Using an employment Deed of Release

When an employer and employee seek to end an employment relationship following a dispute, the parties may consider using a Deed of Release or a Settlement Agreement.

Under such a document, one party accepts to pay a certain amount (or undertake a certain act) and the other party agrees that it will be prevented from making any further claims related to that matter.

A Deed of Release is a signed document that seeks impose the following obligations on an employee:

• the employee releases the employer from all legal claims;
• the employee agrees to keep terms of the termination or matter confidential; and
• the employee agrees to not say anything of a negative nature toward the employer

There are specific differences between a Deed of Release and a Settlement Agreement.

A Deed is a legal instrument in writing, with specific procedures that must be executed for a Deed to be binding. Where a company is signing a Release, the Corporations Act requires at least two statutory directors, or a director and company secretary to sign on behalf of the Company.

A Settlement Agreement is a contract. Under the Corporations Act, a contract may be made by an agent authorised by the company on behalf of the company. The elements required to make an enforceable contract must be present, including offer and acceptance, consideration and an intention to create legal relations.

When it comes to considering use of a Deed of Release, it is well established that statutory public rights cannot be waived or compromised. Parties cannot contract out of award entitlements, nor can an employee be forced to sign a Deed on the condition they are paid their employment entitlements.

Employees can be encouraged to sign if the employer offers a benefit more than they would usually receive, such as an ex-gratia payment (a payment occurring voluntarily or without legal obligation). Employers need to exercise caution with what they propose as a benefit as such offers may be viewed as coercion to prevent the employee from later bringing a claim against the employer.

Frankly, this one can be a legal minefield. Our advice when considering a Deed of Release or Settlement Agreement? Find a qualified legal practitioner: any Deed or Agreement should be tailored to the circumstances at hand. Check out the Queensland Law Society “Find a Solicitor” page here.

Bare Bones Consulting is smart enough to recognise when things are outside our expertise. And it’s the same with HR for SME owners. If you’re not sure what you need when it comes to HR documents, dealing with underperforming employees or Fair Work compliance, call in an expert. Check out our genuine HR management expertise here.