I Am an Employer. When Should I Use a Deed of Release?

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Table of Contents

• What is a Deed of Release?
• What Are the Right Times to Use a Deed of Release?
• What Should I Include in a Deed of Release?
• What Are the Benefits of Using a Deed of Release?
• How Do I Use a Deed of Release to Terminate an Employee’s Employment?
• What if an Employee Breaches the Deed?
• How Do I Use a Deed of Release at the End of Unfair Dismissal Proceedings?
• Other Considerations
• Key Takeaways
• Frequently Asked Questions

As an employer, protecting your business is undoubtedly very important to you. However, knowing when to take legal action or use particular legal documents can sometimes be overwhelming. To help you better understand these processes, this article will take you through when employers should use a deed of release and some key things to know about using a deed of release. 

What is a Deed of Release?

Employers use a deed of release or settlement to formalise arrangements between them and an employee following a dispute. In an employment setting, a deed of release is useful to:

• prevent or settle disputes;
• end employment relationships; or
• prevent claims from occurring due to issues within the employment relationship.

What Are the Right Times to Use a Deed of Release?

You can use a deed of release in various situations as an employer. The primary times that you can use a deed of release are when:

• you make an employee’s position redundant;
• you terminate the employment of an employee; or
• an unfair dismissal proceeding or other employment-related dispute has recently settled.

In any of these situations, you will want to present the employee with a deed of release that states the agreed-upon terms that ‘release’ each party from further obligations. The deed of release will also set out the value of any payments you owe the employee.

What Should I Include in a Deed of Release?

Drafting a deed of release can be tricky, especially if sensitive issues need addressing. Having an experienced employment lawyer prepare the deed of release is prudent. It will ensure that you and your employee have your interests clearly outlined and protected.

Some terms that may be in a deed of release are:

• a description of the circumstances surrounding the employee’s termination; and
• any payments you owe to the employee (settlement pay or redundancy pay);
• the release, including terms that state that neither the employer nor the employee can bring further action against the other after signing the deed of release, such as an unfair dismissal claim by the employee;
• a statement of service is given to the employee;
• the agreement needs to remain confidential; and
• that neither party can disparage the other after the agreement is signed.

What Are the Benefits of Using a Deed of Release?

Broadly, the main benefit of a deed of release is that it will clarify the post-employment obligations. By asking your employee to sign one, you are ensuring that the terms of the redundancy or settlement are clear to both you and the employee.

It is in the employee’s interest to sign the deed of release as it will likely outline all the entitlements you owe them, such as:

• annual leave;
• long service leave; and
• any other ex gratia payments.

Additionally, the deed can include a non-disparagement clause. This clause is usually mutual and protects the employer and the employee’s reputation by restricting what either party can say about the other.

How Do I Use a Deed of Release to Terminate an Employee’s Employment?

Employment ends when the employee:

• resigns;
• is made redundant; or
• has their employment terminated.

When using a deed of release in the termination process, be sure to consider:

• the employee’s length of service;
• the terms stated in the employment agreement;
• whether there are reasonable grounds for termination; and
• if there was underperformance, serious misconduct, or genuine redundancy.

What if an Employee Breaches the Deed?

The deed of release should contain terms stating that the employee will not:

• disclose any confidential information they discovered during employment;
• disparage their employer following termination;
• breach any restraint of trade or non-compete clauses; and
• make an unfair dismissal claim.

If an employee breaches these terms, you can use the deed of release as a tool to stop the behaviour from continuing. For example, you may ask the Fair Work Commission to dismiss the proceedings if the employee makes an unfair dismissal claim despite signing the deed.

The relevant state or territory laws will govern the process of enforcing the terms of the deed if your employee breaches it. 

How Do I Use a Deed of Release at the End of Unfair Dismissal Proceedings?

You may want to use a deed of release to document the agreed-upon terms at the end of an unfair dismissal proceeding. If used in this capacity, the deed should outline:

• the terms of the settlement;
• the fact that the employee is bringing an end to the proceedings; and
• any amounts owed to the employee.

Other Considerations

Despite the benefits of a deed of release, there are still several key things you should consider. Some points to be aware of include that you:

• cannot force an employee to enter into a deed of release, otherwise a court may set the deed aside;
• cannot use a deed of release to restrict the employee from their statutory rights i.e. you cannot use a deed of release to limit their access to superannuation payments; and
• must ensure that the terms are clear and concise.

Seeking assistance from a legal professional to draft a deed of release can ensure the above considerations are taken care of, helping you get the most out of your deed of release. 

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Key Takeaways

You can use a deed of release to formalise arrangements with an employee following a dispute. A deed of release:

• clarifies post-employment obligations, ensuring settlement terms are clear to all parties involved;
• protects the reputation of both parties; and
• articulates all entitlement owed to the employee, minimising the risk of confusion arising. 

If you are unsure when employers should use a deed of release, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions