The Second Labor Court of Santiago rejected, in judgment RIT O-4818-2024, the claim of a former employee of Banco de Chile who sought to invalidate the settlement agreement (finiquito) he had signed without reservation of rights, alleging error and moral duress. The court confirmed that the instrument retains full releasing effect when the worker signed it before the union, with permanent union advice, and obtained a contractual benefit equivalent to seven additional months' pay over what the law would have guaranteed. For your company, the message is concrete: a well-constructed settlement withstands ex post challenges — and that protection is built before signing, not after.
What happened
An evaluation analyst at Banco de Chile with more than 18 years of seniority was dismissed on April 23, 2024, for business needs under article 161, first paragraph, of the Labor Code. On May 8, 2024, he signed a settlement agreement at the offices of the Banco de Chile–Edwards Company Union, before its president, without making any reservation of rights.
The instrument included the usual items of a dismissal — indemnity in lieu of prior notice, severance for years of service, proportional vacation — plus a contractual benefit known as the "union quota" (cupo sindical): the severance for years of service was settled without applying the legal cap of eleven years of service. That benefit meant seven additional months' pay compared to what the law would have guaranteed.
Months later, the worker sued for nullity of the settlement, alleging two defects of consent: error — he claimed he did not understand the legal consequences of signing the instrument without reservation — and moral duress — he argued that the union pressured him to sign without reservation as a condition for accessing the union quota, a point the court dismissed as an unproven fact: the collective agreement does not require the absence of reservation to obtain the benefit, and the bank's own witness confirmed this on cross-examination.
The court rejected both defects. On moral duress: the alleged pressure did not meet the required threshold of severity; moreover, it came from the union leaders, not the employer, so there was no basis to attribute it to the bank. On error: the worker's seniority — more than 18 years at the company — and the continuous presence of union advice supported the conclusion that he knew the legal consequences of what he was signing. And had any error existed, article 1452 of the Civil Code applied: error of law does not vitiate consent.
The claim was rejected in its entirety. The settlement retains full releasing effect under article 177 of the Labor Code. The plaintiff was ordered to pay costs of $250,000.
The court added a further, independent argument: the plaintiff also failed to prove the founding fact of his claim. The collective agreement does not establish signing without reservation as a requirement to access the union quota, and the bank's witness confirmed that no one prevented him from doing so at the moment of signing. In the words of the ruling, the worker "has not proven the founding fact of his claim, that is, that he was in any way prohibited from recording a reservation of rights." This ground alone would have sufficed to reject the action.
What it may mean for your company
The ruling builds its reasoning on three concurrent elements that erode allegations of defect: the union advice present at the time of signing, the signing at the union's premises before its president, and the financial benefit above the legal minimum that the worker obtained. Each independently eroded the allegations of defect. The three together made them untenable. To these is added a fourth, autonomous ground: the worker did not prove that he had been prohibited from recording a reservation of rights — which alone would have sufficed to reject the action.
The logic is as follows: it is very difficult to argue that someone was pressured or led into error to enter into an act that gave them — precisely — more than the legal minimum. The contrast between the disadvantageous position the worker describes and the actual benefit he obtained was at the center of the court's reasoning.
For companies that manage dismissals through collective agreements with benefits above the legal minimum, this ruling reinforces an already consolidated practice: the union quota and other contractual termination mechanisms only generate the protection they promise if the settlement signing process is precisely documented.
There are two areas of caution the ruling does not cover. First: if the pressure to sign without reservation comes from the employer rather than the union, the analysis changes. The court was explicit that union pressure does not implicate the bank; but if the employer conditions payment of the benefit on the absence of reservation, the moral duress argument carries more weight. Second: if the worker has no advice at the time of signing, the allegation of error is more plausible, regardless of the benefit received.
It should be borne in mind that this is a first-instance judgment — RIT O-4818-2024 of the Second Labor Court of Santiago. It does not bind other courts, although its argumentative structure is consistent with the prevailing doctrine on article 177 of the Labor Code.
Does your collective agreement include a union quota or other termination benefits above the legal minimum? Schedule a review of your settlement signing process before handling the next departure.
What you can do
If your company manages dismissals with contractual benefits above the legal minimum — whether through a collective agreement, termination agreement, or other instrument — the ruling invites you to review three aspects of the process:
- Document who advises and where the signing takes place. Union advice and signing at the union's premises before its leadership are elements the court expressly valued. If the dismissal process includes these factors, document them: record the place, date, those present, and the position of the union representative who certifies the act.
- Record the difference between the contractual and legal benefit. When the worker receives more than the legal minimum, that difference must be made explicit in the settlement or in an attached instrument. The proven financial advantage is the most effective argument against later challenges based on error or duress.
- Review the scope of the settlement. The releasing effect covers the expressly included items. A settlement that precisely identifies each settled item and records additional agreements closes off room for challenge. A generic instrument may leave gaps that a precise text would have closed.
If any of these three points raises questions, a 30-minute diagnostic session is enough to size up your gaps. Schedule here.
If you have ongoing dismissal processes, collective agreements with termination benefits, or union quotas that form part of your strategy, schedule a meeting with our team.
This content is informational and does not constitute legal advice.