Paulino Ungos III

Lawyer | Law Professor | Author

Tag: quitclaim

  • 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.

  • No Alternative But to Implement a Retrenchment Program

    In February 1999, the employee was hired to work as a production operator in the hermetic department of the employer corporation. Later, the employee was promoted to the position of quality assurance calibration technician.

    On 23 April 2009, the employee filed for and commenced her 60-day maternity leave, which was to end on 21 June 2009. She gave birth on 27 April 2009.

    On 8 May 2009, while on her maternity leave, the employee was asked to see the employer’s human resource and administrative manager. During their meeting on 21 May 2009, the employee received a letter informing her of her dismissal from employment, effective on 22 June 2009, or the day after the end of her maternity leave. She was told that she would receive her separation pay on the same date. The employer explained that it had to implement survival measures (such as energy saving programs, forced leaves, and compressed workweek arrangements) in view of the global economic crisis that started in the previous year. The employer added that it also suffered a 30% reduction in business volume resulting to substantial losses that threatened its survival. According to the employer, to minimize continuing losses and to ensure survival of the company, it had no alternative but to implement a retrenchment program.

    The employee then went to the Department of Labor and Employment, where she was advised to first accept her separation pay before filing a complaint. Thus, on 8 June 2009, after she had been required to process her clearance and sign several documents, the employee received her separation pay.

    On 9 July 2009, the employee lodged her complaint for illegal dismissal against her employer.

    Was the dismissal from employment on the ground of retrenchment valid?

    In Team Pacific Corp. v. Parente1G.R. No. 206789, July 15, 2020, the Supreme Court declared the illegality of the employee’s dismissal from employment.

    Under Article 2982Article 298 of the Labor Code of the Philippines states: “ARTICLE 298. Closure of Establishment and Reduction of Personnel. — The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. . . . In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. of the Labor Code of the Philippines, retrenchment is one of the authorized causes to dismiss an employee. It involves a reduction in the workforce and is resorted to when the employer encounters business reverses, losses, or economic difficulties, such as “recessions, industrial depressions, or seasonal fluctuations.” This is usually done as a last recourse when other methods are found inadequate.3La Consolacion College of Manila v. Pascua, G.R. No. 214744, March 14, 2018.

    There is a valid retrenchment if the employer had complied with the procedural and substantive requisites of valid retrenchment.

    With regard to the procedural requisites for a valid retrenchment, the employer must:

    • serve a written notice on the employee and the Department of Labor and Employment one month before the date of the dismissal; and
    • pay the required amount of separation pay.

    As to the substantive requisites, the employer must show that:

    • the retrenchment was a necessary measure to prevent substantial and serious business losses;
    • the retrenchment was done in good faith and not to defeat employees’ rights; and
    • it was fair and reasonable in selecting the employees who will be retrenched.4La Consolacion College of Manila v. Pascua, G.R. No. 214744, March 14, 2018.

    Absent any of these, the dismissal is illegal.

    In the said case, the Court found that the employer failed to comply with all the requisites for a valid retrenchment.

    Record revealed that the employer submitted the following documents:

    • Audited Financial Statements for the years 2006 to 2009, showing its net losses and deficits amounting to millions;
    • Letter dated 29 April 2008 advising the Department of Labor and Employment of the compressed work week arrangement it will be implementing;
    • Notice of Retrenchment dated 8 May 2009, served on the Department of Labor and Employment;
    • Duly accomplished Establishment Employment Report received by the Department of Labor and Employment on 8 May 2009;
    • List of Affected Workers by Displacements received by the Department of Labor and Employment on 8 May 2009; and
    • The Decision granting the employer’s Petition for Corporate Rehabilitation.

    Although the Court acknowledged that these documents would suffice to show business losses and compliance with notice requirements, it, nonetheless, ruled that the employer failed to establish that the employees chosen for retrenchment were selected through fair and reasonable criteria. According to the Court, the employer failed to prove that it used fair and reasonable criteria in carrying out the retrenchment program. It also failed to justify why it included the employee, who had already been employed for 10 years. The Court thus ordered the employer to reinstate the employee to her former position and pay her backwages.

    Did the acts of accepting separation pay from the employer and signing a waiver and quitclaim bar the employee from questioning the illegality of her dismissal?

    The Court held that the employee was not barred by estoppel. According to the Court, such acts are generally taken with a grain of salt, considering that employees are usually at an economic disadvantage and are often left with no choice, since they are suddenly faced with the pressure to meet financial burdens. Here, the Court found that the employee was dismissed from employment when she had just given birth. Her dismissal’s effectivity was set on the date she was supposed to return from her maternity leave. For the Court, the employee was at a clear disadvantage, having found herself without a job and a source of income right at a time when finances were crucial. Thus, the employee could not be deemed to have waived her right to file a complaint. She was not estopped from contesting the legality of her dismissal.

    Can the officers be held solidarily liable with the employer corporation?

    The Supreme Court ruled in the negative in view of the principle that corporate directors and officers are solidarily liable with the corporation for the termination of employees done with malice or bad faith. According to the Court, although the employer was unable to show that it applied fair and reasonable criteria in selecting the employees to be entrenched, it did not mean that the dismissals were automatically done in bad faith or with malice. It may have simply failed to strictly comply or to sufficiently prove compliance with the stringent rules for a valid retrenchment. As such, bad faith or malice must still be proved. Since the employee failed to present clear and convincing evidence that the officers of the employer corporation acted in bad faith or with malice, breached any duty, or were motivated by ill will, the employer corporation’s separate and distinct personality was respected.

    Further reading:

    • Team Pacific Corp. v. Parente, G.R. No. 206789, July 15, 2020.

  • Consider the Context of the Quitclaim

    The employee, a university faculty member, filed a case against his employer for illegal dismissal. The Labor Arbiter decided in his favor and awarded reinstatement, full backwages, damages, and attorney’s fees. The employer could not reinstate the employee, but it still appealed this decision to the National Labor Relations Commission (NLRC). Later on, however, the employee executed a quitclaim in favor of the employer.

    Could the employee be estopped now from pursuing his claims for accrued wages under the ruling?

    Is your answer a yes? …Not so fast, though.

    In this case, what happened was that the employee received his retirement pay from the employer when the appeal was still pending. Now, although the NLRC initially affirmed (with modification) the decision of the Labor Arbiter, it reversed the same when it resolved a motion for reconsideration. In other words, NLRC held that the employee’s execution of the receipt and quitclaim respecting his benefits under the retirement plan estopped him from pursuing other claims arising from his employer-employee relationship with the University.

    The Supreme Court rendered a decision in favor of the employee. It ruled that the execution of the quitclaim was not a settlement of the employee’s claim for accrued salaries. The Court said:

    “We agree with the petitioner.


    “The text of the receipt and quitclaim was clear and straightforward, and it was to the effect that the sum received by the petitioner represented ‘full payment of benefits … pursuant to the Employee’s retirement plan.’ As such, both the NLRC and the CA should have easily seen that the quitclaim related only to the settlement of the retirement benefits, which benefits could not be confused with the reliefs related to the complaint for illegal dismissal.

    “Worthy to stress is that retirement is of a different species from the reliefs awarded to an illegally dismissed employee. Retirement is a form of reward for an employee’s loyalty and service to the employer, and is intended to help the employee enjoy the remaining years of his life, and to lessen the burden of worrying about his financial support or upkeep. In contrast, the reliefs awarded to an illegally dismissed employee are in recognition of the continuing employer-employee relationship that has been severed by the employer without just or authorized cause, or without compliance with due process.”

    Further reading:

    • Crisanto F. Castro, Jr. v. Ateneo De Naga University, Fr. Joel Tabora and Mr. Edwin Bernal, G.R. No. 175293, July 23, 2014.