Philippines – When Quitclaims Do Not Halt Employees’ Claims.

20 May 2021
 

Taking off from our last article, we know that rights may be waived unless the waiver is contrary to law, public order, public policy, morals or good customs. In a workplace setting, do the rules of the game change?

 

Quitclaims executed by laborers are valid and recognized. A waiver (sometimes termed “deed of release” 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.

 

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. Hence, such waivers must be upheld as the law between the parties [Periquet vs National Labor Relations Commission 186 SCRA 724 (1990)].
 

Courts have stepped in to invalidate questionable transactions, such as when it was obtained from an unsuspecting or a gullible person, where the agreement or settlement was unconscionable on its face, or bars the full measure of a worker’s rights, or the consideration is scandalously low and inequitable. When the voluntariness of the execution of the quitclaim or release is put into issue, then the claim of employee may also still be given due course despite the execution of a waiver.
 

The law looks with disfavor upon quitclaims and releases by employees pressured into signing the same by unscrupulous employers minded to evade legal responsibilities. For instance, waivers of benefits granted by laws or contracts in favor of workers should be strictly scrutinized to protect the weak and the disadvantaged. Quitclaims that obligate the workers concerned to forego their benefits while at the same time exempting the employer from any liability are void ab initio for running counter to Art. 22 of the Civil Code which provides that no one shall be unjustly enriched at the expense of another.
 

Hence, the waivers should be carefully examined, in regard not only to the words and terms used, but also the factual circumstances under which they have been executed (Land and Housing Development Corporation and ABV Rock Group vs Esquillo, G.R. No. 152012 30 September 2005).

 

Let us look at some examples where the court scrutinized and invalidated an employee’s waiver based on these standards.

 

A quitclaim in which the consideration is scandalously low and inequitable cannot be an obstacle to the pursuit of a worker’s legitimate claim. Obviously, in such case, the employee did not stand on an equal footing with the employer when he seemingly acceded to the waiver of his rights. Where the quitclaims signed by the employees correspond only to their 13th month pay, these waivers do not approximate any reasonable award that would have been awarded to them should they successfully pursue litigation, such as backpay and separation pay arising from their illegal dismissal.

 

In fact, the 13th month pay is a statutory obligation of the employer. The employees are already entitled to it as a matter of law, hence its payment does not constitute a reasonable settlement (Mirandilla vs Jose Calma Development Corp., R.R. No. 242834, 26 June 2019).
 

In another case, the company feigned that it was suffering business losses in order to justify retrenchment and consequently enable it to terminate the services of its employees to prevent wage distortion. The company’s lack of candor and good faith amounted to a deception which invalidated the waiver signed by is employee, who was deceived into thinking there was legal ground for retrenchment and prompted him agree to his termination and signed the waiver. 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 (Philippine Carpet Employees Association and Jonathan Barquin vs Philippine Carpet Manufacturing Corporation, G.R. No. 140269-70, 14 September 2000).

 

Note that it is the employer and not the employee who has the burden of proving that a waiver or quitclaim executed was voluntarily entered into by the employee. Hence, the rule of thumb is still to act in good faith, and to give what is due to another whether in the workplace or elsewhere.