G.R. No. 215874 July 5, 2017
ARLO ALUMINUM, INC., Petitioner vs. VICENTE M. PINON, JR., IN BEHALF OF VIC EDWARD PIÑON, Respondent

FACTS

Vic Edward Piñon, an employee of subcontractor E.M. Piñon Glazing (EMP Glazing), died in a workplace accident while working on a project for petitioner Arlo Aluminum, Inc. Following the incident, the victim’s father, respondent Vicente Piñon, Jr., accepted ₱150,000.00 in financial assistance from the companies and executed a Deed of Release, Waiver and Quitclaim. This deed expressly released Arlo Aluminum and other entities from any liability related to the accident. Subsequently, Vicente filed a complaint before the Labor Arbiter (LA) on behalf of his deceased son, claiming various monetary benefits such as underpayment of wages, 13th month pay, and service incentive leave pay.
The LA partially granted the claims, holding EMP Glazing liable for wage deficiencies. The National Labor Relations Commission (NLRC) affirmed but modified the award, and the Court of Appeals (CA) sustained the NLRC. Arlo Aluminum appealed to the Supreme Court, arguing that the quitclaim barred the claims and that it, as the principal, should not be held solidarily liable with its subcontractor for the latter’s employees’ monetary claims.

ISSUE

The core issues were: (1) whether the Deed of Release, Waiver and Quitclaim was valid and barred the monetary claims; and (2) whether Arlo Aluminum, as the principal, could be held solidarily liable with its subcontractor, EMP Glazing, for the labor standards claims of the subcontractor’s employee.

RULING

The Supreme Court denied the petition and affirmed the CA decision. On the first issue, the Court ruled the quitclaim was invalid. Quitclaims are generally frowned upon and are void when the consideration is unconscionable or when the employee was coerced into signing. Here, the ₱150,000.00 was given as “financial assistance” following a tragic death, and the respondent signed the deed while in a state of emotional and financial distress. The amount was palpably iniquitous compared to the legitimate claims, which included substantial wage deficiencies and statutory benefits. Therefore, the quitclaim did not constitute a valid waiver of the respondent’s rights.
On the second issue, the Court upheld the solidary liability of Arlo Aluminum with EMP Glazing. Under labor law jurisprudence and Department Order No. 18-02, the principal is jointly and severally liable with the subcontractor for the latter’s unpaid wages and monetary benefits owed to its employees. This rule ensures that employees are not left without recourse if the direct employer-subcontractor is unable to pay. Since EMP Glazing failed to prove it paid the correct wages, and as Arlo Aluminum failed to prove EMP Glazing was a legitimate contractor with sufficient capital, the solidary liability was properly imposed. The monetary claims, being based on labor standards, were distinct from and not extinguished by the death benefits claim settled by the quitclaim.