C. Planas Commercial and/or Marcial Cohu vs. National Labor Relations Commission, et al.

An employer claiming exemption from the minimum wage law as a retail/service establishment regularly employing not more than ten workers bears the burden of proving such exemption, including showing that it applied for and was granted the exemption by the appropriate Regional Board. Additionally, not all quitclaims are per se invalid or against public policy, except where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or where the terms of settlement are unconscionable on their face.

Private respondents were hired as helpers/laborers by petitioner Marcial Cohu, owner of C. Planas Commercial, a business engaged in the wholesale of plastic products and fruits. The dispute concerns the applicability of R.A. No. 6727, the Wage Rationalization Act, which provides statutory minimum wage rates for workers in the private sector but allows exemption for retail/service establishments regularly employing not more than ten workers, upon application with and as determined by the appropriate Regional Board.

Private respondents Dioleto Morente, Rudy Allauigan, and Alfredo Ofialda, together with five others, filed a complaint for underpayment of wages, nonpayment of overtime pay, holiday pay, service incentive leave pay, premium pay for holiday and rest day, and night shift differential against petitioners C. Planas Commercial and/or Marcial Cohu. Private respondents alleged that Cohu, owner of C. Planas Commercial, was engaged in the wholesale of plastic products and fruits with more than 24 employees; that they were hired as helpers/laborers on January 14, 1990, May 14, 1990, and July 1, 1991, respectively; that they were paid below the minimum wage law for the past 3 years; that they were required to work more than 8 hours a day without overtime pay; that they never enjoyed holiday pay and did not have a rest day as they worked 7 days a week; and that they were not paid service incentive leave pay despite working for more than one year. Ofialda additionally asked for night shift differential as he had worked from 8 p.m. to 8 a.m. for more than one year.

Petitioners admitted that private respondents were their helpers who accompanied delivery trucks and helped in loading and unloading merchandise, usually working from 10 a.m. to 6 p.m., six days a week. Petitioners claimed that private respondents stopped working sometime in September 1993 and that they were not entitled to holiday and service incentive leave pays because they were employed in a retail and service establishment regularly employing less than ten workers. The Labor Arbiter dismissed the complaint for lack of factual and legal basis, holding that complainants failed to substantiate their claim that the establishment regularly employs more than ten workers.

On appeal, the NLRC modified the Labor Arbiter's decision, directing petitioners to pay private respondents the total amount of P75,125.00 representing their combined salary differentials, holiday pay, and service incentive leave pay. The NLRC held that the burden of proving exemption from the minimum wage law rests on the employer invoking such exemption, and petitioners presented no evidence to show the number of workers they regularly employed. Pending appeal, private respondents Morente and Allauigan filed motions to dismiss with release and quitclaim before the NLRC, having received P3,000.00 and P6,000.00 respectively from petitioners.

The CA affirmed the NLRC decision in toto, holding that petitioners failed to prove their exemption and that the quitclaims executed by Morente and Allauigan were not valid because they did not represent fair and reasonable settlements. The CA noted that Allauigan was only paid P6,000.00 and Morente P3,000.00 when they were legally entitled to receive P28,952.00 and P27,597.00 respectively.

• Exemption from Minimum Wage Law: Petitioners insisted that C. Planas Commercial is a retail establishment principally engaged in the sale of plastic products and fruits to customers for personal use, thus exempted from the application of the minimum wage law; that it merely leases and occupies a stall in the Divisoria Market and its level of business activity requires and sustains only less than ten employees at a time.
• Burden of Proof: Petitioners claimed that since private respondents alleged that petitioners employed 24 workers, it was incumbent upon them to prove such allegation, which private respondents failed to do.
• Strict Application of Rules of Evidence: Petitioners contended that the CA erred in applying strictly the rules of evidence against them by holding that it was incumbent upon them to prove that their company is exempted from the minimum wage law, arguing that they could not present records of their workers because the system of management is very loose and informal, with salaries paid by merely handing money to the worker without requiring any signature as proof of receipt.
• Validity of Quitclaims: Petitioners averred that the CA erred in ruling that private respondents Morente and Allauigan are still entitled to monetary awards despite their execution of release and quitclaims, insisting that both voluntarily entered into amicable settlements on September 17 and 18, 1995, respectively; that they initiated the talks for settlement and pegged the amount; and that they voluntarily appeared before the Labor Arbiter to move for dismissal of their case and submitted their quitclaims which were duly subscribed and notarized.

N/A — The decision does not recount arguments attributed to the private respondents beyond their position paper allegations. Private respondents failed to file comments before the CA and this Court, and the Office of the Solicitor General filed the comment on behalf of all respondents.

• Exemption from Minimum Wage Law: Whether petitioners, as a retail establishment claiming exemption from the minimum wage law, bore the burden of proving that they regularly employ not more than ten workers and had applied for and been granted exemption by the appropriate Regional Board.
• Validity of Quitclaims: Whether the quitclaims and releases executed by private respondents Morente and Allauigan are valid and binding so as to bar them from claiming the full measure of their legal rights.

• Exemption from Minimum Wage Law: Yes, the burden rested on petitioners. Under Section 4(c) of R.A. No. 6727, for a retail/service establishment to be exempted from the coverage of the minimum wage law, it must be shown that the establishment regularly employs not more than ten workers and had applied for exemption with and as determined by the appropriate Regional Board. Petitioners failed to present any evidence of such application or grant.
• Validity of Quitclaims: Yes, the quitclaims are valid and binding. Not all quitclaims are per se invalid or against public policy, except where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or where the terms of settlement are unconscionable on their face. Neither instance was present in the case of Morente and Allauigan.

• Exemption from Minimum Wage Law: The Court held that Section 4 of R.A. No. 6727, the Wage Rationalization Act, clearly provides that retail/service establishments regularly employing not more than ten workers may be exempted from the applicability of the Act upon application with and as determined by the appropriate Regional Board. Petitioners' main defense in controverting private respondents' claim for underpayment of wages was that they are exempted from the application of the minimum wage law, thus the burden of proving such exemption rests on petitioners. Petitioners had not shown any evidence that they had applied for such exemption and, if they had applied, that the same was granted. The Court cited Murillo vs. Sun Valley Realty, Inc., which held that when a party claims to fall within an exception to the general rule, it is incumbent upon them to prove that they belong to a class excepted by law. The Court also cited C. Planas Commercial vs. NLRC, a prior case involving the same petitioners, where the Court ruled that the best proof of exemption would have been their approved application for exemption in accordance with applicable guidelines issued by the Commission. The Court further noted that as employer, Cohu ought to be the keeper of employment records of all his workers, and his inability to produce payrolls without satisfactory explanation can be interpreted as suppression of vital evidence adverse to petitioners.
• Validity of Quitclaims: The Court found merit in petitioners' argument regarding the quitclaims. It held that not all quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on their face. The Court found these two instances not present in the case of Allauigan and Morente. They failed to refute petitioners' allegation that the settlement was voluntarily made as they had not filed any pleadings before the CA. The Court found their inaction an indication that they already relented in their claims and gave credence to petitioners' claim that they had voluntarily executed the release and quitclaim and the motion to dismiss. The Court disagreed with the CA's finding that the compromise agreements were not valid because they did not represent fair and reasonable settlements. The Court stressed that at the time of the execution of the release and quitclaim, the case was already dismissed by the Labor Arbiter and was pending appeal before the NLRC. Private respondents could have executed the release and quitclaim because of a possibility that their appeal with the NLRC may not be successful. Since there was yet no decision rendered by the NLRC when the quitclaims were executed, it could not be said that the amount of the settlement is unconscionable. No deception was established that would justify the annulment of the quitclaims. The Court cited Mercer vs. NLRC, which held that in the absence of any showing that the petitioner was coerced or tricked into signing the quitclaim and release or that the consideration thereof was very low, she is bound by the conditions thereof.

• Burden of Proof in Claiming Statutory Exemption — The party invoking an exemption from the coverage of a law bears the burden of proving the basis for such exemption. The Court applied this principle to hold that petitioners, who claimed exemption from the minimum wage law as a retail establishment employing less than ten workers, had the duty to prove such exemption, including showing that they applied for and were granted the exemption by the appropriate Regional Board under Section 4(c) of R.A. No. 6727.
• Validity of Quitclaims — Not all quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on their face. The Court applied this doctrine to uphold the quitclaims of Morente and Allauigan, finding that neither exception was present, particularly since no NLRC decision existed at the time the quitclaims were executed and no deception was established.
• Suppression of Evidence — An employer's inability to produce payrolls from their files without satisfactory explanation can be interpreted as suppression of vital evidence adverse to the employer. The Court applied this principle in affirming the award of salary differentials, noting that as employer, Cohu ought to be the keeper of employment records of all his workers.

• "Clearly, for a retail/service establishment to be exempted from the coverage of the minimum wage law, it must be shown that the establishment is regularly employing not more than ten (10) workers and had applied for exemptions with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission." — This passage articulates the controlling rule on exemption from the minimum wage law under R.A. No. 6727, establishing the dual requirement of employing not more than ten workers and obtaining formal exemption from the Regional Board.
• "It has been held that not all quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on their face. In these cases, the law will step in to annul the questionable transactions." — This passage states the canonical formulation of the doctrine on validity of quitclaims, providing the two exceptional circumstances that would render such agreements invalid.
• "Since there was yet no decision rendered by the NLRC when the quitclaims were executed, it could not be said that the amount of the settlement is unconscionable. In any event, no deception has been established that would justify the annulment of private respondents quitclaims." — This passage explains the Court's reasoning for upholding the quitclaims, emphasizing that the absence of a prior NLRC decision at the time of execution precludes a finding of unconscionability.

• Murillo vs. Sun Valley Realty, Inc., No. L-67272, June 30, 1988, 163 SCRA 271 — Cited as controlling precedent for the rule that when a party claims to fall within an exception to the general rule, it is incumbent upon them to prove that they belong to a class excepted by law. The Court applied this to hold that petitioners bore the burden of proving they employed less than ten workers.
• C. Planas Commercial vs. NLRC, G.R. No. 121696, February 11, 1999, 303 SCRA 49 — Cited as a prior case involving the same petitioners where the Court ruled that the best proof of exemption from the minimum wage law would have been an approved application for exemption in accordance with applicable guidelines issued by the Commission.
• Mercer vs. NLRC, G.R. No. 105606, March 16, 1995, 242 SCRA 376 — Cited for the rule that in the absence of any showing that the petitioner was coerced or tricked into signing the quitclaim and release or that the consideration thereof was very low, she is bound by the conditions thereof.
• Unicane Workers Union-CLUP vs. National Labor Relations Commission, G.R. No. 107545, September 9, 1996, 261 SCRA 573 — Cited for the doctrine that not all quitclaims are per se invalid or against public policy, except where there is clear proof of wangling from an unsuspecting person or where the terms are unconscionable on their face.
• JGB and Associates, Inc. vs. National Labor Relations Commission, G.R. No. 109390, March 7, 1996, 254 SCRA 457 — Cited for the proposition that quitclaim and release agreements are regarded as ineffective to bar workers from claiming the full measure of their legal rights in the exceptional circumstances identified.
• Veloso vs. Department of Labor and Employment, G.R. No. 87297, August 5, 1991, 200 SCRA 201 — Cited in the CA decision for the principle that the law looks with disfavor upon quitclaims and releases executed by employees, which the Supreme Court distinguished in upholding the quitclaims in this case.

• Section 4(c), R.A. No. 6727 (Wage Rationalization Act) — Provides for the exemption of retail/service establishments regularly employing not more than ten workers from the minimum wage law, upon application with and as determined by the appropriate Regional Board. The Court applied this provision to hold that petitioners failed to prove their exemption since they presented no evidence of having applied for and been granted such exemption.
• Section 1, Rule 131, Rules of Court — Defines burden of proof as the duty of a party to present evidence on the facts in issue necessary to establish his claim or defense. The Court applied this rule to hold that petitioners, who invoked the exemption from the minimum wage law, bore the burden of proving the basis for such exemption.

Puno, Acting C.J., Callejo, Sr., and Tinga, JJ., concurred. Chico-Nazario, J., was on leave.

N/A — No dissenting opinions are noted in the case text.