In this week’s blog we look at deeds of releases with reference to a recent Federal Court Case in which a former employee had his litigation thrown out of court after it was found that the deed of release he had signed acted as a bar from bringing any proceedings.
What is a deed of release?
A deed of release is a legal binding document that contains the terms of an agreement between two or more parties and acts as a bar from future legal proceedings. In an employment law context these are typically used when settling a dispute between an employer and employee or when an employee is leaving the business and at risk of making a potential claim such as unfair dismissal or a breach of the general protections provisions in the Fair Work Act.
When do you need a deed of release?
As discussed above, there are two main scenarios in which an employer may want to use a deed of release. The first of these is when an employer and an employee are exploring a mutually beneficial separation arrangement where an employee is offered to sign a deed of release in exchange for resigning for their position. In this scenario, the employee would usually be offered an additional “ex-gratia” payment in addition to paying out their statutory entitlements in order to waive the right to make any claims against the company.
The second situation a deed of release might be used would be following the commencement of legal proceedings in court or the Fair Work Commission (such as an unfair dismissal application or a general protections application). Generally when parties come to a settlement agreement in these matters, the terms of that agreement are contained within a deed of release. This would usually provide that the claim was withdrawn in return for payment of a sum of money. This was the background for the case explored below.
What is in a deed of release?
In addition to containing the monetary terms of any agreement, a deed of release will typically include standard clauses of:
- confidentiality meaning the terms of the agreement and the discussions leading up to it are confidential;
- non- disparagement meaning a party to the deed can not attempt to injure the reputation of the other; and
- a release from all claims meaning that a party to the deed can not bring a legal claim against the other for a matter that is subject to the deed i.e. an employee’s employment or termination.
Is there anything that can’t be excluded under a deed of release?
There are certain claims that an employee may bring against a current or former employer that are not able to be excluded under a deed of release. These include claims for compulsory super contributions or claims for workers compensation (which is also relevant in the below matter).
In this matter the Applicant Mr Scott, a former employee of the Respondent, Steritech Pty Ltd (Steritech), sought to bring proceedings in the Federal Court of Australia despite the parties entering into a deed of release following similar proceedings commenced in the Federal Circuit Court (FCC) in 2019.
The FCC Proceedings
Mr Scott was an employee of Steritech Pty Ltd from 1 April 2003 to 7 August 2018 when he was dismissed when his position was made redundant by Steritech. Mr Scott alleged that his dismissal was not a case of genuine redundancy and was in breach of the general protections provisions of the Fair Work Act 2009 (Cth).
It was Mr Scott’s case in the FCC Proceedings that he had been directed on multiple occasions throughout his employment to engage in actions in an improper and/or unlawful manner by carrying out unsafe practices and falsifying readings in respect of radiation.
When Mr Scott was again requested to perform the above duties in April 2018 he made a complaint to his employer before taking a period of extended personal leave to deal with a medical issue. When Mr Scott returned from leave, he was invited into a meeting and was informed that his position had been made redundant. Following the termination of employment, Mr Scott suffered from a psychiatric illness which at times required hospitalisation. Accordingly, Mr Scott commenced the proceedings claiming that Steritech had dismissed him in order to prevent him from exercising a workplace right, namely to make a workplace complaint to his employer.
The FCC Proceedings were settled by way of a Deed of Release signed by the parties on 21 May 2020. The terms of this Deed of Release included that in exchange for waiving his right to this and all future claims (except for claims relating to superannuation or worker’s compensation) Steritech would pay Mr Scott a total of $52,500.
Federal Court Proceedings
In subsequent proceedings brought in the Federal Court, Mr Scott sought damages for the psychiatric illness he suffered as a result of the termination and pleaded facts in a similar manner to the FCC Proceedings.
It was the Applicant’s case that the meaning of “worker’s compensation law” as it was referred to in the deed of release was ambiguous and that the deed would not act as a bar to Mr Scott seeking damages for his injuries as a result of Steritech’s negligence (ie common law damages). In these proceedings Mr Scott made two further claims that firstly Steritech had breached their duty of care owed to Mr Scott when effecting his dismissal causing the psychiatric illness and that Steritech has contravened sections of the Fair Work Act 2009 (Cth) as Steritech had failed to comply with the consultation obligations in the relevant modern award. In these proceedings Mr Scott sought damages $1,191,193.19 for breaches of Fair Work Act or alternatively damages of $1,034,423.19 for the alleged breach of the duty of care.
It was the Respondent’s case that the Deed of Release (from the FCC proceedings) contained a broad release for all employment related causes of action, with exception of those under worker’s compensation law and barred the continuation of the FCC Proceedings. Steritech further submitted that Mr Scott’s statement of claim did not plead any factors relevant to the relevant worker’s compensation legislation and that the Federal Court Proceedings were clearly a continuation of the FCC Proceedings. Steritech also sought to argue that as Mr Scott had discontinued the FCC Proceedings that re-litigating the same matters was an abuse of process.
Ultimately the Federal Court agreed with the Respondent and found that the Deed of Release acted as a bar to all future proceedings regarding Mr Scott’s employment. The Court noted:
The release and bar in the Deed of Release are plainly expressed in very broad and comprehensive language, and (save for the defined exception) unambiguously prohibit claims arising out of or in connection with Mr Scott’s employment period, termination of employment, proceedings and any other matter, whether known or unknown or incapable of being known at that time.
Given the Deed provided a broad and comprehensive bar to all future proceedings the court noted that the fact that Mr Scott was seeking to prosecute different rights under the Fair Work Act and then during the FCC proceedings was irrelevant and that the deed would act as a bar to all proceedings.
Ultimately the Federal Court held that Mr Scott’s proceedings in the Federal Court were an abuse of process and dismissed the matter and ordered Mr Scott to pay his employer’s costs.
This case serves as a reminder of the important role that a deed of release can play in settlement negotiations and how they can be an effective tool at minimising potential risks to a business.
It is also important to note that proceedings under the Fair Work Act typically operate under a ‘no costs jurisdiction’ meaning that each party to the litigation will be required to fund their own legal costs regardless of the outcome. The Fair Work Act provides for certain exceptions to this such as under section 570 if a party instituted proceedings vexatiously or without reasonable cause.
Need further help?
If you are an employer who requires any assistance in dealing with an employment law dispute, or require a deed of release drafted please contact EI Legal at: firstname.lastname@example.org