If you have just terminated someone’s employment or are about to, there are many reasons why you would enter into a deed of release with this employee. Entering into a deed of release will provide you with certainty by clarifying your legal obligations. Furthermore, it will prevent the employee from commencing legal proceedings against you or your business. It also benefits the employee by allowing them to move on with their career. This article will answer six frequently asked questions on what a deed of release is 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 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 as a result of entering into the deed.
A deed of release can be extremely beneficial to an employer as it usually prohibits former employees from commencing legal proceedings against them.
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 is required to provide something that benefits the other. This quid pro quo is referred to as consideration. Usually, the consideration for an agreement to release is that an employer provides a settlement amount. This will be in exchange for the employee’s promise to release the employer from any future obligations.
The benefit of entering into a deed instead of an agreement is that you don’t have to provide the employee with a settlement amount.
3. What Should a Deed of Release Include?
Release From All Employment Responsibilities
If included, you will not have any legal responsibility to any past, present or future claims arising from the employment.
Similarly, this will release the employee from any legal responsibility to any past, present or future claims arising from the employment.
It’s a good idea to set out a resolution for any issues that might arise out of the termination. The deed of release 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.
Businesses rarely want to disclose the terms of a deed of release. A confidentiality provision will prevent both the employer and employee from disclosing what was agreed in the deed of release to anyone, except their financial adviser or lawyer.
Details on How the Termination Will be Communicated to Other Employees
Especially if the events leading up to the termination are sensitive, employees will often want to know how their termination will be communicated to their colleagues. Including a term which sets this out will give an employee the certainty that you are handling their personal affairs with care.
You should require an employee to agree not to make any statements that disparage you or your business. This is particularly important in situations where there has been some unrest about an employee’s departure.
4. Will I Be Protected From Being Sued?
Entering into a deed of release gives employers extra 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 your employee is pressured into entering the agreement, the courts may not uphold the deed of release. Such pressure may be physical or financial pressure.
Therefore, it is important to give the employee enough time to seek independent legal advice so they can fully understand what they are signing.
5. What If an Employee Breaches a Deed of Release?
There are a number of ways that an employee may breach the terms of a deed of release.
If an employee breaches a confidentiality clause, you may be able to obtain court orders to prevent further misuse or disclosure of information. You may also be able to get compensation for any losses relating to the misuse of information. Furthermore, you may be able to order an employee to return any confidential information in their possession.
You may have included a restraint of trade clause in your former employee’s contract. This clause prevents an employee from working for a competitor for a specified period of time. If an employee breaches a restraint of trade clause, you have a few legal options. You may be able to legally stop the employee from working for a competitor. Furthermore, you may be able to receive compensation from the breach. In some instances, you can receive an account of any profits that the employee gained from working for a competitor. However, enforcing this clause is very difficult and will require legal expertise.
6. What if an Employee Has Begun Leaving Before Entering Into a Deed of Release?
You may be seeking to enter into a deed of release to discontinue proceedings that an employee has already commenced. If so, it’s important to structure the release so that an employee can only acquire any benefits after they have complied with their obligation to discontinue the proceedings. This can simplify enforcement. Furthermore, if the employee fails to satisfy additional obligations, you may need to enforce obligations by obtaining court orders.
Often, employers view entering into a deed of release as costly and unnecessary. However, having such an agreement in place provides significant protection against employees commencing legal proceedings against you. It also eliminates any uncertainty surrounding the termination for both the employer and employee. If you have any questions regarding deeds of release, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.
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