is not shown that the employee had been forced to execute it. To reiterate, the amount of ₱150,000.00 is a sufficient consideration for Vicente’s labor claims as computed by the LA and affirmed by the NLRC.
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“In Goodrich Manufacturing Corp. v. Ativo, the Court held that the quitclaims were valid because the contents thereof were simple, clear and unequivocal; that the business was closed due to legitimate reasons; and that the consideration given under the quitclaims did not appear to be grossly inadequate vis-a-vis what the employees should have received in full. It was underscored therein that the total monetary awards computed by the LA were even lesser than the amounts already received by the employees in the quitclaim. Thus, due to the sufficient consideration, the validity of the quitclaim was upheld.” (Arlo Aluminum, Inc. v. Pinon, supra.)
“Likewise, in Jiao v. National Labor Relations Commission, the quitclaim was declared valid because there were no allegations of fraud or deceit employed; no force or duress was exerted against the employees to sign the quitclaims; and the consideration was reasonable as it was based on the amount required by law. The Court observed that the compensation of separation pay equivalent to one and a half month salary for every year of service was a sufficient consideration under labor laws.” (Ibid.)
b. Contents of quitclaims
In order to prevent disputes on the validity and enforceability of quitclaims and waivers of employees under Philippine laws, said agreements should contain the following:
1) A fixed amount as full and final compromise settlement;
2) The benefits of the employees if possible with the corresponding amounts, which the employees are giving up in consideration of the fixed compromise amount;
3) A statement that the employer has clearly explained to the employee in English, Filipino, or in the dialect known to the employees – that by signing the waiver or quitclaim, they are forfeiting or relinquishing their right to receive the benefits which are due them under the law; and,
5. A statement that the employees signed and executed the document voluntarily, and had fully understood the contents of the document and that their consent was freely given without any threat, violence, duress, intimidation, or undue influence exerted on their person. (EDI-Staffbuilders International, Inc. v. NLRC, Gran, G.R. No. 145587, 26 October 2007)
1) English and Tagalog, or in local dialect known to employee
It is advisable that the stipulations be made in English and Tagalog or in the dialect known to the employee. (Ibid.)
2) At least two (2) witnesses
There should be two (2) witnesses to the execution of the quitclaim who must also sign the quitclaim. (Ibid.)
3) Subscribed and sworn to under oath
The document should be subscribed and sworn to under oath preferably before any administering official of the Department of Labor and Employment or its regional office, the Bureau of Labor Relations, the NLRC or a labor attaché in a foreign country. Such official shall assist the parties regarding the execution of the quitclaim and waiver. (Ibid.)
c. Burden of proof: When on the employers
The burden rests on the employer to prove that the quitclaim constitutes a credible and reasonable settlement of what an employee is entitled to recover, and that the one accomplishing it has done so voluntarily and with a full understanding of its import. (F.F. Cruz & Co. Inc. v. Galandez, G.R. No. 236496, 08 July 2019)
d. Burden of proof: When on the employees
After the employer has shown that the employees willfully and voluntarily signed the quitclaims, the burden shifts on the employees who will claim otherwise.
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CASE STUDY
Poseidon International Maritime Services, Inc. v. Tamala
G.R. No. 186475, 26 June 2013
[The employees were hired as seafarers/fishermen by the employers, a group of foreign fishing companies operating at the coastal and offshore area of Cape Verde Islands. Sometime thereafter, fishing operations ceased resulting in the separation of the employees who signed quitclaims in exchange for full settlement amounts, which were higher than those provided under Philippine laws.]
[RESOLUTION]
We [the Supreme Court] find the requisites for the validity of the [the employees’] quitclaim present in this case. We base this conclusion on the following observations:
First, the [the employees] acknowledged in their various pleadings, as well as in the very document denominated as “waiver and quitclaim,” that they voluntarily signed the document after receiving the agreed settlement pay.
Second, the settlement pay is reasonable under the circumstances, especially when contrasted with the amounts to which they were respectively entitled to receive as termination pay pursuant to Section 23 of the POEA-SEC and Article 283 of the Labor Code.
x x x
Thus, the [the employees] undeniably received more than what they were entitled to receive under the law as a result of the cessation of the fishing operations.
Third, the contents of the waiver and quitclaim are clear, unequivocal and uncomplicated so that the [the employees] could fully understand the import of what they were signing and of its consequences. Nothing in the records shows that what they received was different from what they signed for.
Fourth, [the employees] are mature and intelligent individuals, with college degrees, and are far from the naive and unlettered individuals they portrayed themselves to be.
Fifth, while [the employees] contend that they were coerced and unduly influenced in their decision to accept the settlement pay and to sign the waivers and quitclaims, the records of the case do not support this claim. [The employees’] claims that they were in “dire need for cash” and that they would not be paid anything if they would not sign do not constitute the coercion nor qualify as the undue influence contemplated by law sufficient to invalidate a waiver and quitclaim, particularly in the circumstances attendant in this case. The records show that the [the employees], along with their other fellow seafarers, served as each other’s witnesses when they agreed and signed their respective waivers and quitclaims.
Sixth, [the employees’] voluntary and knowing conformity to the settlement pay was proved not only by the waiver and quitclaim, but by the letters of acceptance and the vouchers evidencing payment. With these documents on record, the burden shifts to the [the employees] to prove coercion and undue influence other than through their bare self-serving claims. No such evidence appeared on record at any stage of the proceedings.
In these lights and in the absence of any evidence showing that fraud, deception or misrepresentation attended the execution of the waiver and quitclaim, we are sufficiently convinced that a valid transaction took place…
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Philippine National Bank v. Dalmacio
G.R. No. 202308, 05 July 2017
[The employee was hired as an Information Technology (IT) Officer by the employer, a bank. As he was covered by a redundancy program implemented by the employer, he was separated and signed a quitclaim in exchange for full settlement of his monetary claims. Later, he filed for illegal dismissal challenging his redundancy and the validity of the quitclaim.]
[RESOLUTION]
[The quitclaim was declared valid.]
Not having sufficiently proved that he was forced to sign said Deed of Quitclaim and Release, [the employee] cannot expediently argue that quitclaims are looked upon with disfavor and considered ineffective to bar claims for the full measure of a worker’s legal rights. Indeed, it cannot even be said that [the employee] did not fully understand the consequences of signing the Deed of Quitclaim and Release. He is not an illiterate person who needs special protection. He held a responsible position at PNB as an IT officer. It is thus safe to say that he understood the contents of the Deed of Quitclaim and Release. There is also no showing that the execution thereof was tainted with deceit or coercion. Although he claims that he was “forced to sign” the quitclaim, he nonetheless signed it. In doing so, [the employee] was compelled by his own personal circumstances, not by an act attributable to PNB.
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e. Compromise agreement even if there is final judgment
While quitclaims are generally intended for the purpose of preventing or putting an end to a lawsuit, jurisprudence nonetheless holds that the parties are not precluded from entering into a compromise even if a final judgment had already been rendered. (F.F. Cruz & Co. Inc. v. Galandez, supra.)
There is no justification to disallow a compromise agreement, solely because it was entered into after final judgment. The validity of the agreement is determined by compliance with the requisites and principles of contracts, not by when it was entered into. (Magbanua v. Uy, G.R. No. 161003, 06 May 2005)
1) Requisites
As provided by the law on contracts, a valid compromise must have the following elements:
1) The consent of the parties to the compromise;
2) An object certain that is the subject matter of the compromise; and,
3) the cause of the obligation that is established. (Ibid.)
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CASE STUDY
F.F. Cruz & Co. Inc. v. Galandez
G.R. No. 236496, 08 July 2019
While quitclaims are generally intended for the purpose of preventing or putting an end to a lawsuit, jurisprudence nonetheless holds that the parties are not precluded from entering into a compromise even if a final judgment had already been rendered,58 as in this case. As pointed out in Magbanua v. Uy, “[t]here is no justification to disallow a compromise agreement, solely because it was entered into after final judgment. The validity of the agreement is determined by compliance with the requisites and principles of contracts, not by when it was entered into.”
As culled from the records, it is not disputed that the NLRC Decision had already become final and executory, declaring respondents to have been illegally dismissed, and accordingly, ordered petitioner to: (a) pay respondents their unpaid 13th month pay, backwages in accordance with Article 294 of the Labor Code, and attorney’s fees (monetary aspect); and (b) reinstate respondents or pay their separation pay should reinstatement be no longer viable (reinstatement aspect). It is likewise not denied that respondents immediately sought for the enforcement of the foregoing final and executory NLRC Decision in their letters dated February 1, 2013 and March 14, 2013.
However, records disclose that [the employer] was only able to partly comply with the NLRC Decision by paying respondents [the employees] Galandez and Sajuela the amount of ₱123,230.25 each, and Namoc the sum of ₱116,587.18, representing their backwages, 13th month pay and attorney’s fees as provisionally computed by the NLRC as of July 17, 2012.65 Thereafter, respondents executed a Quitclaim and Release in favor of petitioner acknowledging payment, which pertinently reads:
THAT I, _____ , his/her successors and assigns, for and in consideration of the sum of ______ (P ___ ) to his/her in hand paid, the receipts of which is hereby acknowledge, does hereby release and discharged F.F. CRUZ & CO., INC., their successors and assigns, from any and all manner of claims, demand, damages, causes of action or suits that he/she may now have, or that might subsequently occur to his/her by reason of any matter or things whatsoever, and particularly growing out or in any way connected with her employment with F.F. CRUZ & CO. INC.
It is the purpose of this release to forever settle, adjust and discharge all claims of whatsoever kind of nature that the undersigned has or may have against the parties here to mention.
[The employer] insists that the amount received by [the employees] represent the full settlement of their claims, and that they had agreed to waive not only their right to reinstatement but also to the additional backwages that would have accrued up until the time they are reinstated (additional backwages). To be sure, the latter claim proceeds from the dictum that “for as long as the employer continuously fails to actually implement the reinstatement aspect of the decision x x x, the employer’s obligation to the employee for his accrued backwages and other benefits continues to accumulate.”
The Court disagrees that [the employees] waived their right to be reinstated, but agrees on the waiver of the additional backwages.
Other than [the employer’s] bare assertion, there is no showing that [the employees’] intended to freely and voluntarily waive their right to reinstatement under the said quitclaim. In fact, [the employees] had consistently averred that the afore-mentioned quitclaims were executed with the assurance that petitioner would reinstate them as decreed in the NLRC’s final iudgment. It bears stressing that in determining the intention of parties to a contract, their contemporaneous and subsequent acts shall be principally considered. For this reason, in Solgus Corporation v. CA, the Court ruled that quitclaims and waivers should be carefully examined and strictly scrutinized with regard not only to the words and terms used, but also to the factual circumstances under which they have been executed. Thus, as [the employees] executed the quitclaim in consideration of, among others, [the employer’s] promise of reinstatement as evinced by their contemporaneous and subsequent acts, then the said contract must be interpreted accordingly.
Notably, this conclusion holds true notwithstanding the absence of any express clause therefor in the Quitclaim and Release. This is because the said document is ambiguous as to whether or not, in fact, the decreed reinstatement has been waived. The phrase “all claims of whatsoever kind of nature” is a general, standard clause in most employee quitclaims that cannot be construed in its strict literal sense in light of this case’s peculiarities. In this relation, the Court deems it apt to state that “[t]he interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity,” as [the employer] in this case who prepared the quitclaim form.
On the other hand, with respect to the monetary aspect, records do not show that [the employees] made the same insistence anent their right to additional backwages. In fact, records fail to disclose that: (a) any promise of such nature was made; or (b) [the employees] further demanded any additional monetary amount after they were paid the above-stated sums upon their signing of the Quitclaim and Release. This clearly demonstrates that respondents had voluntarily accepted the said amounts to serve as a complete settlement of the monetary aspect of the NLRC Decision.
Indeed, as the Court discerns, the consideration, therefore, for [the employees] in acceding to the Quitclaim and Release was to realize the expeditious settlement of petitioner’s monetary obligations (13th month pay, backwages, and attorney’s fees), without, however, compromising their right to get back their jobs and continue to earn a living in [the employer’s] employ (reinstatement aspect). To the Court, this is the evident intent of the parties as may be gathered from their contemporaneous and subsequent acts. To hold otherwise – that is, to construe the Quitclaim and Release as a complete discharge of [the employer’s] obligations to [the employees] – would not only be illogical (since why would respondents waive their reinstatement if it was both promised to them and already decreed under a final and executory judgment), it would also prevent the labor quitclaim from being a fair and reasonable agreement between the parties as required by law.
In fine, the CA correctly ruled that the NLRC gravely abused its discretion in completely relieving [the employer] from all of its obligations (both in its monetary and reinstatement aspects) under the final and executory NLRC Decision. Nevertheless, the Court finds it proper to set aside the CA ruling since it altogether rendered ineffective the Quitclaim and Release duly signed by the parties. Cognizant of their intent as explained-above, the Quitclaim and Release remains valid; however, it should be interpreted as a fair and reasonable settlement between the parties only of the monetary aspect of the NLRC Decision, but not of its reinstatement aspect, which hence, should be implemented as a matter of course.
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2) Test of validity
The test is whether it was executed voluntarily, freely and intelligently; and whether the consideration for it was credible and reasonable. (Ibid.)
Where there is clear proof that a waiver was wrangled from an unsuspecting or a gullible person, the law must step in to annul such transaction. (Ibid.)
3) Absence of counsel – does not affect validity
The presence or the absence of counsel when a waiver is executed does not determine its validity. There is no law requiring the presence of a counsel to validate a waiver. (Ibid.)
f. Applies to OFWs who sign quitclaims abroad
The rules on the validity of quitclaims apply even if the employees are working abroad as Overseas Filipino Workers (OFW) and they sign quitclaims in exchange for a suitable compensation as full settlement or any and all monetary claims.
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CASE STUDY
Land and Housing Development Corporation v. Esquillo, (supra.)
[Complainant was an overseas Filipino worker hired as a structural engineer by the employer, a company based in Jeddah, Kingdom of Saudi Arabia. He was hired via a local placement agency. Sometime later, his employment contract was terminated due to “reduction of force.” He signed a quitclaim in exchange for SR23,153.00 (Saudi Riyals). When he returned to the Philippines, he filed for illegal dismissal.]
[RESOLUTION]
In the present case, petitioners themselves offered the Release and Quitclaim as a defense. Even though respondent — in his pleadings before the labor arbiter — was silent on the matter, he nonetheless filed this case and questioned his dismissal immediately, a few days after setting foot in the Philippines. In asking for payment for the unexpired portion of his employment Contract, he was eloquently taking issue with the validity of the quitclaim. His actions spoke loudly enough; words were not necessary.
To determine whether the Release and Quitclaim is valid, one important factor that must be taken into account is the consideration accepted by respondent; the amount must constitute a “reasonable settlement.” The NLRC considered the amount of US$6,716 or SR23,153 reasonable, when compared with (1) $3,900, the three-month salary that he would have been entitled to recover if RA 8042 [Migrant Workers Act] were applied; and (2) US$9,447, his salaries for the unexpired portion of his Contract.
It is relevant to point out, however, that respondent was dismissed prior to the effectivity of RA 8042. As discussed at the outset, he is entitled to his salaries corresponding to the unexpired portion of his Contract. This amount is exclusive of the SR23,153 that he received based on the November 29, 1994 Final Settlement. The latter amount was comprised of overtime pay, vacation pay, indemnity, contract reward and notice pay — items that were due him under his employment Contract. For these reasons, the consideration stated in the Release and Quitclaim cannot be deemed a reasonable settlement; hence, that agreement must be set aside.
That respondent is a professional structural engineer did not make him less susceptible to disadvantageous financial offers, faced as he was with the prospect of unemployment in a country not his own. “This Court has allowed supervisory employees to seek payment of benefits and a manager to sue for illegal dismissal even though, for a consideration, they executed deeds of quitclaims releasing their employers from liability.”
g. Courts banned from assuming jurisdiction
“A quitclaim executed in favor of a company by an employee amounts to a valid and binding compromise agreement between them… Article 227 of the Labor Code provides that any compromise settlement voluntarily agreed upon with the assistance of the Bureau of Labor Relations or the regional office of the DOLE, shall be final and binding upon the parties and the NLRC or any court ‘shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion.’” (Wyeth-Suaco Laboratories, Inc. v. NLRC, Santos, supra.)
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3. When invalid
a. Consideration or amount is unreasonably low
Courts have stepped in to invalidate questionable transactions, especially where there is clear proof that a waiver, for instance, was obtained from an unsuspecting or a gullible person, or where the agreement or settlement was unconscionable on its face. A quitclaim is ineffective in barring recovery of the full measure of a worker’s rights, and the acceptance of benefits therefrom does not amount to estoppel. Moreover, a quitclaim in which the consideration is scandalously low and inequitable cannot be an obstacle to the pursuit of a worker’s legitimate claim. (Ibid.)
It is only where there is clear proof that the waiver was wrangled from an unsuspecting or gullible person, or the terms of the settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is sufficient and reasonable, the transaction must be recognized as a valid and binding undertaking. (Ibid.)
“Dire necessity” may be an acceptable ground to annul quitclaims if the consideration is unconscionably low and the employee was tricked into accepting it. (Ibid.)
“[When] the voluntariness of the execution of the quitclaim or release is put into issue, then the claim of employee may still be given due course. The law looks with disfavor upon quitclaims and releases by employees pressured into signing the same by unscrupulous employers minded to evade legal responsibilities.” (Philippine Carpet Employees Association v. Philippine Carpet Manufacturing Corporation, supra.)
Accordingly, while generally valid, quitclaims be rendered invalid under certain situations. The employers cannot thus shield themselves from liability by simply relying on quitclaims. When it is established that the quitclaims are defective, the employee can successfully claim for illegal dismissal.
a. Fraud or bad faith on the employer
Where there is fraud or bad faith on the employer, the quitclaims will be invalidated.
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CASE STUDY
Philippine Carpet Manufacturing v. Tagyamon
G.R. No. 191475, 11 December 2013
“As a rule, deeds of release and quitclaim cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel.” To excuse [the employees] from complying with the terms of their waivers, they must locate their case within any of three narrow grounds: (1) the employer used fraud or deceit in obtaining the waivers; (2) the consideration the employer paid is incredible and unreasonable; or (3) the terms of the waiver are contrary to law, public order, public policy, morals, or good customs or prejudicial to a third person with a right recognized by law. The instant case falls under the first situation.
As the ground for termination of employment was illegal, the quitclaims are deemed illegal as the employees’ consent had been vitiated by mistake or fraud. The law looks with disfavor upon quitclaims and releases by employees pressured into signing by unscrupulous employers minded to evade legal responsibilities. The circumstances show that [the employer’s] misrepresentation led its employees, specifically [the employees] herein, to believe that the company was suffering losses which necessitated the implementation of the voluntary retirement and retrenchment programs, and eventually the execution of the deeds of release, waiver and quitclaim.
It can safely be concluded that economic necessity constrained [the employees] to accept [the employer’s] monetary offer and sign the deeds of release, waiver and quitclaim. That [the employees] are supervisors and not rank-and-file employees does not make them less susceptible to financial offers, faced as they were with the prospect of unemployment. The Court has allowed supervisory employees to seek payment of benefits and a manager to sue for illegal dismissal even though, for a consideration, they executed deeds of quitclaims releasing their employers from liability.
x x x There is no nexus between intelligence, or even the position which the employee held in the company when it concerns the pressure which the employer may exert upon the free will of the employee who is asked to sign a release and quitclaim. A lowly employee or a sales manager, as in the present case, who is confronted with the same dilemma of whether [to sign] a release and quitclaim and accept what the company offers them, or [to refuse] to sign and walk out without receiving anything, may do succumb to the same pressure, being very well aware that it is going to take quite a while before he can recover whatever he is entitled to, because it is only after a protracted legal battle starting from the labor arbiter level, all the way to this Court, can he receive anything at all. The Court understands that such a risk of not receiving anything whatsoever, coupled with the probability of not immediately getting any gainful employment or means of livelihood in the meantime, constitutes enough pressure upon anyone who is asked to sign a release and quitclaim in exchange of some amount of money which may be way below what he may be entitled to based on company practice and policy or by law.
The amounts already received by [the employees] as consideration for signing the releases and quitclaims should be deducted from their respective monetary awards. (Emphasis supplied.)
•••
Philippine Carpet Employees Association v. Philippine Carpet Manufacturing Corporation, (supra.)
In the present case, both the Court of Appeals and the voluntary arbitrator erred in concluding that [the employee] voluntarily signed the Deed of Release and Quitclaim. Records reveal that [the employer] informed [the employee] that his services were being terminated on the ground of retrenchment as the company was constrained to reduce the number of its personnel “due to the tremendous drop of production output since about the last quarter of 1994 up to the present”. However, this claim was rejected by both the voluntary arbitrator and the Court of Appeals, which ruled that [the employer] failed to prove that it was suffering from actual poor financial condition and that it was “doubtful if the retrenchment of one helper in the production department earning ₱145.00 a day would avert losses of the company.” Instead, the voluntary arbitrator found that the [the employer] had an ulterior motive behind [the employee’s] dismissal and that only he was singled out and retrenched by [the employer]. The voluntary arbitrator went as far as saying that [the employee’s] hasty dismissal in the guise of retrenchment was a feeble attempt at circumventing the law. It was shown that [the employee] was the only employee earning ₱145.00 a day and was qualified to receive the mandated wage increase granted by Wage Order Nos. 4 and 4-A. An increase in his salary would cause a wage distortion in the wage structure of the company, which would necessitate the adjustment of the wages of its other employees. It is therefore reversible error to hold, despite such findings, that [the employee] voluntarily signed the quitclaim for the only logical conclusion that can be drawn is that [the employer] feigned that it was suffering business losses in order to justify retrenchment and consequently enable it to terminate the services of [the employee] in order to prevent the wage distortion. [The employer’s] lack of candor and good faith in informing [the employee] that he was being terminated due to a valid retrenchment and not because it sought to avoid compliance with the mandated wage increases amounted to a deception which led [the employee] to the mistaken belief that that there was legal ground for retrenchment and prompted him to acquiesce to his termination and sign the quitclaim. [The employee] correctly point[s] out that such an act has been declared by this Court in the case of Trendline Employees Association-Southern Philippines Federation of Labor vs. NLRC as tainted with bad faith and should not be countenanced as being prejudicial and oppressive to labor. Verily, had the [the employer] not misled [the employee] into believing that there was a ground to retrench, it is not difficult to believe that he would have thought twice before signing the quitclaim inasmuch there was no reason for the termination of his employment.
Contrary to the assumption of both the Court of Appeals and the voluntary arbitrator, the mere fact that [the employee] was not physically coerced or intimidated does not necessarily imply that he freely or voluntarily consented to the terms of the quitclaim. Under Article 1330 of the Civil Code, consent may be vitiated not only through intimidation or violence but also by mistake, undue influence or fraud. Mistake may invalidate consent when it refers to the substance of the thing which is the object of the contract or to those conditions which have principally moved one or both parties to enter into contract; there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.
Moreover, as correctly pointed out by the petitioners, this Court has ruled in Salonga vs. National Labor Relations Commisison that it is the employer (respondent company) and not [the employee] who has the burden of proving that the quitclaim was voluntarily entered into by him. The Court of Appeals therefore erred in ruling that the burden of proof to show that the Deed of Release and Quitclaim was signed and executed voluntarily was on [the employee].
[The employee’s] consent to the quitclaim cannot be deemed as being voluntarily and freely given inasmuch as his consent was vitiated by mistake or fraud, we have no recourse but to annul the same. There being no valid quitclaim, [the employee] is entitled to receive the benefits granted an employee whose dismissal on the ground of retrenchment is declared illegal. [The employee] is therefore entitled to reinstatement to his former position without loss of seniority rights and other privileges, as there is no evidence to show that reinstatement is no longer possible. He is also entitled to backwages computed from the time of his dismissal up to the time of actual reinstatement, without qualification or deduction. However, the amount [the employee] received as separation pay if any when he signed the Deed of Release and Quitclaim should be deducted from this monetary award.
•••
Wyeth-Suaco Laboratories, Inc. v. NLRC, Santos
G.R. No. 100658, 02 March 1993
[The employee was hired as a medical representative and then became a product manager of the employer, a pharmaceutical company. Sometime thereafter, the employer announced a merger with another company and thus “the employees were advised to keep their options open and to look for other jobs.” Being a family man, the employee looked for employment elsewhere. When he found another employer, he tendered his resignation and signed a quitclaim after receiving his benefits. Later, it was discovered by the company union that a buy-out of the employer’s assets, and not a merger, was being discussed. Thus, after bargaining, the company union successfully negotiated for a retrenchment package consisting of three months’ pay for every year of service. Learning of this, the complainant filed for illegal dismissal.]
[RESOLUTION]
In the case at bar, both the labor arbiter and the NLRC found for private respondent primarily because of the fact that [the employer] [was] guilty of misrepresentation by their failure to disclose to the [the employees] the real nature of the negotiations and transaction between Wyeth and [the employer]…
Indeed, [the employee] resigned because of the uncertainty as to the future of [the employer]. Like the other employees, he was made to believe that the deal between the two companies was merely a merger but it really was a projected buy-out. While “dire necessity” as a reason for signing a quitclaim is not acceptable reason to set aside the quitclaim in the absence of a showing that the employee had been forced to execute it, such reason gains importance if the consideration for the quitclaim is unconscionably low and the employee has been tricked into accepting it…
The consideration of compassionate justice cited by the labor arbiter in her decision which [the employer] belittle as lacking in statutory basis…, in fact finds meaning in this case. [The employee] was no ordinary employee. He was the recipient of (a) the UTAK Award given by the Drug Association of the Philippines for two consecutive years (1986 and 1987); (b) two plagues for best art work; and (c) the Honorable Mention Award at the 1985 UTAK Awards. He was the Salesman of the Year in 1979-1980 and the second placer for the same award in 1976-1977. These awards were capped in April 1987 by the UTAK Grand Award.
Although these awards were bestowed upon him as an individual, they also indirectly gave recognition to [the Company] as an employer. That [the employee] resigned when he felt that the company he had worked for was floundering as it was in a way seeking a crutch for its survival should not be taken against him. Indeed, the employees of [the employer] were advised by management to keep their options open and to begin to scout for other employment. Given such circumstances, [the employee] cannot be blamed for grabbing the first acceptable offer in another company. Equity and justice, therefore, demand that [the employee’s] untainted record of service to [the employer] for fourteen years should be justly compensated by giving him at least the same retrenchment package as that given to the other employees.
•••
To emphasize, waiver and quitclaims are valid. However, they cannot be used to shield the employer who engage in fraud or bad faith to make employees sign quitclaims.
b. Legally-mandated benefits – cannot be defeated
The fact that employees have signed a release and/or quitclaim does not necessarily result in the waiver of their claims. The law strictly scrutinizes agreements in which workers agree to receive less compensation than what they are legally entitled to. That document does not always bar them from demanding benefits to which they are legally entitled. (Land and Housing Development Corporation v. Esquillo, supra.)
Quitclaims do not bar employees from filing labor complaints and demanding benefits to which they are legally entitled. They are “ineffective in barring recovery of the full measure of a worker’s rights, and the acceptance of benefits therefrom does not amount to estoppel.” The law does not recognize agreements that result in compensation less than what is mandated by law. These quitclaims do not prevent employees from subsequently claiming benefits to which they are legally entitled. (Aldovino v. Gold and Green Manpower Management and Development Services, Inc., G.R. No. 200811, 19 June 2019)
The rationale was explained in this case:
•••
CASE STUDY
Marcos v. National Labor Relations Commission
G.R. No. 111744, 08 September 1995
[The Supreme Court] has heretofore explained that the reason why quitclaims commonly frowned upon as contrary to public policy, and why they are held to be ineffective to bar claims for the full measure of the workers’ legal rights, is the fact that the employer and the employee obviously do not stand on the same footing. The employer drove the employee to the wall. The latter must have harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed it. They are deemed not have waived any of their rights. Renuntiatio non praesumitur.
Along this line, we have more trenchantly declared that quitclaims and/or complete releases executed by the employees do not estop them from pursuing their claims arising from unfair labor practices of the employer. The basic reason for this is that such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of termination does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. While there maybe possible exceptions to this holding, we do not perceive any in the case at bar.
Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the instrument of release and quitclaim, they made a written manifestation reserving their right to demand the payment of their service awards. The element of total voluntariness in executing that instrument is negated by the fact that they expressly stated therein their claim for the service awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof.
As earlier stated, petitioners even sought the opinion of the Department of Labor and Employment to determine where and how they stood in the controversy. This act only shows their adamant desire to obtain their service awards and to underscore their disagreement with the “Release and Quitclaim” they were virtually forced to sign in order to receive their separation pay.
We have pointed out in Veloso, et al., vs. Department of Labor and Employment, et al., that:
While rights may be waived, the same must not be contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law.
Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the quitclaim obligates the workers concerned to forego their benefits while at the same time exempting the employer from any liability that it may choose to reject. This runs counter to Art. 22 of the Civil Code which provides that no one shall be unjustly enriched at the expense of another.
We agree with the further observations of the Solicitor General who, in recommending the setting aside of the decision of respondent NLRC, called attention to the fact that “contrary to private respondent’s contention, the “additional” redundancy package does not and could not have covered the payment of the service awards, performance and anniversary bonuses since the private respondent company has initially maintained the position that petitioners are not legally entitled to the same. . . . Surprisingly, in a sudden turnabout, private respondent now claims . . . that the subject awards and bonuses are integrated in the redundancy package. It is evident, therefore, that private respondent has not truly consolidated the payment of the subject awards and bonuses in the redundancy package paid to the petitioners.
We are likewise in accord with the findings of the labor arbiter that petitioners are indeed entitled to receive service awards and other benefits, thus:
Since each of the complainants have rendered services to respondent in multiple(s) of five years prior to their separation from employment, respondent should be paid their service awards for 1990.
We are not impressed with the contention of the respondent that service award is a bonus and therefore is an act of gratuity which the complainants have no right to demand. Service awards are governed by respondent’s employee’s manual and (are) therefore contractual in nature.
On the matter of anniversary and performance bonuses, it is not disputed that it is respondent’s practice to give an anniversary bonus every five years from its incorporation; that pursuant to this practice, respondent declared an anniversary bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the employees of respondent as of 15 November 1990 will be given the bonus; and that complainants were separated from respondent only 25 days before :the respondent’s anniversary. On the other hand, it is also (not) disputed that respondent regularly gives performance bonuses; that for its commendable performance in 1990, respondent declared a performance bonus; that per terms of this declaration, only permanent employees of respondent as of March 30, 1991 will be given this bonus; and that complainants were employees of respondents for the first 10 months of 1990.
We cannot see any cogent reason why an anniversary bonus which respondent gives only once in every five years were given to all employees of respondent as of 15 November 1990 (pro rata even to probationary employees; Annex 9) and not to complainants who have rendered service to respondent for most of the five year cycle. This is also true in the case of performance bonus which were given to permanent employees of respondent as of 30 March 1991 and not to employees who have been connected with respondent for most of 1990 but were separated prior to 30 March 1991.
We believe that the prerogative of the employer to determine who among its employee shall be entitled to receive bonuses which are, as a matter of practice, given periodically cannot be exercised arbitrarily. (Emphasis and corrections in parentheses supplied.)
•••
d. Resignation letters worded as quitclaims
In the case of Mobile Protective & Detective Agency, [the Supreme Court] ruled that resignation letters which are in the nature of a quitclaim, lopsidedly worded to free the employer from liabilities reveal the absence of voluntariness. (Carolina’s Lace Shoppe v. Maquilan, G.R. No. 219419, 10 April 2019)
•••
CASE STUDY
Mobile Protective & Detective Agency v. Ompad
G.R. No. 159195, 09 May 2005
[The employee was hired as a security guard by the employer, a security service provider. After inquiring from the employer’s client whether their backwages were already paid to the employer, he was allegedly relieved from his post and never given another assignment. In exchange for paying his money claims, he was allegedly instructed to copy in his handwriting the resignation letter provided to him. A day after receiving the meager amount of Php5,000.00, he filed for illegal dismissal.]
[RESOLUTION]
[The resignation letter with quitclaim was declared void.]
First, it is a rule that quitclaims, waivers or releases are looked upon with disfavor and are commonly frowned upon as contrary to public policy and ineffective to bar claims for the measure of a worker’s legal rights.
In this case, the subject resignation letters identically read:
Sept. 23/98
(Date)
The Manager
MOBILE PROT. & DET. AGENCY, INC.
E. Rodriguez Jr. Ave. cor. Atis St.,
Valle Verde I, Pasig City
Sir:
I have the honor to tender my resignation as Security guard under your Agency effective today Sept. 23/98 .
That I have regularly received all what is due me for the services rendered as Security Guard under said Agency for the whole period of my employment.
That I have never incurred any injury during and in the course of my employment.
That the MOBILE PROTECTIVE & DETECTIVE AGENCY, INC. has no further obligation due me, either for money or otherwise as a result of or arising out of my employment, and that I have no claims or complaints against my employer or the Agency, judicial or administrative.
Hoping for your consideration on this matter.
Respectfully yours,
____________________
(sgd.) Security Guard
(Print Name)
ALBERTO G. OMPAD
Approved by:
_______________________________
(sgd.) COL. BENJAMIN x x x
(ret)
President & General Manager
We [the Supreme Court] agree with the NLRC and the CA that the two resignation letters are dubious, to say the least. A bare reading of their content would reveal that they are in the nature of a quitclaim, waiver or release. They were written in a language obviously not of respondent’s and “lopsidedly worded” to free the Agency from liabilities. We uphold the CA’s ruling that: “[w]hen the first resignation letter was a pro forma one, entirely drafted by the petitioner Agency for the private respondent to merely affix his signature, and the second one entirely copied by the private respondent with his own hand from the first resignation letter, voluntariness is not attendant.”
•••
Carolina’s Lace Shoppe v. Maquilan
G.R. No. 219419, 10 April 2019
[Gloria and Joy were hired respectively as sales clerk and header by the employer, a shop. Sometime thereafter, they were allegedly dismissed from service for no reason and made to sign quitclaims in exchange for separation pay – Php15,000.00 to Gloria and Php4,000.000 to Joy. Thereafter, they filed for illegal dismissal. In response, the employer claimed they resigned and showed resignation letters containing quitclaims in the body.]
[RESOLUTION]
[The resignation letters with quitclaims in the body were declared void.]
“In illegal dismissal cases, the fundamental rule is that when an employer interposes the defense of resignation, the burden to prove that the employee indeed voluntarily resigned necessarily rests upon the employer.”
Putting forth their claim that Gloria indeed voluntarily resigned, [the employer] insist[s] that the former offered no evidence which depicted that force or fraud was employed when the resignation letter with quitclaim was executed. Hence, the same was accomplished voluntarily.
On this note, this Court finds it proper to delve into the voluntariness of Gloria’s resignation.
x x x
Verily, the acts preceding and subsequent to the employee’s resignation must be taken into consideration.
Here, prior to her resignation, there was no indication that Gloria intended to relinquish her employment. Such alleged resignation actually took place after the DOLE conducted an inspection, which yielded to an information that [the employer] was not giving its employees their due wages. A month after such inspection, like the employee who reported such labor standards violation, Gloria was separated from employment by virtue of a resignation letter. In this regard, there was no clear intention on the part of Gloria to relinquish her employment.
As to her acts after her resignation, Gloria filed a complaint for illegal dismissal and money claims 12 days thereafter. On this note, this Court reiterates that such act of filing said complaint is difficult to reconcile with voluntary resignation.
Moreover, a reading of the resignation letter executed by [the employee] finds significance as it bears the following statements:
May 31, 2008
CAROLINA’S LACE SHOPPE
Quad Branch
To whom it may concern:
This is to tender my resignation effective at the close of office hours of May 31, 2008.
I would like to thank the management for the opportunity that you have given me during my stay with the company.
This resignation will serve as notice that I have received all the benefits, salaries, 13th month and service leave. I have no more claims of whatsoever against the company its owner or officers. This will serve as my clearance and quit claim.
Truly yours,
(Sgd.) GLORIA MAQUILAN
Sales clerk
In the case of Mobile Protective & Detective Agency, this Court ruled that resignation letters which are in the nature of a quitclaim, lopsidedly worded to free the employer from liabilities reveal the absence of voluntariness…
x x x
Admittedly, the quitclaim does not indicate that Gloria received the amount of ₱15,000.00 as full and final settlement. Similarly, there was nothing which indicates that said amount constitutes said full and final settlement. The quitclaim was also couched in general terms and the tenor of the same does not show that Gloria understood the importance of the same considering that on the same day that she resigned, she immediately relieved respondents from their liabilities. There was also no indication that Gloria intends to give up her claimed benefits in consideration of a fixed compromise amount. It must be emphasized that Gloria was constrained to receive the amount of ₱15,000.00 as she was eight months pregnant at that time and lives with no other means aside from her employment with CLS’.
As to Joy, there was no indication that she intended to voluntarily resign. There was no execution of a resignation letter, but merely a quitclaim, which likewise does not contain the above-mentioned stipulations as the same was a standard clearance and quitclaim form which Joy merely filled out. The manner by which Joy’s name and the effectivity date of her cessation from employment were written, bore the same style and strokes with the entries pertaining to the computation of the amount paid to her; such entries were obviously written by one of [the employer’s] employees. It is apparent, therefore, that the entries in the whole document were written by the same person and Joy was merely asked to sign the same. In addition, the day after she signed the alleged quitclaim, she immediately filed a complaint for illegal dismissal.
While the resignation letter of Gloria and quitclaim signed by Joy appear to have been notarized, the fact of such notarization is not a guarantee of the validity of the contents. The presumption of regularity as regards notarized documents is not absolute and may be rebutted by clear and convincing evidence to the contrary. In this case, the presumption cannot be made to apply because of the following circumstances: (1) Gloria and Joy denied appearing before a notary public; (2) Gloria and Joy did not understand the textual import and effects of the documents notarized; (3) the consideration therein was not fixed; (4) the executions by Gloria and Joy of the notarized documents appear questionable; and (5) Gloria and Joy did not intend to resign from [the employer].
Under the law, there are no shortcuts in terminating the security of tenure of an employee. As the certitude of the purported resignations of Joy and Gloria remain dubious as the evidence of the same were done involuntarily, this Court rules that Gloria and Joy were illegally dismissed from their employment.
•••
3. Offsetting
When a quitclaim is invalidated, the amount received by the employee will be legally compensated or offset with the total amount due. Thus, it is only the remaining balance that will owing and will be paid by the employer to the employee.
This follows the rule against unjust enrichment. To illustrate, if the amount legally owing to the employee is Php200,000.00 but he only received Php150,000.00 by way of settlement via a quitclaim, it is only the remaining Php50,000.00 that will be paid to the employee in case the quitclaim is declared void.
•••
CASE STUDY
Arlo Aluminum, Inc. v. Pinon (supra.)
When a quitclaim is declared invalid for one reason or another, the recipient thereto must return or offset the compensation received. The case of Emco Plywood Corporation v. Abelgas involves the validity of the deed of release or quitclaim signed by the retrenched employees. In that case, it was ruled that the employer failed to discharge its burden in proving that the quitclaims were valid. Nevertheless, the Court ruled that the amounts already received by the employees pursuant to the quitclaim should be deducted from their respective monetary awards, to wit:
As a rule, deeds of release or quitclaim cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel. The amounts already received by the present respondents as consideration for signing the Quitclaims should, however, be deducted from their respective monetary awards.
Similarly, in Rondina v. Court of Appeals, the Court declared that the quitclaim signed by the employees were invalid because there was a gross disparity between the consideration received therein and the proper amount of award computed by the voluntary arbitrator. Nevertheless, it was adjudged that the amounts already received by the employee under the invalid quitclaim must be subtracted from the monetary award to be received by the employee.
In the case at bench, even if the deed of release, waiver or quitclaim signed by Vicente is declared invalid, it does not negate the fact that he already received ₱150,000.00 in consideration thereof. The said amount must either be returned or deducted from the total monetary award determined by the LA. To recap, the LA computed the monetary award in favor of Vic Edward at ₱145,276.22. Evidently, the said amount is adequately covered by the consideration in the quitclaim. Thus, Arlo Aluminum and Eton Properties have nothing more to pay as far as the labor claims are concerned.
The Court cannot sanction the ruling of the CA that despite receiving the ₱150,000.00 from the quitclaim, which clearly covers the salary and benefits that Vic Edward is entitled to, Arlo Aluminum must still pay the amount of ₱145,276.22 as a monetary award. This will amount to double compensation considering that said monetary award was already covered by the quitclaim. Hence, the Court is of the view that Arlo Aluminum already satisfied its liabilities to Vic Edward insofar as his unpaid wages and other labor benefits are concerned.
•••
4. Foreign employer and foreign laws
The foregoing rules on quitclaim or waiver shall apply only to labor contracts of OFWs in the absence of proof of the laws of the foreign country agreed upon to govern said contracts. Otherwise, the foreign laws shall apply. (EDI-Staffbuilders International, Inc. v. NLRC, Gran, supra.)
•••
CASE STUDY
EDI-Staffbuilders International, Inc. v. NLRC, Gran, (supra.)
The Court finds the waiver and quitclaim null and void for the following reasons:
1) The salary paid to [the employee] upon his termination, in the amount of SR 2,948.00, is unreasonably low. As correctly pointed out by the court a quo, the payment of SR 2,948.00 is even lower than his monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also very much less than the USD 16,150.00 which is the amount [the employee] is legally entitled to get from petitioner EDI as backwages.
2) The Declaration reveals that the payment of SR 2,948.00 is actually the payment for [the employee’s] salary for the services he rendered to [the employer] as Computer Specialist. If the Declaration is a quitclaim, then the consideration should be much much more than the monthly salary of SR 3,190.00 (USD 850.00)—although possibly less than the estimated [the employee’s] salaries for the remaining duration of his contract and other benefits as employee of OAB. A quitclaim will understandably be lower than the sum total of the amounts and benefits that can possibly be awarded to employees or to be earned for the remainder of the contract period since it is a compromise where the employees will have to forfeit a certain portion of the amounts they are claiming in exchange for the early payment of a compromise amount. The court may however step in when such amount is unconscionably low or unreasonable although the employee voluntarily agreed to it. In the case of the Declaration, the amount is unreasonably small compared to the future wages of [the employee].
3) The factual circumstances surrounding the execution of the Declaration would show that [the employee] did not voluntarily and freely execute the document. Consider the following chronology of events:
a. On July 9, 1994, [the employee] received a copy of his letter of termination;
b. On July 10, 1994, [the employee] was instructed to depart Saudi Arabia and required to pay his plane ticket;
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, [the employee] departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, [the employee] filed the Complaint before the NLRC.
The foregoing events readily reveal that [the employee] was “forced” to sign the Declaration and constrained to receive the amount of SR 2,948.00 even if it was against his will—since he was told on July 10, 1994 to leave Riyadh on July 12, 1994. He had no other choice but to sign the Declaration as he needed the amount of SR 2,948.00 for the payment of his ticket. He could have entertained some apprehensions as to the status of his stay or safety in Saudi Arabia if he would not sign the quitclaim.
4) The court a quo is correct in its finding that the Declaration is a contract of adhesion which should be construed against [the employer]… An adhesion contract is contrary to public policy as it leaves the weaker party—the employee—in a “take-it-or-leave-it” situation. Certainly, the employer is being unjust to the employee as there is no meaningful choice on the part of the employee while the terms are unreasonably favorable to the employer.
Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under Philippine laws in the absence of proof of the applicable law of Saudi Arabia.
•••
Accordingly, for OFWs, they have to prove the foreign law if they want it to govern the quitclaim. Otherwise, Philippine law will apply.
