BACKWAGES; effect of invalid QUITCLAIM signed under duress

"xxx.

Fifth and Last Issue: Gran is Entitled to Backwages

We reiterate the rule that with regard to employees hired for a fixed period of employment, in cases arising before the effectivity of R.A. No. 804258 (Migrant Workers and Overseas Filipinos Act) on August 25, 1995, that when the contract is for a fixed term and the employees are dismissed without just cause, they are entitled to the payment of their salaries corresponding to the unexpired portion of their contract.59 On the other hand, for cases arising after the effectivity of R.A. No. 8042, when the termination of employment is without just, valid or authorized cause as defined by law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term whichever is less.60

In the present case, the employment contract provides that the employment contract shall be valid for a period of two (2) years from the date the employee starts to work with the employer.61 Gran arrived in Riyadh, Saudi Arabia and started to work on February 7, 1994;62 hence, his employment contract is until February 7, 1996. Since he was illegally dismissed on July 9, 1994, before the effectivity of R.A. No. 8042, he is therefore entitled to backwages corresponding to the unexpired portion of his contract, which was equivalent to USD 16,150.

Petitioner EDI questions the legality of the award of backwages and mainly relies on the Declaration which is claimed to have been freely and voluntarily executed by Gran. The relevant portions of the Declaration are as follows:

I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER RECEIVING MY FINAL SETTLEMENT ON THIS DATE THE AMOUNT OF:

S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE HUNDRED FORTY EIGHT ONLY)
REPRESENTING COMPLETE PAYMENT (COMPENSATION) FOR THE SERVICES I RENDERED TO OAB ESTABLISHMENT.

I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL OBLIGATION IN MY FAVOUR AFTER RECEIVING THE ABOVE MENTIONED AMOUNT IN CASH.

I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION TOWARDS ME IN WHATEVER FORM.

I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY AFFIXING MY SIGNATURE VOLUNTARILY.

SIGNED.

ELEAZAR GRAN


Courts must undertake a meticulous and rigorous review of quitclaims or waivers, more particularly those executed by employees. This requirement was clearly articulated by Chief Justice Artemio V. Panganiban in Land and Housing Development Corporation v. Esquillo:

Quitclaims, releases and other waivers of benefits granted by laws or contracts in favor of workers should be strictly scrutinized to protect the weak and the disadvantaged. 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.63 (Emphasis supplied.)

This Court had also outlined in Land and Housing Development Corporation, citing Periquet v. NLRC,64 the parameters for valid compromise agreements, waivers, and quitclaims:

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. 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. (Emphasis supplied.)

Is the waiver and quitclaim labeled a Declaration valid? It is not.

The Court finds the waiver and quitclaim null and void for the following reasons:

1. The salary paid to Gran 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 Gran 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 Gran's salary for the services he rendered to OAB 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 Gran'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 Gran.

3. The factual circumstances surrounding the execution of the Declaration would show that Gran did not voluntarily and freely execute the document. Consider the following chronology of events:

a. On July 9, 1994, Gran received a copy of his letter of termination;

b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay his plane ticket;65

c. On July 11, 1994, he signed the Declaration;

d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and

e. On July 21, 1994, Gran filed the Complaint before the NLRC.


The foregoing events readily reveal that Gran 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, OAB. 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.66

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.

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

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.

It is advisable that the stipulations be made in English and Tagalog or in the dialect known to the employee. There should be two (2) witnesses to the execution of the quitclaim who must also sign the quitclaim. 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.67 This compromise settlement becomes final and binding under Article 227 of the Labor Code which provides that:

[A]ny 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.

It is made clear that 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.

Xxx."


G.R. No. 145587, October 26, 2007

EDI-STAFFBUILDERS INTERNATIONAL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELEAZAR S. GRAN, respondents.

https://lawphil.net/judjuris/juri2007/oct2007/gr_145587_2007.html