What is a Deed of Release?
A Deed of Release is a document used to settle disputes between two parties or prevent them from arising.
Typically under such a document, one party undertakes to pay a certain amount or to do a specific act. The other party then agrees that it will be prevented from making any further claims related on that matter. The document is also used when there may be a mutual release of liability between the parties so that both parties agree to release each other from all future claims on the basis that they have reached a settlement.
Why do you need a Deed of Release?
A Deed of Release is most commonly used to finalise current and future issues between an employer and a former employee. These matters may be contractual claims or claims arising out of the termination of employment. A common use is when an employee is being paid a redundancy amount. In those circumstances, the employer and employee execute a Deed or Release and it is agreed that the payment of the redundancy amount will prevent any further claims.
It is recommended that employers who terminate an employee by way of termination payment, that is above the minimum entitlements, make the payment conditional on a Deed of Release. This will prevent the employee from bringing any claims against you, including an unfair dismissal claim.
Employers that neglect the Deed of Release can be exposed to the risk of legal proceedings, which may result in the payment of further compensation or further action by the employee.
It is important to note that no employee should ever be pressured into signing a deed of release. An employee should be given the opportunity to obtain legal advice about the contents of a deed if they wish.
Important provisions in a Deed of Release:
Without any admission of liability the parties agree to settle the matter on the specified terms:
- Terms governing payment and the steps to be taken by each party, including any relevant time frame
- Terms of the release
- An agreement that the Deed is confidential
- A bar to any further legal proceedings
- A warranty by the terminated employee
Limits of a Deed of Release
A deed cannot bind anyone other than a party to the deed. On top of that, a deed between an employer and employee cannot serve to impede the work of statutory agencies, as it is a private arrangement between the parties. A deed has no effect if it is against public policy, contrary to law or if its purpose is to conceal unlawful activity.
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