Labor Compromise Agreement (Philippines)
COMPROMISE AGREEMENT AND QUITCLAIM
Labor Case Settlement — Article 233, Labor Code of the Philippines (PD 442)
This Compromise Agreement and Quitclaim ("Agreement") is entered into this [Agreement Date] by and between:
EMPLOYER: [Employer Name], with address at [Employer Address], represented by [Employer Representative] (hereinafter, the "Employer"); AND
EMPLOYEE: [Employee Name], with address at [Employee Address] (hereinafter, the "Employee").
The Employer and Employee are hereinafter collectively referred to as the "Parties."
RECITALS
WHEREAS, a labor dispute between the Parties is currently pending before the [Labor Arbiter Name], docketed as [Case Number], involving the following claims: [Claims Settled];
WHEREAS, the Parties wish to amicably settle the above claims without further litigation, in accordance with Article 233 of the Labor Code of the Philippines (PD 442) and Rule V, Section 8 of the 2011 NLRC Rules of Procedure;
NOW, THEREFORE, for and in consideration of the mutual covenants and the Settlement Amount herein stated, the Parties agree as follows:
1. SETTLEMENT AMOUNT AND PAYMENT
1.1 The Employer agrees to pay, and the Employee agrees to accept, the total amount of [Settlement Amount] (Philippine Pesos) as full and complete settlement of all claims listed in the Recitals above ("Settlement Amount").
1.2 The Settlement Amount shall be paid as follows: [Payment Schedule].
1.3 Payment mode: [Payment Mode].
2. REINSTATEMENT / SEPARATION
2.1 [Reinstatement Provision].
3. QUITCLAIM AND RELEASE
3.1 Upon receipt of the Settlement Amount in full, the Employee hereby releases and forever discharges the Employer, its officers, directors, shareholders, successors, and assigns from any and all claims, demands, causes of action, and liabilities arising from or related to the employment relationship and its termination, including all claims enumerated in the Recitals above.
3.2 This release is executed freely and voluntarily by the Employee with full understanding of the rights being waived and with the advice of counsel, in consideration of the Settlement Amount which the Employee acknowledges to be credible and equitable relative to the claims being released, in accordance with the standard established in Periquet v. NLRC (G.R. No. 91298, June 22, 1990).
4. ADDITIONAL CONDITIONS
4.1 [Additional Conditions]
5. PRAYER FOR APPROVAL
5.1 The Parties jointly pray that the [Labor Arbiter Name] approve this Compromise Agreement as a final and complete settlement of the above case under Article 233 of the Labor Code (PD 442) and Rule V, Section 8 of the 2011 NLRC Rules of Procedure, and render judgment based on this Agreement.
5.2 The Parties agree that upon approval, this Agreement shall have the force and effect of a final judgment of the Commission, enforceable by writ of execution under Rule XI of the 2011 NLRC Rules of Procedure.
IN WITNESS WHEREOF, the Parties have signed this Agreement on [Agreement Date].
[Employer Name]
By: [Employer Representative]
Employer
[Employee Name]
Employee
Employer (Authorized Representative)
________________
Signature
Employee
________________
Signature
What Is a Labor Compromise Agreement (Philippines)?
A Labor Compromise Agreement in the Philippines sets out the agreed resolution of the disagreement, defining what each party gives up and what they receive in return.
A Labor Compromise Agreement has the same force and effect as a final judgment of the NLRC or Labor Arbiter when approved by the approving authority — the Labor Arbiter before whom the case is pending, or the Commission in cases on appeal. Under Article 233 of the Labor Code, a compromise agreement once approved is executory and the NLRC Sheriff may enforce it directly through a writ of execution under Rule XI of the 2011 NLRC Rules of Procedure if the settling party defaults.
The Supreme Court has consistently upheld Labor Compromise Agreements that are freely and voluntarily executed with full knowledge of the rights being waived and adequate consideration. In Periquet v. NLRC (G.R. No. 91298, June 22, 1990), the Court held that quitclaims are valid when the consideration is credible and equitable relative to the legal rights surrendered. Conversely, in Talam v. National Labor Relations Commission (G.R. No. 41514, February 18, 1992), the Court voided a quitclaim where the consideration was grossly inadequate compared to the employee's legal entitlements.
A Labor Compromise Agreement differs from a simple Quitclaim and Release (which is a unilateral waiver by the employee) in that the compromise agreement is bilateral — both parties make concessions — and requires approval by the NLRC or Labor Arbiter to be fully enforceable as a labor judgment. For disputes covered by the DOLE Single Entry Approach (SEnA) under Republic Act No. 10396 and DOLE Department Order No. 107-10, the settlement agreement is recorded in the SEnA Record and has the effect of an enforceable settlement under that framework.
For Kasambahay (domestic worker) disputes, compromise agreements are governed by Republic Act No. 10361 (Kasambahay Law) and its Implementing Rules, with disputes adjudicated by the NLRC for money claims exceeding the jurisdictional threshold of the DOLE Regional Offices.
The legal framework governing the Labor Compromise Agreement (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Labor Compromise Agreement (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Labor Code of the Philippines (PD 442) sets the foundational requirements.
When Do You Need a Labor Compromise Agreement (Philippines)?
A Labor Compromise Agreement in the Philippines is needed whenever an employer and employee decide to settle a pending or potential labor dispute through mutual concession rather than full litigation before the NLRC or DOLE.
A Labor Compromise Agreement is needed when an employee files an illegal dismissal complaint before the NLRC Labor Arbiter under Rule V of the 2011 NLRC Rules of Procedure, and both parties wish to settle the backwages, separation pay, and reinstatement claims under Articles 294-299 of the Labor Code. The agreement avoids the time and cost of full arbitration proceedings, which under the 2011 NLRC Rules of Procedure may take 30-90 days at the Labor Arbiter level.
A Labor Compromise Agreement is required when a complaint for money claims — unpaid wages, 13th month pay under PD 851, overtime pay under Article 87 of the Labor Code, service incentive leave under Article 95, or underpaid mandatory benefits — is settled before the DOLE Regional Office or the NLRC. The agreement specifies each claim settled, the amount paid, and the claims released.
A Labor Compromise Agreement is needed during DOLE Single Entry Approach (SEnA) proceedings under DOLE Department Order No. 107-10, where the conciliator-mediator supports a 30-day mandatory conciliation-mediation period before formal case filing. A settlement reached at SEnA is recorded in the SEnA Report and has immediate legal effect.
A Labor Compromise Agreement is required when an employer and employee settle a constructive dismissal claim — where the employee resigned due to unbearable working conditions — including claims for separation pay equivalent to at least 1 month's pay per year of service under Article 298 of the Labor Code.
A Labor Compromise Agreement is needed when a collective bargaining dispute or unfair labor practice (ULP) charge under Article 259 of the Labor Code is amicably resolved between a union and management, with the settlement covering specific ULP acts alleged and the remedies agreed upon.
What to Include in Your Labor Compromise Agreement (Philippines)
A valid Labor Compromise Agreement in the Philippines must contain the following elements to be approvable by the NLRC or Labor Arbiter and enforceable as a labor judgment.
Parties and Case Reference: Full legal names and addresses of the employer and employee (or former employee), the NLRC or DOLE case reference number (e.g., NLRC NCR Case No., RAB Case No., or SEnA RFA No.), and the name of the Labor Arbiter or Conciliator-Mediator handling the case. For corporate employers, include the SEC Registration Number and the name and authority of the authorized signatory.
Claims Being Settled: An itemized list of each claim covered by the agreement — illegal dismissal, unpaid wages, 13th month pay (PD 851), overtime pay (Article 87, Labor Code), SILP (Article 95), separation pay (Article 298), backwages (Article 294), and any other money claims. The agreement must clearly state whether ALL claims arising from the employment relationship are settled or only specified claims.
Settlement Amount: The gross settlement amount in Philippine pesos (PHP ₱), the computation basis (e.g., months of backwages, years of service for separation pay), and the payment schedule — lump sum or installments. If paid in installments, include a confession of judgment clause allowing direct execution upon default under Rule XI of the 2011 NLRC Rules of Procedure.
Quitclaim and Release: A thorough release clause where the employee releases the employer from all claims, demands, causes of action, and liabilities arising from the employment relationship and its termination, effective upon receipt of the full settlement amount. The quitclaim language must satisfy the Periquet v. NLRC (G.R. No. 91298, June 22, 1990) standard: freely executed, with full understanding, and for adequate consideration.
Non-Dismissal / Reinstatement Terms: If reinstatement is part of the settlement, specify the date, position, salary, and conditions of reinstatement. If the parties agree to separation instead, confirm that reinstatement is waived and separation is the full and complete remedy.
Approval Clause: A joint prayer for the Labor Arbiter or Commission to approve the compromise agreement as a final settlement under Article 233 of the Labor Code and Rule V, Section 8 of the 2011 NLRC Rules of Procedure, and to render judgment based on the agreement.
Notarization and Signatures: Both parties must sign, with signatures witnessed and notarized under the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC). Counsel for both parties should also sign as conforming attorneys to confirm that the settlement was reached with legal advice.
Additional compliance elements for a Labor Compromise Agreement (Philippines) used in Philippines include: Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.
Cite this page
Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Labor Compromise Agreement (Philippines) (Philippines) [Legal document template]. Forms Legal. https://forms-legal.com/philippines/employment/termination/compromise-agreement-labor-philippines
"Labor Compromise Agreement (Philippines) (Philippines)." Forms Legal, 2026, https://forms-legal.com/philippines/employment/termination/compromise-agreement-labor-philippines.
@misc{formslegal-compromise-agreement-labor-philippines,
author = {{Forms Legal}},
title = {Labor Compromise Agreement (Philippines) (Philippines)},
year = {2026},
howpublished = {\url{https://forms-legal.com/philippines/employment/termination/compromise-agreement-labor-philippines}},
note = {Free legal document template. Based on Labor Code of the Philippines (PD 442)}
}Frequently Asked Questions
A Labor Compromise Agreement approved by the NLRC Labor Arbiter or the Commission is final and binding on both parties and has the same force and effect as a final judgment under Article 233 of the Labor Code of the Philippines (PD 442). Once approved, neither party can unilaterally rescind or reopen the settled claims. The agreement may be enforced through a writ of execution issued by the NLRC Sheriff under Rule XI of the 2011 NLRC Rules of Procedure if the settling party defaults on payment. However, under the Civil Code of the Philippines (Articles 2028-2041 on compromise agreements), a compromise agreement may be set aside on grounds of fraud, mistake, or duress — and the Supreme Court in Samaniego v. NLRC (G.R. No. 88626, September 14, 1990) held that labor compromise agreements induced by fraud or executed without full understanding of the rights being waived are void. Even without formal NLRC approval, a compromise agreement reached at the DOLE Single Entry Approach (SEnA) level under DOLE DO 107-10 creates an immediately enforceable settlement under the SEnA framework.
Philippine labor law does not fix a mandatory minimum for compromise settlement amounts, but the Supreme Court has established through the Periquet v. NLRC (G.R. No. 91298, June 22, 1990) standard that a quitclaim is valid only when the consideration is credible and equitable. As a practical benchmark, settlement amounts in illegal dismissal cases should reasonably approximate the employee's statutory entitlements: separation pay equivalent to at least 1 month pay per year of service (the higher of Article 297 or 298, Labor Code) plus full backwages from the date of dismissal to the date of settlement under Article 294. For authorized cause terminations — retrenchment, redundancy, installation of labor-saving devices under Article 298 — separation pay is 1 month pay or at least 1/2 month pay per year of service, whichever is higher. Settlements at 50% or less of computed statutory entitlements have been voided by Philippine courts as grossly inadequate. The NLRC Labor Arbiter reviewing the compromise agreement will assess whether the consideration is reasonable before approving it as a final judgment.
A labor compromise agreement approved by the NLRC Labor Arbiter as a judgment is generally not appealable on the merits because the parties have already consented to the terms. Under Rule VI, Section 1 of the 2011 NLRC Rules of Procedure, appeal lies from decisions of Labor Arbiters to the Commission within 10 calendar days from receipt. However, a compromise judgment — being based on the parties' mutual consent — may only be challenged on grounds that negate consent under the Civil Code: fraud (Article 1338), mistake (Article 1331), duress (Article 1335), or undue influence (Article 1337). The proper remedy is a petition to annul the compromise agreement filed with the Labor Arbiter or Commission, not a regular appeal on the merits of the underlying claims. For compromise agreements reached at the SEnA level under DOLE DO 107-10, the settlement may be challenged before the NLRC if one party refuses to comply, triggering an enforcement proceeding rather than an appeal.
A Labor Compromise Agreement with a comprehensive quitclaim and release clause prevents the employee from filing new NLRC cases for claims that were settled and released under the agreement. The quitclaim releases the employer from all claims, demands, and causes of action 'known and unknown' arising from the employment relationship up to the date of the agreement. Under the doctrine in Periquet v. NLRC (G.R. No. 91298, June 22, 1990), a valid and voluntary quitclaim is a complete bar to any subsequent action on the settled claims. However, claims arising AFTER the date of the agreement — such as withheld final pay or unreturned security deposits — are not covered by the release. Claims based on violations of laws enacted after the agreement — such as new minimum wage orders under Republic Act No. 6727 — are likewise not barred. Importantly, a quitclaim cannot waive mandatory benefits that accrued but were not paid — such as 13th month pay (PD 851), SSS contributions (RA 11199), or PhilHealth contributions (RA 7875) — as these are rights under special laws that cannot be waived under Article 100 of the Labor Code.
If an employer fails to pay the settlement amount on the due date specified in a Labor Compromise Agreement approved by the NLRC Labor Arbiter, the employee may immediately move for issuance of a writ of execution under Rule XI, Section 1 of the 2011 NLRC Rules of Procedure without need for further hearing. The NLRC Sheriff will serve the writ on the employer and, upon failure to satisfy the judgment within 5 days, will proceed to levy the employer's personal and real property, garnish bank accounts, or attach business assets to satisfy the judgment amount. If the compromise agreement includes a confession of judgment clause — authorizing execution upon default without further proceedings — execution is even faster. The employee does not need to file a new complaint or go through a new hearing. The computation of the execution amount includes the original settlement sum plus legal interest at 6% per annum from the date of default under Nacar v. Gallery Frames (G.R. No. 189871, August 13, 2013).
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
Found an error? Let us knowRelated Documents
You may also find these documents useful:
Employment Separation Agreement (Philippines)
A bilateral agreement between employer and employee formalizing the terms of separation from employment, including separation pay computation under Articles 297-299 of the Labor Code (PD 442), final pay settlement, clearance, and mutual release. Distinct from unilateral termination letters.
Quitclaim and Release (Employment, Philippines)
A Philippine employment quitclaim and release deed under which a separated employee acknowledges receipt of full and final settlement of all monetary claims arising from employment, including separation pay, final wages, 13th month pay, and SIL conversion. Governed by Labor Code (PD 442) and Supreme Court doctrine on valid quitclaims.
Termination Letter (Philippines)
A Philippines employee termination letter for just-cause dismissal under Article 297 of the Labor Code (PD 442). Compliant with the DOLE twin-notice rule under Department Order 147-15 — serves as the Notice of Decision (second notice). Covers serious misconduct, willful disobedience, gross neglect, fraud, and crime against employer.