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AT A GLANCE:
In the case of Leo Abad, Romeo Abella et. al vs. San Roque Metals Inc., G.R. No. 255368, May 29, 2024, the Supreme Court held that compromise agreements and settlements between employers and employees that offer employees excessively low amounts are invalid.
For a quitclaim to be valid, the Court has held that the following must be present: 1) the employee executes a quitclaim voluntarily; 2) there is no fraud or deceit on the part of any parties; 3) the consideration of the quitclaim is credible and reasonable; and 4) the contract is not contrary to law, public order, public policy or good customs, or prejudicial to a third person with a right recognized under the law.
The petitioners in this case are twelve (12) of the original thirty (35) employees declared by the Supreme Court to have been illegally dismissed by Prudential Customs and Brokerage Services Inc. (PCBSI) and San Roque Metals, Inc. (SRMI). Both companies were ordered to pay the employees backwages and separation pay.
The petitioners later entered into separate compromise agreements where they agreed to receive settlement amounts from PCBSI and SRMI, ranging from 5.20% to 23.42% of the backwages and separation pay they were entitled to due to the illegal dismissal case.
The Executive Labor Arbiter (ELA) noted on the final page of each agreement that the settlement will not affect the outcome of ongoing proceedings related to the calculation of backwages and separation pay owed to the petitioners.
PCBSI and SRMI contended that the petitioners cannot receive their remaining backwages and separation pay since they have already accepted the settlement.
The ELA later ordered that amounts in the compromise agreements are to be considered as advances on backwages and separation pay owed, not as full payment.
SRMI then filed a petition for extraordinary remedies with the NLRC, which it denied. The NLRC ruled that the compromise agreements were invalid because the amounts given to the petitioners were unreasonable.
However, the Court of Appeals ruled that the compromise agreements were valid for being voluntarily signed by the petitioners, prompting their present petition before the Supreme Court.
Issue: Whether or not the CA erred in finding grave abuse of discretion on the part of the NLRC when it denied SRMI’s petition for extraordinary remedies.
The Supreme Court’s Decision
The Supreme Court agreed with the NLRC and found the compromise agreements invalid. The Court ruled that settlements are also considered quitclaims or legal documents signed by employees to waive their rights in favor of their employers.
For a quitclaim to be valid, (1) it must be signed by the employee voluntarily; (2) there is no fraud or deceit on the part of the parties; (3) the amount stated in the quitclaim is credible and reasonable; and (4) it is not contrary to law, public order, public policy, morals or good customs.
The Court found that the compromise agreements signed by the petitioners only represent 5.20% to 23.42% of the amounts they are entitled to receive from the judgment in their illegal dismissal case. The Court ruled that there is no fixed percentage that determines the reasonableness of settlement amounts; instead, this is evaluated on a case-by-case basis. In this case, the amounts received in the settlements are significantly lower than the back wages and separation pay the petitioners are owed, making them unreasonable.
The Court ordered SRMI and PCBSI to pay the petitioners the amounts owed to them from the illegal dismissal case, after deducting any amounts they have already received. Additionally, legal interest of 6% per year will apply from the date of the Court’s Decision until full payment is made.
Source:
Leo A. Abad, Romeo Abella et. al vs. San Roque Metals, Inc.
G.R. No. 255368 | May 29, 2024
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