Employers can’t compel an employee to sign a deed of release, but can offer extra benefits to encourage signing. These benefits can be financial, such as an ex-gratia payment or extended notice period, or non-financial, like outplacement services or a positive reference. However, statutory and contractual entitlements must be paid regardless of the deed.
Outgoing employees & deeds
When a challenging employee departs the business, it is worthwhile considering whether the employee should be asked to sign a deed of release.
A deed of release is a legally binding document that parties often use to resolve a dispute. Employers may want outgoing employees to sign a deed of release to prevent them from making employment claims in the future.
Employers can’t force employees to agree to a deed of release. Employers also can’t make the payment of entitlements conditional upon signing a deed, entitlements must be paid regardless.
So why would an employee agree?
Many employees will agree to a deed of release if they receive some benefit that exceeds their entitlements. Benefits could include financial compensation such as:
- an ex-gratia payment;
- a longer paid notice period;
- payment of benefits that aren’t entitlements (e.g. a non-contractual bonus payment);
- allowing an employee to keep company property (e.g. a phone or computer).
Benefits can also be non-financial (or a combination of both). Non-financial benefits could include:
- outplacement services;
- a reference in an agreed (but truthful) form;
- an agreed statement announcing the employee’s departure to other employees and stakeholders.
Employers can make these types of additional benefits conditional on an employee signing a deed. In these cases you would offer an additional voluntary benefit (say, an additional two weeks’ pay and outplacement services) above what the employee is entitled to receive. However you would make it clear to the employee that the additional benefit will only be paid if they sign the deed.
Of course, some employers make additional payments on a goodwill basis without requiring an employee to sign a deed. This means providing an additional benefit and foregoing the protection of a release and it is truly a gift.
Deed must haves
If you decide that the best option is to request an employee sign a deed:
- Remember that its voluntary. You cannot force and employee to sign a deed and you must be careful not to suggest that payment of any entitlements are conditional on a deed – this could breach the Fair Work Act.
- Give the employee time to consider the deed. The employee should have enough time to properly consider the deed and get advice if they need to. There is no set time, but 3 -5 business days is a good guide.
- You can’t settle all claims. Employees can release employers from most claims by signing a deed of release. However, some claims cannot be released (for example certain personal injury claims and claims for unpaid superannuation). So it’s important to check in with an employment lawyer to make sure your deed does what you want it to.
What’s next?
From a legal standpoint, deeds may seem simple, yet they contain complex technicalities to ensure their validity and legality.
Maintaining a legally sound standard deed template and having it reviewed yearly is prudent. In cases involving difficult employees or situations, seeking legal advice is crucial to confirm the deed’s intentions are met effectively.
If you’re uncertain about using a deed, or require assistance with drafting one, feel free to reach out to Emily or Joe, our specialists in employment and safety law.
| Joe Mullavey Principal M: 0416 794 061 E: jmullavey@pageseager.com.au |
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| Emily Creak Principal M: 0400 955 183 E: ecreak@pageseager.com.au |
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Published: 30 April 2024
