THE Supreme Court has declared that settlement agreements offering excessively low payments to employees are invalid.
The ruling comes as a significant victory for labor rights, impacting compromise agreements between San Roque Metals, Inc. (SRMI), Prudential Customs Brokerage Services, Inc. (PCBSI), and a group of workers dismissed illegally.
The decision, authored by Associate Justice Antonio Kho Jr. of the Supreme Court’s Second Division, stems from a petition filed by 12 of the original 35 employees the Court had recognized as illegally dismissed by SRMI and PCBSI. Initially, the companies were directed to compensate the workers with full back wages and separation pay.
However, after this ruling, these employees entered into separate settlements with SRMI and PCBSI, agreeing to receive amounts that represented only 5.20 percent to 23.42 percent of their due compensation.
SRMI and PCBSI argued that the settlement agreements barred further claims for back wages and separation pay.
However, the Executive Labor Arbiter (ELA) clarified that these settlements were to be treated as advances, not complete fulfillment of the companies’ financial obligations. When the National Labor Relations Commission (NLRC) reviewed the case, it concurred with the ELA, finding the agreements unreasonable and thus invalid.
Despite the Court of Appeals’ later endorsement of the agreements, the Supreme Court ultimately sided with the NLRC, asserting that such settlements must meet specific criteria to be enforceable.
Under these guidelines, a quitclaim is valid only if it is voluntarily signed, absent of fraud, offers a fair and reasonable amount, and does not conflict with public policy.
The Court ruled that the amounts offered to the workers in this case — representing only a fraction of what they were owed — were indeed unreasonable.
The ruling reaffirms that the adequacy of settlement amounts should be assessed individually, ensuring fair compensation in each instance.
PCBSI and SRMI are now required to pay the employees the full back wages and separation pay ordered, minus any prior settlements received, with an added 6 percent annual interest from the decision date until full payment.
The Supreme Court’s decision has received positive responses from labor advocates, including the Federation of Free Workers (FFW).
FFW President Sonny Matula, commended the Court for its ruling, which he stated protects workers’ rights and prevents employers from imposing unjust settlement agreements.
“This decision ensures that workers can fully benefit from the Court’s original ruling and reinforces the principles of fairness and justice in labor relations,” Matula said.
The FFW, a staunch supporter of the employees, had championed their cause from the Labor Arbiter’s ruling of illegal dismissal to the Supreme Court’s affirmation.
The organization emphasized the role of unions in defending workers’ rights and empowering them to challenge oppressive practices.
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