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Deed of Release

Payroll

22 May 2025 (Last updated 3 Sept 2025)

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If you are an employer, you will have several things going on at the same time. This will involve managing your employees, looking after their performance, salaries, and even handling disputes should the situation arise. Disputes are tricky, complex, and need to follow accurate Australian legislation around them in cases of employment relations. For ending dispures, you may need certain documents in Australia such as a deed of release.

In this guide for employers, we will discuss what a deed of release is, types of deed of release, benefits of having a deed of release, risks involved, and other key factors employers need to remember.

Deed of release

A deed of release is a legal document, also known as a deed of settlement, used to formalise an agreement between two or more parties involved in a dispute. Deed of release is a formal document used to settle a dispute.

In an employment setting, a deed of release is often used to resolve a dispute between an employer and employee or ex-employee. These types of documents contain terms that are legally binding.

It relieves one or both parties from any claims, responsibilities, or liabilities originating from the dispute. A deed of release is critical for avoiding future legal problems in relation to a specific matter and making sure that all parties concerned realise that the subject has been resolved indefinitely. Employers may also want to get departing employees to sign this agreement to agree that they will not make any employment claims against you once they have gone.

Benefits of a deed of release

Perhaps the biggest advantage of a deed of release is they are a cheaper, quicker, and less stressful form of dispute resolution than court proceedings. It also legally protects you and provides clarity to both parties about potential consequences and risks.

Another advantage is each person has the freedom to express their views, negotiate the terms, and reach an agreement that satisfies both parties (unlike the ‘win-lose’ scenario of court).

With the right terms, the agreement can ‘release’ both you and the employee from most future dealings with each other and may allow ex-employees to easily secure employment soon.

Types of Releases

There are different ways that a release can be used and in different situations.

  • Resolving a commercial dispute - In business, you can end up having disputes over contracts, services or goods. The deed of release can be used to resolve this dispute or a breach of contract or settlement of an outstanding debt.
  • Employment contracts - You can use a deed of release when terminating an employment contract, ensuring that neither party can make future claims related to employment. You can also give a deed of release as a part of redundancy or other termination agreement or as a part of a settlement of dispute between them.
  • Mutual release - A mutual release is a type of deed of release where both parties agree to release each other from all claims.
  • Termination of loan or credit agreement - A deed of release can be used to terminate a loan or credit agreement. It formally acknowledges that the borrower is no longer liable for the debt.
  • Personal guarantee- Usually the only way to end a personal guarantee and avoid liability is to have a deed of release.

When to use a deed of release

There are many business situations where a deed of release may be the best way to resolve a dispute.

As an employer, you may face a dispute with an ex-employee. This could be for any number of reasons e.g. if that person was made redundant from their position or their employment contract was terminated in circumstances with which they disagree.

Whatever the reason, when an employee is presented with a Deed of Release, they must clearly understand the terms of the agreement and how those terms affect them once they sign the agreement.

The agreement must also specify the exact amount the employee will receive from you.

During the sale of a business, a deed of release can also ensure that the seller is released from any future claims of the business.

Before creating a deed of release, you should consult an expert to ensure the deed is fair and legal. Likewise, the person presented with the deed is also entitled to seek advice from a legal expert before they sign the agreement.

Key provisions to include

The content of the provisions depend entirely on the nature of the dispute, the employment agreement, and what each party wants out of the settlement agreement.

Below are the most common provisions found in a deed of release:

  • Payment: The employee is given a lump sum payment. In return, the employee gives up their right to sue the employer for certain actions and/or take them to the Fair Work Commission (FWC). Aside from the base amount, this payment should also include all accrued but unpaid entitlements owed to the employee like annual leave or any unpaid wages.
  • Avoid unfair dismissal claims: If the employee agrees to not submit a claim against you, the employee should know exactly what legal rights they are giving up in exchange for the payment. Some agreements may prevent an employee from making any claims against an employer, while other agreements may only limit a specific type of claim. There are, however, certain claims that cannot be excluded eg workers compensation claims or claims for any other entitlements the employee is owed under law.
  • Statement of service: A document given to the departing employee which contains brief details about their employment with your company. This provision may be required as part of company policy or an extra benefit negotiated between the two parties. If requested, you may also provide a letter of reference, helping the employee find further employment elsewhere.
  • Confidential details: this documents the employee’s agreement to maintain the confidentiality of the employer’s confidential information and, often, the requirement to keep the terms of the settlement confidential. Keep in mind you cannot restrict an ex-employee from sharing or using any general knowledge or skills they gained during the course of their employment.
  • Mutual disparagement: the parties agree not to disparage each other or injure the other’s reputation.

Signing a deed of release

The deed of release needs to be signed and executed correctly to make it valid. Some things to remember are:

  • There should be someone present who is not part of the deed that witnesses your signatures
  • Companies should execute the deed according to the rules for companies with the correct number of directors and the company secretary
  • Each of the signing parties should have enough copies
  • One party should sign all copies of the deed and then hand over the signed copy to the other party for signature. Parties can sign separate but identical copies of the same deed to create a single binding document together. Nowadays parties also scan and forward copies of the deed to other parties by email. You can also exchange the parts electronically with original copies letter sent by post.
  • The printed copies of deed of release should be stored securely

Can a deed of release protect you from unfair dismissal claims?

When done well, it is possible to protect your business from unfair dismissal claims with a Deed of Release.

This is because the purpose of the deed is to reach a mutual agreement on terms that make both parties happy. When the employee is able to express their issues with their employer and able to be involved in reaching what they view as a fair settlement, they are far less likely to pursue further claims against a current or former employer. Depending on the terms of the deed, it can also prevent the employee from taking any further legal action, such as an Unfair Dismissal Claim.

Risks

While a deed of release is beneficial and provides security about the end of a dispute, it also limits your options. When you sign a deed of release, you are prevented from pursuing legal claims, even if new evidence or information emerges. For example, if the deed of release involves any monetary settlement, you may be restricting your ability to claim further funds owed and the monetary settlement listed in the deed of release will be the maximum amount you will be entitled to in relation to the dispute or agreement.

Some deeds are purposely vague or broad in scope. This means that someone can sign away rights or claims beyond what is intended or agreed between the parties.

That's why it's recommend that you should get legal advice about what rights you may be giving up when signing a deed of release.

When a breach of the deed of release occurs

If either you or an ex-employee does breach any of the agreement terms, the other party is entitled to begin legal proceedings to recover damages for damage sustained as a result of the breach.

A breach may occur, for example, if an employee shares confidential information about the company or an employee breaches a non-disparagement clause.

We understand the support you need to keep up with your obligations and duties. Contact our team for free initial expert advice.

This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.

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