What is a quitclaim in relation to labor law?

A quitclaim, in relation to labor law, is defined as a waiver of a claim by an employee against his employer. An employer who may want to prevent an employee from filing future cases for the recovery of his monetary claims would be encouraged to prepare a quitclaim agreement in favor of the employee to prevent the latter from filing future monetary claims. In other words, a quitclaim is executed in order to settle once and for all the disputes arising from such employment relation and to close the lid on an impending litigation.

Are quitclaim agreements valid? Yes, quitclaims are valid contracts under Philippine laws. The validity of quitclaims coincides with Article 1306 of the Civil Code of the Philippines which states: "The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy."

The requisites for a valid quitclaim are: 1) that there was no fraud or deceit on the part of any of the parties; 2) that the consideration for the quitclaim is credible and reasonable; and 3) that the contract is not contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law. (See Francisco Soriano, Jr. vs. NLRC et al., G.R. No. 165594 April 23, 2007). In other words, employees, must not have been deceived in signing, or taken advantage of their vulnerability and ignorance of the law.

A quitclaim is a valid and binding, provided that it constitutes a credible and reasonable settlement, and that the one accomplishing it has done so voluntarily and with a full and complete understanding of its import and consequences. (See Plastimer Industrial Corporation et al. vs. Natalia C. Gopo et al. G.R. No. 183390 February 16, 2011).

Usually, a quitclaim is prepared by the employer and is being utilized in instances where an employee files a labor dispute and subsequently agrees to a settlement, or when a resigning employee has been terminated from employment but given a substantial severance pay so that no future litigation can be filed by the employee for recovery of additional monetary claims.

Are there instances when a quitclaim has been declared void and ineffective? The answer is in the affirmative. According to jurisprudence, even if an employee has signed a satisfaction receipt for his claims, it does not necessarily result in a valid quitclaim. A quitclaim may not be considered as a valid agreement where a worker agrees to receive less compensation than what he is entitled to recover. It is well-settled that a deed of release or quitclaim cannot prevent an employee from demanding benefits to which he is legally entitled. The reason why quitclaims are commonly frowned upon as contrary to public policy, is that the employer and the employee do not obviously stand on the same footing, the tendency for the employer to drive the employee to the wall. (See Lourdes Marcos et al. vs. NLRC et al., G.R. No. 111744 September 8, 1995)

While rights may be waived under Article 6 of the Civil Code of the Philippines, the waiver must not be contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law. A quitclaim agreement is considered void where it obligates the workers concerned to forego their benefits while at the same time exempting the employer from any liability that it may choose to reject. This also runs counter to Article 22 of the Civil Code of the Philippines which provides that no one shall be unjustly enriched at the expense of another.

So how can quitclaims be validly enforced? It boils down to being transparent during negotiations. Parties must be well-informed of all the necessary data to enable each one to make a sound decision before signing a quitclaim agreement. All cards must be laid down the table with nothing to hide. This way, parties can effectively negotiate on a substantial settlement, even if it does not coincide with each other's ideal expectations.