Should I Use A Deed Of Release When Employees Leave The Job?

As a business owner, you will encounter changes in your staff, whether your employees resign or you have to let them go. It is valuable to know how best to deal with these changes, including how to protect your business into the future.

One document that can protect your business is a deed of release. Keep reading this article to find out what it is and when you should use one.

What is a deed of release?

A deed of release is a legal document, also known as a deed of settlement. This document is 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. The most important thing to know about this document is that it is legally binding.

When should you use a deed of release?

A deed of release is generally most useful when there is a dispute, a meaningful risk of future claims, or an additional payment being offered in exchange for finality. However, it’s not required whenever an employee leaves.

An employment deed may be appropriate in the following circumstances:

• Redundancy: The employer wants finality around potential claims arising from the redundancy or termination.
• Negotiated termination or separation: The parties agree on the terms for ending the employment relationship.
• Performance or conduct exits: The employee disputes the allegations, process, or decision, creating a risk of a future claim.
• Settlement of an existing dispute: The parties want to resolve an unfair dismissal, general protections, discrimination, breach of contract, or other employment dispute.
• An additional ex gratia payment: The employer is offering money beyond the employee’s ordinary statutory, industrial, and contractual entitlements in exchange for a release and other obligations.

Note that a deed shouldn’t be used as a substitute for paying minimum employment entitlements that are already owed.

What rights can a deed of release cover?

Depending on its wording, an employment deed may cover claims arising from employment or termination, including potential:

• Unfair dismissal claims
• General protections claims
• Discrimination claims
• Breach of contract claims
• Other employment-related claims

The release only covers the claims and parties described in the deed. It should therefore be drafted clearly and reviewed carefully.

What should an employee check before signing a deed of release?

When it comes to a deed of release, an employee should read the entire deed and confirm exactly what they are agreeing to. Important questions include:

• What claims are being released?
• Is the release one-way or mutual?
• What confidentiality and non-disparagement obligations apply?
• Are there post-employment restrictions?
• Are references and announcements dealt with?
• Does it deal with company property and information?
• What payment is offered in exchange for the release?
• Is there enough time to obtain independent legal advice?

This checklist is not a substitute for reviewing the specific deed. Its purpose is to help identify the terms that may have practical consequences.

Is the ex-gratia payment separate from your redundancy and final entitlements?

An ex gratia payment is different from standard entitlements. It’s an additional negotiated payment offered in exchange for the employee agreeing to the release and other obligations in the deed.

An employee should identify their minimum final pay entitlements, including those under statutory, award, enterprise agreement, and contractual agreements, before assessing an additional payment offered under a deed.

Final entitlements may include:

When assessing the deed, don’t simply look at the total termination payment. Identify what you were already entitled to receive and what additional value is being offered for signing the release.

Should employees get legal advice before signing?

Independent legal advice is particularly useful because a deed can have broad and final consequences. Get legal advice if:

• The release is broad.
• The termination is disputed.
• You believe they may have an unfair dismissal, general protections, or discrimination claim.
• The ex gratia amount is significant.
• The deed includes post-employment restraints or extensive confidentiality terms.
• You’re unsure which rights you’re giving up.

You should also consider obtaining advice if you’re being asked to sign quickly or can’t identify what additional value you’re receiving in exchange for the release.

Conclusion

Ultimately, there are several instances in which a deed of release is suitable. It can be a very useful tool for protecting your interests. However, it is always wise to consult a contract or employment lawyer if you are unsure about your situation.

FAQs

Should I sign a deed of release from my employer?

You should understand what claims and rights you are releasing before signing. Compare the additional payment offered with the final entitlements you were already owed, and consider independent legal advice if the release is broad or the termination is disputed.

Is an ex gratia payment separate from redundancy pay?

Usually, yes. Redundancy pay and other final entitlements may already be payable, while an ex gratia payment is an additional negotiated amount offered in exchange for signing the deed and accepting its obligations.

Can an employer make you sign a deed of release?

An employer can ask an employee to sign a deed, but an employee should understand the terms before agreeing.

What claims can an employment deed of release in Australia cover?

Depending on its wording, an employment deed can cover claims arising from employment or termination, including unfair dismissal, general protections, discrimination, and breach of contract claims.

Do you need a lawyer to review a deed of release?

You don’t always need a lawyer, but independent legal advice can be valuable because a deed may release broad rights and impose continuing obligations.