A deed of release is commonly used in employment law to resolve disputes between employers and employees.

The case of  Scott v Steritech Pty Ltd [2023] FCA 1401 (14 November 2023) highlights the significance of a deed of release in employment law matters.  

Deed of Release

What is a Deed of Release?

A deed of release is a document used to formalise an agreement between two or more parties to prevent future legal disputes. In an employment law context, a deed of release is used to settle a dispute when an employee is leaving the business and at risk of making a claim such as unfair dismissal.

The deed of release will generally contain the monetary terms of an agreement along with clauses of confidentiality, non-disparagement and a release from all claims. This means that a party cannot bring a legal claim against the other for a matter under the deed.

When do you need a Deed of Release?

An employer may want to initiate a deed of release in two common scenarios:

First, when the employer and employee are interested in a mutually beneficial separation arrangement. Here, the employee resigns their position and may receive additional payments in addition to their statutory entitlements whilst waiving their right to make claims against the company.

Secondly, following the commencement of legal proceedings. Here, the deed would provide that the claim is withdrawn in return for the payment of a sum of money. This is relevant to the case below.  

Scott v Steritech Pty Ltd  

In this case, the Applicant (Scott) was an employee of the Respondent (Steritech). Scott was made redundant by Steritech. Scott alleged that the dismissal was not genuine redundancy and breached the general protections provisions of the Fair Work Act 2009 (Cth). This proceeding was settled by a deed of release in which Scott waived his rights to this and all future claims in exchange for Steritech paying him $52,500.

In subsequent proceedings brought before the Federal Court, Scott sought damages for the psychiatric illness he suffered due to the termination. Scott claimed that the meaning of ‘workers compensation law’ per the deed of release was unclear and not a bar to him seeking damages for his injuries due to Steritech’s negligence. Scott alleged that Steritech failed to comply with the obligations in the relevant modern award and sought damages for breaches of the Fair Work Act or alternatively damages for the alleged breach of the duty of care.

Steritech however maintained that the deed of release contained a broad release for all employment related causes of action with the exception of those under worker’s compensation law. Steritech further claimed that Scott’s statement of claim were a continuation of the initial proceedings.

Ultimately the Federal Court determined that the deed of release acted as a bar to all future proceedings regarding Mr Scott’s employment. Thus, the fact that Scott was seeking to use different rights under the Fair Work Act was irrelevant. Moreover, it was held that Scott’s proceedings were an abuse of process and the matter was dismissed, with Scott being required to pay his former employer’s costs.

How can Cogent Legal help?

This case demonstrates the importance of a deed of release and the long-term protections they offer. If you need advice in dealing with a similar matter or would like assistance drafting a deed of release, please contact our office.