SC Affirms the NLRC Decision Voiding the Compromise Agreement for P150K and Reinstated the P2.5M Judgment Award

The National Labor Relations Commission (NLRC) ruled that the P150,000.00 received by Mr. Gestiada, a representative employee of the complainants, did not cover the monetary claim of the 22 employees against Powertech Corporation. The Quitclaim and Release executed by Mr. Gestiada cannot be recognized as a valid and binding undertaking as the consideration of P150,000.00 as opposed to the total monetary award of P2.5 Million is clearly unconscionable and is thus void for being contrary to public policy.

            The case stems from a complaint for illegal dismissal and other monetary claims filed by the Nagkakaisang Manggagawa Ng Powertech Corporation. At the Arbitration Level of the NLRC, Labor Arbiter Dela Cruz rendered a decision declaring illegal the termination of 22 employees and granting their monetary claims in the total amount of P2.5 Million.

            During the pendency of appeal filed by Powertech Corporation, Mr. Gestiada, for himself and on behalf of other complainants, executed a Quitclaim, Release and Waiver in favor of Powertech Corporation in consideration of the amount of P150,000.00.

            The NLRC and the Supreme Court, however, were of the same view that the P150,000.00 compromise is rather measly when taken in light of the more than P2.5 Million judgment award. The 22 employees already won on the arbiter level P2.5 Million. It is highly improbable that they would suddenly agree to accept P150,000.00 as compromise for the P2.5 Million. That translates to paltry sum of P6,000.00 each for employees. From this amount will still be deducted attorney’s fees and other litigation expenses. In effect, the 22 employees agreed to waive more than 94% of what they expect to receive from Powertech Corporation. The Court note that the compromise is a mere 6% of the contingent sum that may be received by the 22 employees. This minuscule amount is certainly questionable because, according to the Court, it does not represent a true and fair amount which a reasonable agent may bargain for his principal.

            In support to their decision, the NLRC and the Supreme Court reiterates the landmark case of Galicia v. NLRC, which held that the consideration for the quitclaim, a measly P12,000.00 per worker and the total sum of P300,000.00 are inordinately low and exceedingly unreasonable relative to the P107,380.00 per worker and total P3,223,261.00 awarded by the Labor Arbiter. Palpably inequitable, the quitclaim cannot be considered an obstacle to the pursuit of their legitimate claims.

            Further, the NLRC and the Supreme Court established that Powertech Corporation colluded with Mr. Gestiada in shortchanging, nay, fraudulently deprived the other employees of their just share in the award. According to the Supreme Court, collusion is a species of fraud. Notably, Article 227 of the Labor Code empowers the NLRC to void a compromise agreement for fraud. Thus, the NLRC was justified in declaring the compromise agreement for P150,000.00 as void, and reinstating the judgment award for P2.5 Million. (Arellano, et. al. vs. Powertech Corporation, et. al., G.R. No. 150861, January 22, 2008)