Waiver, Release, and Quitclaim by employees: When are they legally binding and when are they invalid?
Will a Waiver, Release, and Quitclaim executed by an employee really forever release and discharge the employer from any action, damages, demands, and any further liability whatsoever arising from employment? Case law tells us that it depends.
Quitclaims, waivers, or releases by employees are generally looked upon with disfavor and are commonly frowned upon by the courts, since they are usually contrary to public policy, ineffective, and are meant to bar claims to an employee’s legal rights. Hence, the Supreme Court established guidelines and standards for determining the validity of quitclaims.
To be valid and enforceable, quitclaims must contain the following:
1. A fixed amount as a full and final compromise and 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 employees in English, Filipino, or the dialect known to the employees, that by signing the quitclaim, they are forfeiting or relinquishing their right to receive the benefits which are due them under the law; and,
4. 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.
In addition, it must be shown that:
1. There was no fraud or deceit on the part of any parties;
2. The consideration for the quitclaim is credible and reasonable; and,
3. It is not contrary to law, public order, public policy, morals, or good customs, or prejudicial to a third party with a right recognized by law.
Thus, to determine whether a quitclaim is valid, one important factor that must be taken into account is the consideration accepted by the employee.
As to what constitutes a reasonable consideration for quitclaims, it was held that if the consideration is equal to, or more than, what the employees are legally entitled to, then the quitclaim is valid and binding, and may not later be disowned simply because of a change of mind.
On the other hand, a quitclaim in which the consideration is scandalously low and inequitable was held to be invalid. This is because an obviously “lowball” consideration in a quitclaim indicates that the employees did not stand on an equal footing with the employer. In such a case, the quitclaim will not bar the employees from demanding the benefits to which they are legally entitled, and the acceptance of benefits therefrom does not amount to estoppel.
Another important factor that must be considered is the voluntariness of the execution of the quitclaim.
In one case, a quitclaim was declared invalid because it did not contain any statement that the employer clearly explained the repercussions of signing the form to the employees — janitors and electricians who badly needed to be apprised of the implications of their actions in view of their low educational attainment. (Jacob v. Villaseran Maintenance Service Corp., G.R. No. 243951, Jan. 20, 2021)
On the other hand, in another case, a quitclaim was held to be voluntarily executed considering that the employee occupied a highly responsible position in the company, and it would be implausible to hold that he could be easily duped into simply signing away his rights. (Radio Mindanao Network, Inc. v. Amurao, G.R. No. 167225, Oct. 22, 2014)
That the employee accepted the consideration due to dire economic needs would not necessarily invalidate the quitclaim, especially if it is not shown that the employee was forced to execute it. “Dire necessity” may only be an acceptable ground to annul quitclaims if the consideration is unconscionably low and the employee was tricked into accepting it. (Arlo Aluminum, Inc. v. Pinon, G.R. No. 215874, July 5, 2017)
That the employee was required to sign the quitclaim as a condition for the release of the settlement pay would also not invalidate the quitclaim since the employer is allowed to take steps to protect its interest and obtain its release from all obligations once it paid the employee his settlement pay. (Radio Mindanao Network, Inc. v. Amurao, G.R. No. 167225, Oct. 22, 2014)
In any case, while a quitclaim is valid for complying with all the above requisites, the claims thereby waived by the employee cannot be deemed to include a claim for illegal dismissal. This is because the legality of an employee’s dismissal is determined by law, and it is the labor tribunals that have the jurisdiction to determine such a case.
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 authority to determine whether such termination is legal or not. This matter cannot be deemed to be covered by a quitclaim.
The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or legal opinion.
April Jane S. Sillada is an associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW), Davao Branch.
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