G.R. No. 163269, 19 April 2006

FACTS:

Petitioner had been working for Solidbank Corporation since July 1, 1977. In December 1994, Solidbank offered two retirement programs to its employees, the ORP and SRP. Petitioner applied for retirement under the SRP. Solidbank approved the application and gave petitioner the amount due to him. Rivera received the amount and confirmed his separation from Solidbank on February 25, 1995. Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and Quitclaim, which was notarized on March 1, 1995. It stipulated that petitioner cannot “seek employment with any competitor bank or financial institution within one (1) year from February 28, 1995.” Furthermore, the bank was entitled to go after the petitioner for the amount he received, in case of breach. On May 1, 1995, the Equitable Banking Corporation. Solidbank, then, demanded the benefits received by the petitioner to be returned.

ISSUE:

WON the undated Release, Waiver and Quitclaim is void for being contrary to the Constitution, the law and public policy, because it was unreasonable, arbitrary, oppressive, discriminatory, cruel, unjust, inhuman, and violative of his human rights.

RULING:

Yes. The stipulation in the contract is against public policy, in that it is injurious to the public or against the public good. Generally, the law does not relieve a party from the effects of an unwise, foolish or disastrous contract, entered into with full awareness of what he was doing and entered into and carried out in good faith. Such a contract will not be discarded even if there was a mistake of law or fact. On the other hand, retirement plans, in light of the constitutional mandate of affording full protection to labor, must be liberally construed in favor of the employee, it is the general rule that pension or retirement plans formulated by the employer are to be construed against it. Retirement benefits, after all, are intended to help the employee enjoy the remaining years of his life, releasing him from the burden of worrying for his financial support, and are a form of reward for being loyal to the employer. Respondent, as an employer, is burdened to establish that a restrictive covenant barring an employee from accepting a competitive employment after retirement or resignation is not an unreasonable or oppressive, or in undue or unreasonable restraint of trade, thus, unenforceable for being repugnant to public policy.

Thus, in determining whether the contract is reasonable or not, the trial court should consider the following factors: (a) whether the covenant protects a legitimate business interest of the employer; (b) whether the covenant creates an undue burden on the employee; (c) whether the covenant is injurious to the public welfare; (d) whether the time and territorial limitations contained in the covenant are reasonable; and (e) whether the restraint is reasonable from the standpoint of public policy.

 * Case digest by Suzyne Garcia, LLB-1, Andres Bonifacio Law School, SY 2017-2018