You might consider making a settlement agreement or deed of release with an employee or ex-employee to resolve an employment-related claim.

For example, a settlement agreement for an unfair dismissal claim would typically include a settlement amount (which would include any unpaid entitlements and some compensation) in return for releases from all future claims, liability and confidentiality.

In a deed of release, the employee agrees to give up their rights to sue their employer for anything relating to their employment except rights under workers’ compensation legislation or compulsory superannuation contributions (which cannot be given up).

If you draft a release using general words (e.g. “release all claims whatsoever arising out of or incidental to the employment and the termination”), the Court may confine the release to the claims and litigation that were in the minds of the parties when the release was given.

In Elisha v Vision Australia (2022), the parties had entered into a deed of release to settle an unfair dismissal proceeding. The release provided that the employee “releases and forever discharges” the employer “from all claims, demands, actions, suits, costs, interest and expenses of whatsoever kind which he has or but for this Deed of Settlement would have had, arising out of or incidental to his employment, proceedings and the termination”.

When the release agreement was made, the only claims being made was an unfair dismissal claim and claims about the employer’s compliance with the enterprise agreement in disciplining and dismissing the employee. The Supreme Court of Victoria ruled this did not prevent the employee later making a claim to recover damages for breach of contract and negligence to compensate for the injury suffered as a result of the way the employer disciplined and dismissed the employee.

Note: At the time of writing, this decision is under appeal.

Find out how to use settlement agreements and deeds of releases, and what provisions you should include when negotiating them, in the Employment Law Practical Handbook chapter, Settlement and separation agreements.