As we have discussed in previous blogs, it is not uncommon for an employer and employee to enter into a deed of release or settlement when ending the employment relationship. A deed provides assurances to both parties that the employment relationship is at an end and they can both move forward.
A major reason that deeds are so effective is that they operate as a bar to any proceedings that a party may wish to commence at a later point in time in relation to the subject matter of the deed. For example, the employment relationship or the termination of employment.
Employers must therefore ensure that deeds are entered into by the parties legitimately and that employees are given every opportunity to understand the terms and effect of the document, to minimise the risk of a court finding a deed invalid or otherwise void.
A recent decision of the Fair Work Commission (FWC) has shown that deeds can effectively operate as a bar to proceedings as long as they have been legitimately agreed to by the parties.
In Salisbury v Sigmatek Pty Ltd  FWC 2, the FWC dismissed an employee’s claim that he had signed a deed of release on termination of his employment under duress from his employer.
The employee had claimed that the deed was signed under duress because he was led to believe that the only way that he would be able to access his accrued leave and benefits would be if he signed the deed.
The FWC found that this was not the case.
In fact, the employer had provided the deed to the employee to review some 10 days prior to his intended termination date, and invited him to discuss the contents of the deed if he had any questions. The employee chose not to discuss the deed and instead signed and returned the deed within 3 days.
The FWC was satisfied that the employer did not place any pressure on the employee to sign the deed, and the employee chose instead not to meet with the employer to discuss the deed or undertake any other action to clarify his concerns prior to signing it.
Accordingly, the deed was valid and acted as a bar to the unfair dismissal proceedings commenced by the employee, and his application was dismissed.
Lessons for employers
When negotiating deeds with departing employees, it is important for employers to ensure that an employee’s rights and entitlements are clearly and properly represented to them, and that employees are given adequate time to consider any potential deed.
A failure to do so can increase the risk of an employee claiming that the deed was made under duress or coercion, or that an employer misrepresented the employee’s entitlements.
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