Employee Quitclaims vis-à-vis Nominal Damages

In October 1988, Twinstar Professional Protective Services, Inc. (Twinstar) employed Jose as a security guard and deployed him at the Las Haciendas in Tarlac City.

In January 2011, Jose sought help from a program to complain about the underpayment of his salaries. On January 24, 2011, Twinstar directed Jose to report to its office in Quezon City. Jose stated that upon reporting to the office the next day, Twinstar informed him that he was being placed on floating status. Jose also stated that his floating status lasted for over six (6) months.

This was why he filed a complaint for illegal dismissal against Twinstar.

Twinstar failed to file a position paper.

The Office of the Labor Arbiter then ruled that Twinstar illegally dismissed Jose from employment, which prompted Twinstar to file an appeal.

The National Labor Relations Commission applied the rules liberally; allowed Twinstar to present evidence on appeal; granted the same; and reversed the decision of the Office of the Labor Arbiter.

The Commission found that Twinstar had just cause to dismiss Jose from employment because Jose went on unauthorized leave of absence and was unwilling to return to duty.

However, the Commission also found that Twinstar failed to observe the requirements of procedural due process in the termination of Jose’s employment. Despite such finding, the Commission did not direct Twinstar to pay nominal damages because of the effects of the quitclaim executed by Jose on March 3, 2012.

The Court of Appeals ruled that the Commission did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in allowing Twinstar to present its evidence for the first time on appeal; in ruling that Jose was not illegally dismissed; and in considering his quitclaim as valid.

In upholding the validity of the quitclaim, the Court of Appeals ruled that the same erased the infirmities in the notice of termination, which consequently meant that it could not impute abuse of discretion upon the Commission in not awarding nominal damages.

The totality of circumstances led the Supreme Court to conclude that no constructive dismissal happened. Instead, the circumstances revealed Jose’s stubborn unwillingness to return to work despite being required by Twinstar to report for work multiple times within six (6) months from January 21, 2011.

Thus, the Court ruled that Twinstar had just cause to terminate Jose’s employment.

However, the Court also found that Twinstar failed to provide Jose with an ample chance to explain and be heard on the allegations against him. For the Court, this necessitated an award of nominal damages to the latter.

In this regard, the Court ruled that it was erroneous for the Commission and the Court of Appeals to not award nominal damages because of the existence of the quitclaim executed by Jose on March 3, 2012.

The Court reiterated the standards that must be observed in determining whether a waiver and quitclaim has been validly executed. Said the Court:

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 wangled 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.

In the present case, while the Court considered the quitclaim valid for complying with all the requisites stated above, it stressed that the stipulations in such quitclaim must still be interpreted within the bounds of law and reason. A waiver/quitclaim is a contract by nature, and thus, following the rule that the law is deemed written into every contract, the stipulations therein must be interpreted with this in mind.

According to the Court, Jose’s statement in the quitclaim that he had “no more claim, right or action of whatsoever nature whether past, present or contingent against the said respondent and/or its officers” did not include the illegal dismissal case. This is because the legality of an employee’s dismissal is determined by law, and it is the Office of the Labor Arbiter that has the original and exclusive jurisdiction to determine such a case.

The Court added that while an employee may indeed accept his dismissal and agree to waive his claims or right to initiate or continue any action against his employer, both parties do not have the jurisdiction or authority to determine the legality of such termination; such question of law is still subject to the final determination of the competent labor tribunals and courts, as the case may be. It follows then that the award of nominal damages, which by its nature, arises from the determination of a violation of the employee’s rights in an illegal dismissal case, cannot be deemed to be covered by the quitclaim.

The Court stressed that nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

The Court further stated that any quitclaim or agreement executed by the parties, as with all contracts, must not be contrary to law or public policy. It is apparent that the public policy in the stiffer imposition of nominal damages is to discourage the abhorrent practice of dismiss now, pay later.

The Court then explained that if it were to allow the quitclaim to cover nominal damages, this will promote, either advertently or inadvertently, the practice of dismiss now, pay later, which would obviously run afoul to the public policy behind the imposition of such nominal damages in the first place.

For the Court, regardless of the quitclaim, Jose was entitled to an award of P30,000.00 as nominal damages.

Further reading:

  • Dela Torre v. Twinstar Professional Protective Services, Inc., G.R. No. 222992, June 23, 2021.