DEED OF RELEASE
Deed of Releases
A Deed of Release, which can also be known as a Deed of Settlement, is an agreement between two parties, in our case, the Employer and Employee, on how an employment relationship is to end.
They are extremely useful to set out, legally, the terms in which a relationship ends, any payments that might be due (including statutory payments). Most importantly, along with confidentiality, Deeds ensure that you protect your business from any further legal issues or claims (Fair Work, Australian Human Rights Commission, etc), with the exception of WorkCover rights and Superannuation entitlements.
Deeds do not have to be drawn up and executed by a legal expert. There are many useful Deed templates available – ranging from the very simple to the very complex – depending upon your requirement.
The above is an example of the opening clauses of a Deed of Release.
When might an Employer look to settle a Deed of Release
An Employer might look to a Deed of Release when parting ways with an employee, where the relationship has soured significantly between both parties. In some instances, it is better for both parties to part ways amicably (or at least civilly through a Deed), but there may not have been a full legal process followed as outlined in the Fair Work Act.
Example A:
Kevin is a Sales Manager for a large national company and has been with the Company in various roles for three years. Since Kevin was promoted to Sales Manager in the last four months, sales have nose-dived and there are serious HR issues that have arisen with the way Kevin treats his Sales team. Although these have been raised informally and formally with Kevin, with further training provided, staff complaints about his attitude and lack of support to his team continue.
While Kevin has one formal warning in place, and multiple informal coaching sessions, there is no immediate improvement in sight. Given the impact on cashflow to the business from the rapidly declining sales revenue, the GM decides to try to negotiate an exit with Kevin through a Deed of Release. If successfully concluded, this negates any issues with the Fair Work Commission in regards to further formal warnings and performance reviews, and provides a “quicker” outcome. The GM must ensure that:
Kevin receives his standard pay and appropriate expenses / allowances up to his agreed last day of work;
Kevin’s statutory leave entitlements are paid, and pays out any notice period as per his contract;
She does not coerce Kevin into signing a Deed, and allows him time to seek legal advice to ensure his full understanding.
On top of this, a negotiation may well include other terms such as:
An “ex-gratia” (golden handshake) amount to compensate Kevin for leaving his role without further formal proceedings and delay;
Payment of additional leave, or any other terms that might be agreed to, such as writing a Statement of Service;
Specific terms around confidentiality & IP – that may be specific to the job role.
While it is not critical to provide an ex-gratia payment to an exiting employee, Employers must be open to this suggestion as it makes little sense for an Employee to agree to waive their employment rights without compensation in doing so. Employers should also consider the amount of time it might take the Employee to locate another role, etc.
There is always a possibility that the GM may not be able to negotiate a Deed with Kevin, at which point, standard HR procedures should be followed in regards to further performance management and disciplinary processes.
Example B:
It is also possible to pay employees a genuine redundancy under a Deed of Settlement as long as the position is genuinely being removed. An Employer may enter into a Deed in this instance – either the Employer does not wish to undertake the formal consultation requird, or there are critical time constraints that require the business to move quickly. There could be a variety of circumstances where this is appropriate.
An Employer should ensure that all statutory entitlements are followed such as redundancy pay, notice period, leave. Again, an ex-gratia payment to smooth the exit on the terms that the business wants will no doubt be necessary. This does not always have to be a large amount, given that the Employee may well be looking to leave, and leave with dignity.
Without a doubt, Deeds can be very easy if both Parties are willing to exit the relationship – i.e., get out quickly with their dignity and confidentiality in tact. However, they can be significantly more complex if one Party wants more than the other is willing to offer (normally a cash settlement), and / or the Employee does not really wish to leave.
If the terms of a Deed cannot be settled upon, then the Employer must recognise that the Employee’s rights as per law continue undiminished. Any issues should be dealt with under the standard employment framework, along with any corresponding company policies about disputes / grievances / disciplinary / performance issues.
Key Aspects
Make sure you don’t enter into a Deed of Release / Settlement without understanding what a Deed is for, the terms of the Deed, and your legal entitlements.
Either Party is never obliged to enter into a Deed, and opening up the conversation can sometimes be tricky.
Deeds are legal documents – they are binding on all parties who are listed and sign the Deed.
A Deed is confidential and must be treated as such – there should be no conversations about the terms of the Deed to Parties outside of the Deed, including post settlement.
Non-disparagement is a key term in most Deeds – both Parties must not talk ill of each other in any setting, with remedies applying. This is one of the most useful aspects to an exiting employee if performance or conduct has been an issue.
Final points to note about Deeds
Deeds can be executed in parts if the document allows it (i.e., a secondary Party doesn’t have to sign the exact same page as the other Party but can be executed separately);
Check the terms of the Deed carefully to ensure you 1) understand the Terms, and 2) can execute the Terms in good faith;
Deeds are confidential. They should be saved in a secure Company location/drive to ensure that they are not discovered through the course of normal business operations. Normally, this is a locked-down Corporate server or HR server without general access;
The terms of a Deed are normally only ever then referenced post settlement if:
o A Party breaches the agreed terms and brings a dispute into play
o A legal proceeding requires the Deed to be produced as a matter of law
Contact HR Unplugged on mel@hrunplugged.com.au or 0424 995 502 for a Deed template. We can also assist you to amend the template to the scenario you are looking to settle.
Our expertise also lies in helping you negotiate through a difficult situation when looking to settle a Deed of any nature – we can either do the negotiations and guide you on the outcomes or provide advice as and when required.