If your employer expects you to sign a deed of release, there are a number of considerations to take into account before you decide whether you should sign it.

A deed of release is a formal legal document by which an employer and an employee seek to set out an agreement to settle or avoid a dispute between them. It is a legally binding document which may limit your rights, and if you were to breach a signed deed of release, your ex-employer would be entitled to sue you and seek damages. For these reasons, it is important to make sure that you understand what the consequences of signing the release are and whether these are fair.

Key things you should look out for when trying to decide whether to sign a deed of release

deed of release

Payment

Typically, a deed of release gives a departing employee some form of lump sum payment called a settlement amount. This is generally made up of entitlements and an optional ex-gratia amount.

In order to work out whether you are getting a good deal, it is important to get advice on whether your employer owes you entitlements and whether these have been correctly calculated by your employer. You should also consider whether the ex-gratia amount adequately compensates you for the rights surrendered by signing the release.

Release from liability

A clause preventing you from commencing legal proceedings against your employer is almost always found in a deed of release. It is important to understand exactly how broad that prohibition on future claims is so that you know exactly what it is that you are giving up.

You should seek advice on whether you can make any claims against your employer – for example, for unfair dismissal, unlawful termination or unpaid entitlements. It may be in your interest not to sign the deed of release and instead make a claim.

Classification of termination

You should check to see how the termination of your employment will be classified and whether you will be given a ‘statement of service’ or a ‘reference’.

Most employers are willing to give you a positive or at least neutral reference and say that you have ‘resigned’ for personal reasons as a way of settling a dispute. This can be particularly important if you want to continue working in the same industry.

If you have been made redundant, this should be acknowledged in the statement of service as this is particularly important for tax purposes.

Confidential information

Often, deeds of release will prevent you from disclosing or using any of the employer’s confidential information.

If you are unsure exactly what information is confidential, it is important to ask your employer what they consider to be confidential in order to make sure that you do not inadvertently breach the clause.

One thing which employers cannot say is confidential is your ‘know-how’, or the ‘general skill, knowledge and experience’ gained during your employment. If such a clause is included in your deed of release, you should seek legal advice to see whether it can be removed.

Restraints of trade and post-employment obligations

Some deeds of release will create restraints of trade. These restraints include:

  • ‘Non-compete’ clauses, which prevent you from setting up or working for a competitor who operates within a defined geographical area for a particular period of time; and
  • ‘Non-solicitation’ clauses, which prevent you from soliciting the business of any of the employer’s clients, or from enticing other employees to join a new or different business.

These clauses can hinder your future career progression. It will be important to get legal advice on the effect of the clause and whether it will be enforceable. If it appears not to be enforceable, it may be possible to have the clause narrowed or entirely removed.

You should also make sure you know what obligations set out in your contract of employment will continue to be binding, after your employment ends, under the deed of release. These obligations generally include restraint of trade, confidentiality and intellectual property clauses that may be found in your employment contract.

Non-disparagement

Non-disparagement clauses restrict what you can say about your employer. Generally, they will stop you from saying anything that would damage the reputation of the employer in its industry and the community generally.

It is a good idea to ensure that the non-disparagement clause is ‘mutual’. This means that your employer should also agree to not disparage you. This can be important to protect your own reputation.

It is strongly recommended that you seek legal advice before you sign a deed of release. If you are an employee who has recently received a deed of release, JFMLAW has a wealth of experience to help you ensure that the release is fair. Simply contact us on 02 9331 0266 or email front.desk@jfmlaw.com.au to discuss.