What is a deed of release?
A deed of release is a formal agreement by which an employer and an employee seek to settle a dispute between them. Typically, deeds of release are used when an employee has made, or is considering making, a claim against his or her employer for unfair dismissal, unlawful termination or unpaid entitlements.
Why should employers sign a deed of release?
Employers obtain the following benefits from signing deeds of release with employees:
- Ending a dispute: Deeds of release can prevent employee from commencing litigation, or making claims or demands, relating to their unpaid entitlements and the circumstances surrounding the termination of their employment. This lets an employer get on with running his or her business.
- Certainty: Deeds of release can have the effect of converting an uncertain and unknown future liability that might be contingent on the outcome of litigation into a certain amount that is paid to the employee under the deed. This makes it easier for an employer to plan the short and medium-term financial future of your business.
- Post-employment restraints: Deeds of release can provide an opportunity for employers to impose post-employment restraints on their former employees. These restraints can help to protect the reputation confidential information and intellectual property of the employer and to prevent the former employee from disrupting the employer’s clients and staff.
What clauses should employers include in a deed of release?
Employers may wish to consider including the following clauses in deeds of release:
- The release: The release is often the most important clause in a deed of release. Generally, such clauses have the effect of preventing employees from making any claims or commencing any proceedings to recover their unpaid entitlements or to allege that their employment was unfairly or unlawfully terminated. Such clauses can be relied upon to prevent any future action against the employee in courts and tribunals.
- Restraints of trade: Restraint of trade clauses are often included in deeds of release to protect the commercial interests of the employer. The two most common types of restraint of trade clauses are ‘non-compete’ clauses and ‘non-solicitation’ clauses.
- ‘Non-compete’ clauses prevent a former employee from setting up or working for a competitor who operates within a defined geographical area for a particular period of time. This prevents the former employee from using confidential information and ‘know how’ gained from the former employer to benefit a competing business and damage the employer’s market position.
- ‘Non-solicitation’ clauses can prevent a former employee from soliciting the business of any of the employer’s clients, or from enticing other employees to join a new or different business. This helps employers to stop former employees from disrupting their workforce and client base.
It is important to note that restraints of trade will not be enforceable against a former employee unless the employer proves that the restraint is no broader than is reasonably necessary to protect its legitimate interests. In this regard, it is particularly important that they are drafted carefully and precisely.
- Non-disparagement clauses: Non-disparagement clauses restrict what former employees can say about the employer. Such clauses generally prevent an employee saying anything that would damage the reputation, goodwill or standing of the employer in its industry and the community generally. This can minimise the reputational risks associated with disputes with former employees.
- Confidential information clauses: Confidential information clauses require former employees to return any copies of confidential documents that they have in their position to the employer, and to refrain from using or disclosing any confidential information in the future.
- Intellectual property clauses: Intellectual property clauses are particularly important in creating and technological industries. They often require former employees to assign any intellectual property that they may have developed during the course of their employment to the employer, and to co-operate with the employer to secure the registration of any designs, patents or trademarks that the employee may have developed.
To get in touch with someone about putting in place a deed of release, call us on (02) 9199 8597 or email us for a no-obligation chat.
The information contained in this post is current at the date of editing – 2 September 2025.