Deed of Release in Employment Litigation

In Australia, a deed of release is an instrument frequently used to resolve a dispute between an employer and employee. In employment litigation, an employee may be asked to waive their right to take further legal action in return for a monetary settlement. It is used to record this legally binding agreement. However, the enforceability of these agreements depends on the fairness of the terms and the execution, emphasising the importance of negotiation and careful legal drafting. This article looks at the impact of deeds of release in employment litigation with reference to a recent Federal Court case.

What is a deed of release?

A deed of release is a written agreement between two or more parties that is usually used to bring a dispute to an end or prevent a dispute in the future. It is a legally binding discharge of obligations that can preclude future legal proceedings. In employment law, these documents are typically used to settle a dispute between employee and employer, or when an employee leaves an organisation and there is potential for a an unfair dismissal claim or other legal claim (such as an allegation under the general protections provisions of the Fair Work Act 2009).

There are two common scenarios when a deed of release is employed in the workplace. The first is when an employee with a prospective claim is asked to waive their rights against the company by signing a deed of release in exchange for resigning and receiving an ‘ex-gratia’ payment in addition to their statutory entitlements. The second common situation is where a deed of release is used after a legal proceeding has begun in the Fair Work Commission or an Australian court. In this second scenario, the deed of release would provide that the claim was withdrawn in exchange for a sum of money. In some instances, both parties wish to be mutually released from liability under an agreement. This means that both the employer and employee are released from their obligations and any future demands, claims, debts or other actions that could arise from their legal contract.

In both scenarios, the deed of release will outline the terms of settlement and the specific claims that the employer is released from, such as a claim of discrimination, unfair dismissal or breaches of employment contracts. It will include not only monetary terms, but standard clauses relating to:

• confidentiality, so that the parties are both bound to keep the terms of the agreement and the negotiation confidential
• non-disparagement, so that both parties are prevented from injuring the reputation of the other party, and  
• a release from all claims, so that neither party to the deed can bring a legal complaint against the other on any matter that is the subject of the deed.

If either party breaches their deed of release, the other party can sue to recover damages for any loss that results from the breach of contract.

However, there are some claims that cannot be excluded in a deed of release. For instance, even if an employee signs a deed of release, they can still bring a claim for workers compensation or compulsory super contributions.

Case study

An employee, Mr Scott, was made redundant in 2018 after working for his employer, Steritech, for 15 years. He took his employer to the Federal Court of Australia in 2019 alleging that Steritech had given him repeated instructions to engage in unsafe work practices and falsify radiation readings, and further claiming that he was only made redundant after he took extended leave on medical grounds. The FCC proceedings settled with a Deed of Release in 2020, with Mr Scott agreeing to waive his right to this and all future claims (except superannuation and worker’s compensation) in return for $52,500.

In Scott v Steritech Pty Ltd [2023], Mr Scott sought to reanimate the case against his former employer despite the deed of release. Mr Scott sought damages for psychiatric illness he suffered because of his termination, pleading mostly facts already presented during the prior FCC proceeding. The applicant claimed that the deed of release did not restrain him from seeking common law damages for injuries caused by Steritech’s negligence. He sought damages of over one million for breaches of the Fair Work Act or for breaches of the employer’s common law duty of care.

The respondent claimed that there was a broad release from all employment causes of action, except those that cannot be excluded under a deed of release. The Federal Court agreed and found the deed of release was a comprehensive bar against all cases regarding Mr Scott’s employment. The Federal Court also held that the case was an abuse of process and ordered Mr Scott to pay his employer’s legal costs.

This case demonstrates the important role of a deed of release and how crucial it is to have them drawn up by a competent solicitor. Deeds of release play a significant role in resolving employment litigation, offering a mechanism to minimise time, uncertainty, and costs. For employers, the agreements provide finality and legal protection against future complaints. Go To Court Lawyers can provide advice on negotiating a deed of release or discuss options if there is a breach of contract. Please get in touch with our experienced solicitors on 1300 636 846.