Summary
- A deed of release is a legally binding document entered into between an employer and a former employee upon termination, which typically releases both parties from future claims arising from the employment relationship and can prevent the employee from commencing legal proceedings.
- Unlike a standard agreement, a deed does not require consideration to be binding, meaning an employer is not obliged to provide a settlement amount, though doing so may incentivise the employee to sign.
- Key provisions in a deed of release commonly include a release from employment responsibilities, confidentiality obligations, non-disparagement clauses, restraint of trade provisions, and terms addressing how the termination will be communicated internally.
- This article is a plain-English guide to deeds of release for employers and business owners operating in Australia, produced by LegalVision, a commercial law firm.
- LegalVision specialises in advising clients on employment law and workplace dispute resolution.
Tips for Businesses
Allow the employee sufficient time to seek independent legal advice before signing, as a deed obtained under pressure is unlikely to be upheld by a court. Clearly document all entitlements owed and any continuing restraint of trade obligations within the deed. If an employee has already commenced proceedings, structure the deed so that discontinuation of those proceedings is a condition precedent to receiving any benefits.
On this page
- 1. What is a Deed of Release?
- 2. Do I Need to Include a Settlement Amount?
- 3. What Should a Deed of Release Include?
- 4. Will a Deed Protect Me From Being Sued?
- 5. What if an Employee Breaches a Deed of Release?
- 6. What if an Employee Has Already Begun Proceedings?
- Key Takeaways
- Frequently Asked Questions
A deed of release is a legally binding document that settles the terms of an employee’s departure and typically prevents them from bringing future claims against you or your business. Used correctly, it gives both parties certainty and protection after a termination. This article will answer six frequently asked questions on deeds of release and how to respond to a breach.
1. What is a Deed of Release?
A deed of release is a legally binding agreement between an employee and their employer following the employee’s termination. It includes:
- the conditions of the settlement;
- details on the settlement amount that the employer has agreed to pay the employee; and
- an agreement between the parties over what they can and cannot do due to entering into the deed.
2. Do I Need to Include a Settlement Amount?
Parties can enter into a release as either an agreement or a deed.
An agreement is a contract, meaning that each party must provide something that benefits the other. This exchange is known as consideration. Usually, as the employer, you will provide a settlement amount as consideration for an agreement to release an employee. This settlement will be in exchange for the employee’s promise to release the employer from any future obligations.
Alternatively, entering into a deed instead of an agreement means that you do not have to provide the employee with consideration for entering into the contract. Although, providing a settlement amount may be beneficial as it serves as an incentive for the employee to agree to sign a deed of release
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3. What Should a Deed of Release Include?
The provisions of your deed will change depending on the context in which you are using it. Nevertheless, below are some key provisions you will likely find in a deed of release.
Release From All Employment Responsibilities
Signing a deed will likely release you from any and all future claims. So, both you and your employee agree to have no legal responsibility for any past, present or future claims arising from the employment. For example, under a deed of release, your employee might agree not to bring a claim for unfair dismissal against you. Likewise, you might agree to not sue your former employee for any negligent misconduct arising from their employment.
Although you can release yourself from some responsibilities, there are specific claims that an agreement cannot exclude. For instance, as an employer, you cannot discharge yourself from superannuation obligations by deed of release. In the same way, a deed cannot revoke your employee’s claim for worker’s compensation. You should seek legal advice to ensure that the terms in your deed of release are consistent with the law.
Certainty
Some issues may arise when constructing a deed of release from the employee’s termination. Therefore, it is crucial to set out a resolution within the deed to help resolve any potential complications. In addition, you should include terms where the parties acknowledge:
- that the former employee will receive payment for all entitlements owed and any outstanding bonus or commission payments; and
- whether any restraint of trade found in the employee’s original contract continues or ceases to apply.
Confidentiality
Businesses are rarely inclined to disclose the terms of any particular deed of release. A confidentiality provision will prevent you and your employee from disclosing whatever you may agree on in the deed to anyone except your financial adviser or lawyer.
Details on Communicating Termination
If the events leading up to the termination are sensitive, employees will often want to know how you may disclose the details of their termination to their colleagues. Including a term within the deed that outlines this circumstance will assure your employee that you are handling their personal affairs with care.
Non-Disparagement
You may also wish to include a term that requires your employee to refrain from making statements that disparage you or your business’ reputation. This is particularly important in situations where there has been some unrest surrounding your employee’s departure.
4. Will a Deed Protect Me From Being Sued?
As an employer, entering into a deed of release can provide additional protection against unfair dismissal claims and claims for loss resulting from termination. This is because the deed usually indicates that the employee resigned voluntarily.
However, if you have pressured your employee into entering the agreement, the courts will likely not uphold the deed of release. Such pressure may include physical or financial pressure. For example, financial pressure may include threats to withhold certain financial entitlements if the employee refuses to sign the deed. Therefore, you must give your employee enough time to seek independent legal advice to fully understand what they are signing.
5. What if an Employee Breaches a Deed of Release?
There are several ways that your employee may breach the terms of a deed of release. For example, suppose that the deed prevented your employee from commencing legal proceedings against you. If your employee were to do so, you would be able to raise the deed of release to stop the commencement of proceedings.
If an employee breaches a confidentiality clause, you may be able to:
- obtain court orders to prevent further misuse or disclosure of information;
- obtain compensation for any losses relating to the misuse of information; and
- order an employee to return any confidential information that is within their possession.
If an employee breaches a restraint of trade clause, you have a few legal options. In this case, you may be able to:
- legally stop the employee from working for a competitor;
- receive compensation for the breach of contract; and
- receive an account of any profits that the employee gained from working for a competitor.
6. What if an Employee Has Already Begun Proceedings?
You may be seeking to enter into a deed of release to discontinue proceedings that an employee has already commenced. If so, you must structure the release so that your employee must discontinue the proceedings that they have commenced before receiving any benefits. Structuring a deed in this way makes it easier for you to enforce these terms on your employee. If your employee fails to satisfy additional obligations, you may need to obtain a court order.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
Employers may sometimes view entering into a deed of release as costly and unnecessary. However, as an employer, having such an agreement in place may provide you with significant protection against employees who commence legal proceedings against you. A deed of release may also eliminate any uncertainty you or your employee have regarding the termination.
If you need help drafting a deed of release, LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced employment lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
A deed of release is a legally binding agreement between an employee and employer following the employee’s termination. A deed of release often includes the conditions of the settlement, a settlement amount and a release from employment responsibilities.
A non-disparagement clause prevents your outgoing employee from saying or doing anything that may injure your business’ reputation.
No. If you pressure an employee into signing through physical or financial means, such as threatening to withhold entitlements, courts will likely not uphold the deed. You must give your employee sufficient time to seek independent legal advice before signing.
Not necessarily. Unlike an agreement, a deed does not require consideration to be legally binding, meaning you are not obligated to provide a settlement amount. However, offering one can serve as an incentive for the employee to sign the deed.
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