Deed of Release

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signing a deed of release

A Deed of Release is a legal document, also known as a deed of settlement, used to formalise an agreement between two or more parties involved in a dispute.

In an employment setting, a Deed of Release is often used to resolve a dispute between an employer and employee or ex-employee. These types of documents contain terms that are legally binding.

Before creating a Deed of Release, you should consult an expert to ensure the deed is fair and legal. Likewise, the person presented with the deed is also entitled to seek advice from a legal expert before they sign the agreement.

Benefits of a Deed of Release

Perhaps the biggest advantage of a Deed of Release is they are a cheaper, quicker, and less stressful form of dispute resolution than court proceedings.

Another advantage is each person has the freedom to express their views, negotiate the terms, and reach an agreement that satisfies both parties (unlike the ‘win-lose’ scenario of court).

With the right terms, the agreement can ‘release’ both you and the employee from most future dealings with each other, and may allow ex-employees to easily secure employment in the near-future.

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When to Use a Deed of Release

There are many business situations where a deed of release may be the best way to resolve a dispute.

As an employer, you may face a dispute with an ex-employee. This could be for any number of reasons e.g. if that person was made redundant from their position or their employment contract was terminated in circumstances with which they disagree.

Whatever the reason, when an employee is presented with a Deed of Release, they must clearly understand the terms of the agreement and how those terms affect them once they sign the agreement.

The agreement must also specify the exact amount the employee will receive from you.

Provisions to Include

Not all workplace disputes are resolved with just a fixed settlement amount. There may be other factors that led to the dispute which need to be resolved before both parties go their separate ways.

Of course, the content of these provisions depend entirely on the nature of the dispute, the employment agreement, and what each party wants out of the settlement agreement.

Below are the most common provisions found in a Deed of Release:

  • PaymentThe employee is given a lump sum payment. In return, the employee gives up their right to sue the employer for certain actions and/or take them to the Fair Work Commission (FWC). Aside from the base amount, this payment should also include all accrued but unpaid entitlements owed to the employee like annual leave or any unpaid wages.
  • Avoid Unfair Dismissal Claims: If the employee agrees to not submit a claim against you, the employee should know exactly what legal rights they are giving up in exchange for the payment. Some agreements may prevent an employee from making any claims against an employer, while other agreements may only limit a specific type of claim. There are, however, certain claims that cannot be excluded eg workers compensation claims or claims for any other entitlements the employee is owed under law.
  • Statement of Service: A document given to the departing employee which contains brief details about their employment with your company. This provision may be required as part of company policy or an extra benefit negotiated between the two parties. If requested, you may also provide a letter of reference, helping the employee find further employment elsewhere.
  • Confidential Details: this documents the employee’s agreement to maintain the confidentiality of the employer’s confidential information and, often, the requirement to keep the terms of the settlement confidential. Keep in mind you cannot restrict an ex-employee from sharing or using any general knowledge or skills they gained during the course of their employment.
  • Mutual disparagement: the parties agree not to disparage each other or injure the other’s reputation.

Can a Deed of Release Protect you From Unfair Dismissal Claims?

When done well, it is possible to protect your business from unfair dismissal claims with a Deed of Release.

This is because the purpose of the deed is to reach a mutual agreement on terms that make both parties happy. When the employee is able to express their issues with their employer and able to be involved in reaching what they view as a fair settlement, they are far less likely to pursue further claims against a current or former employer. Depending on the terms of the deed, it can also prevent the employee from taking any further legal action, such as an Unfair Dismissal Claim.

When a Breach of the Deed of Release Occurs

If either you or an ex-employee does breach any of the agreement terms, the other party is entitled to begin legal proceedings to recover damages for damage sustained as a result of the breach.

A breach may occur, for example, if an employee shares confidential information about the company or an employee breaches a non-disparagement clause.

Employsure advisers can advice employers on creating a deed of release.  For peace of mind, call 1300 651 415 to learn more.

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