Deeds of release are often used in settling workcover cases and common law claims between employers (or their representing insurance companies and defense lawyers) and injured workers — but what are they really? In this article, we try to discuss what deed are, how they’re written and provide very important tips on their use for injured workers.
Deeds of release often used in settling workcover cases- what are they?
A deed of release is a legal expression which is referring to a release or an agreement to settle the current or future legal claims of one person against another. Deeds take their full name from their purpose. For example, the expression ‘deed of release’ reflects the agreement to settle current or future legal claims of one person against another. So a deed it is a type of written contract as it were which contains the agreement of usually two parties (i.e employer and injured worker). Deeds must also comply with certain established formalities- both in presentation and in execution. However, we prefer to refer to them as “hush contracts” or “mouse traps”!
What are deeds of release used for?
deeds of release, within the context of normal employment, are commonly used to finalise contentious (read: quarrelsome, disputed, highly controversial, most often litigious!) matters between employers and (former) employees. These matters may be contractual claims or claims arising out of the termination of employment.
A deed of release can be used to record the settlement of a claim made against the employer. Settlement may occur in the context of litigation initiated by the employee (worker/injured worker), or it may be the outcome of negotiations at the workplace without any actual litigation ( i.e in a case of bullying an injured worker accepting a separation package)
A Deed of Release is a type of legal document that sets out how you will end a (the) dispute. It is similar to “Terms of Agreement”.
Deed of Release will usually settle all claims between you and the employer. Before you sign anything, you should be sure that you are not owed any other money or entitlements by your employer. For example, annual leave payments, underpaid wages, long service leave or money for injury claims. If you are owed money or are considering making a claim about an injury, it is possible to write a settlement agreement that only settles the general protections claim and leaves you the option of making other claims.
Many employers (workcover insurers) will eventually reach a settlement agreement with an injured worker. Most cases never go to court. A deed of release is always (that we know of) used when a settlement is reached – usually it does not only stipulate the agreement reached, but will also most often have a confidentiality clause. Meaning that you (the injured worker) are not allowed to disclose how much compensation you were offered (agreed settlement amount).
There may be heaps of other clauses, terms and conditions stipulated in the deed of release such as future payment for a medical procedure, promise of retraining for the injured worker etc. Again it is extremely important that you understand the deed jargon fully (discuss it in detail with you lawyer before you sign!).
Some of these “terms and conditions” or “promises” can be worded in such a way that, in the end, the injured worker does in fact not ever receive those “promises”, under cover of associated laws and what-not.
For example we know of a seriously injured worker whose case settled out of court and for which a deed was signed: at first glance, the deed appeared to promise that the injured worker would be allowed to retrain (part of the settlement deal); however at closer inspection and when the time came that the injured worker was ready for retraining, he found out that the deed in fact states that the injured worker “would continue to be eligible for “retraining” within the requirements of Workcover legislation“. So, the bit “within the requirements of the workcover legislation” basically undid the promise, as the injured worker unfortunately found out. He must a) be fit for work (have a work capacity) in order to be eligible for retraining and b) generally must be working in order to be eligible. The injured worker suffered a very severe injury and could realistically speaking only “work” a couple of hours a week, and from their home. So how on earth is this injured worker able to meet the “requirements of the workcover legislation” when it comes to retraining? He understood that part of his settlement deal included the retraining – he envisioned learning new skills and then working from home a few hours a week – make himself feel worthy and at least return to some sort of employment. …
Similar clauses exist with re to “medical and like treatment/services” – again, please be careful and vigilant as how they are worded, as many insurance companies (and their big shot lawyers) will inevitably continue to try to erode whatever you “got” by means of writing things in certain ways, which seem innocent at first, but (may) have huge negative implications later.
Once settlement has been reached, your case is deemed CLOSED and there is no way back for more, or to change a deed of release.
What’s in a deed?
For example, if you are dismissed, and If you and the employer can agree about how to end the dispute, the Fair Work Commission member (the Commission member) will suggest (at Conciliation) you put this agreement in writing. You can either use a Deed of Release or a Terms of Agreement.
The Commission may provide you with a Terms of Agreement document to complete and sign. Sometimes the employer may ask to use a Deed of Release instead of Terms of Settlement/Agreement.
The content of a deed between an employer (company) and (former) employee (or injured worker) need not only be restricted to a release from actual or potential claims. There is a wide range of matters that can potentially form the content of a deed.
For example, a deed may deal with confidentiality of information, use or return of employer property, non-disparagement, references and various post-employment obligations.
It may also be the case that the a deed covers present and future claims, even where those claims are not directly related to the immediate claim(s) made by the employee against the employer. Deeds can be, ahum, very carefully written by the employer (or insurer/defense lawyer) and…
Limits of the effect of a deed
There are limits to the effect of a deed. For example, a deed cannot bind anyone other than a party to the deed.
A deed is really a private arrangement between parties, so a deed between an employer and employee for example cannot be used to impede the work of statutory agencies such as government agencies with for example responsibilities in the areas of OHS or taxation.
A deed has also no effect whatsoever if it is against public policy, contrary to law or if its intention is to conceal unlawful activity.
In the case of Daebritz v Gandy & Ors  WASC 45, for example, the WA Supreme Court found that the deed of release was unenforceable on public policy grounds because it had been written to prevent a person from accessing family provision entitlements available under applicable legislation.
Validity of a deed of release
It is important you understand that a party should be willingly enter into a deed. The validity of a deed could therefore certainly be open to challenge if, for example, unreasonable duress has been applied to a party to enter the deed or a party has entered into a deed under a misrepresentation from another party.
A deed is also unlikely to have effect if its purpose is to deny statutory entitlements. I.e. if an employee’s employment entitlements are set by statute or by an award, it will be unnecessary for the employee to enter into a deed to access those entitlements. A deed will be ineffective in the case where an employer insists upon a deed as a condition of payment of statutory or award entitlements (i.e. in the case where you resign).
Some professional deed-er tips
There are some things employers (and employees) should consider in negotiating and preparing a deed of release, but again, legal advice should be obtained with respect to the exact preparation of a deed:
- Negotiate the deed expressly on a ‘without prejudice’ basis. This makes it very clear that your communications are for the purpose of the negotiations and are not admissions.
- Prior to making an offer to resolve a matter, consider what claims and matters are sought to be covered by the deed. In particular, consider any special conditions.
- It is said that employers should ensure that when entering a deed of release it is drafted in a way that it caters for all possible future actions by the employee – so be very careful when signing such a document!
- Not every release will be strictly enforceable: care needs to be taken to ensure the release is correctly drafted (i.e. there are different legal rules covering ‘Deeds’ and ‘Agreements’). Furthermore, it is not possible to contract out of certain legal obligations. In most States, a deed or agreement to prevent future workers’ compensation claims will generally not be enforceable. But, again, be very very wary of the deed is worded (see sample cases).
Sample cases involving deeds of release and workcover
Case 1: claim for racial discrimination denied
A recent case in the Federal Magistrates Court has strengthened the argument that a deed of release in settlement of one claim that intends to discharge an employer from all other claims will be legally enforceable.[source: http://www.findlaw.com.au/articles/1948/will-a-deed-release-you-from-everything.aspx]
Background of the case
At the completion of negotiations over his workers’ compensation claim, the applicant, Daud Kahi-Rud Dean, agreed to and signed a Deed of Release (Deed) in exchange for the payment of $40,000. The applicant resigned his employment at the time the Deed was entered into. The Deed was intended to effectively discharge the employer, Cumberland Newspaper Group, ‘from all [future] actions, suits, demands, claims, proceedings whatsoever’.
Subsequently, the applicant claimed that his former employer had also breached the Racial Discrimination Act 1975 (Cth) and the Disability Discrimination Act 1992 (Cth) during his employment. Mr Dean argued that the Deed was intended to be only a release in respect of actions for personal injury arising out of his employment, and it did not prevent him from bringing a discrimination claim. Justice Federal Magistrate Raphael rejected this submission.
Although the Deed was entered into in the context of negotiations for settlement of a workers’ compensation claim, Federal Magistrate Raphael found that those negotiations provided for the resignation of the applicant from the respondent.
Implications for employers
- Employers should ensure that when entering a deed of release it is drafted in a way that it caters for all possible future actions by the employee.
- Not every release will be strictly enforceable: care needs to be taken to ensure the release is correctly drafted (eg there are different legal rules covering ‘Deeds’ and ‘Agreements’). Furthermore, it is not possible to contract out of certain legal obligations. In most States, a deed or agreement to prevent future workers’ compensation claims will not be enforceable.
To view the full text of the case, click here.
Case2: Deed released employer from psychological injury common law damages claim
In 2008, the WA Supreme Court of Appeal held that a deed of release was ‘quite clear’ in specifying an employer was freed from any common law action from an employee (injured worker) who claimed his stress condition was work-related.
Background of the case
The injured worker made a complaint to the Human Rights and Equal Opportunity Commission, but then abandoned the application when conciliation was unsuccessful.
The hospital and the injured worker agreed then – without liability- to settle the application as well as” all other matters” between them arising from, relating to or in connection with the complaint, the application, the employment and the compensation claim (except the workers compensation entitlements the injured worker was/may be receiving). Now, this deed included any entitlement to common law damages arising from, relating to or in connection with the disability and a one-off payment of $5618 to compensate the injured worker for any hurt or humiliation he may have suffered.
Injured worker attempts Common law damages claim: Supreme Court WA
Subsequently to signing the deed (and his life away), the injured worker did attempt to pursue a common damages claim claim against the hospital, by then his former employer.
The injured worker argued that the deed did not specifically cover certain incidents that occurred throughout his employment at the hospital, which he now wished to claim for.
Deed was framed in wide terms but “quite clear”
At the supreme court hearing, Justices Carmel McLure, Michael Buss and David Newnes unanimously agreed that the intention of the deed was ‘quite clear’ even though they admitted that the deed was written in “very wide terms”.
Judge Newnes stated: “It is immediately obvious that in this case the deed is framed in very wide terms. The releases and discharges are expressed to be “in connection with”, “arising out of” or “in respect of” allegations of vilification, victimisation and discrimination previously made by the appellant (worker) and the circumstances on which those allegations were based”
“… it is quite clear from the terms of the deed that it was the intention of the parties that by the deed the respondent (hospital) was to be discharged and released both from the specific claims referred to in it and from any other existing and future claims and proceedings at common law based on allegations that, during the course of his employment, the appellant had been subject to vilification, victimisation or discrimination for which the respondent was liable.”
“The broad language of the deed is entirely inconsistent with an intention that the deed was to operate in the limited way contended for by the appellant; it was plainly intended by the parties that the deed was to put an end to claims of the nature of the “first accident” and the “third accident”.”
You can read the full case here: Butler v St John of God Health Care Inc  WASCA 174 (22 August 2008)
Case 3: a deed of release between a company and a deceased worker cancelled out his wife’s claim for spousal compensation – Tasmanian Workers Rehabilitation and Compensation Tribunal
In 2006, The Tasmanian Workers Rehabilitation and Compensation Tribunal ruled that a deed of release between a company and a deceased worker cancelled out his widow’s claim for “spousal compensation”.
Background of the case
The 9now deceased) worker was employed by Gunns Limited from 1991 to 2002. On 5 September 2001 he claimed workers compensation from Gunns (the employer) alleging that he had suffered a cancer in his sinuses caused by ongoing exposure to wood dust at his work.
Notwithstanding that the employer disputed liability for the worker’s disease, both the employer and the ill worker reached a settlement in 2004 – the terms of which were specified in a deed of release.
Widow’s compensation for death benefits denied
Following the unfortunate death of the ill from his cancer in December 2005, his wife (widow) then made a claim for compensation under s67 (=Amount of compensation in case of death) of the Tasmania Workers Rehabilitation and Compensation Act 1988.
The deceased worker’s widow argued in court that the deed was written to release the employer (Gunns) from a liability for any further claim(s) made by the (ill) worker, and so it cannot serve to protect the employer from a liability for a claim made by a dependent of the now deceased worker, referring to the limits to the effect of a deed. ( i.e. as we stated in the bulk of the article, a deed cannot bind anyone other than a party to the deed.)
The widow further argued that the Act “vests dependents with a separate right to compensation and that right cannot, in a particular case, be signed away by a worker without his dependent’s consent”.
The (inhuman) employer (Gunns) on the other hand, relentlessly argued the deed operates to discharge it from all liability in respect of any right to compensation under the Act and this includes any liability for a claim made by a dependent under s67.
The Commissioner accepted the employer’s argument!!!
Commissioner Chandler furthermore stated that as the dependent’s right to compensation only arises at the death of an injured worker, it follows “the time of that event is the relevant time for determining whether an employer has liability to pay compensation”
“The question therefore arises whether in this instance the employer was liable to pay compensation at the time of the worker’s death being 14 December 2005, he said.
Commissioner Chandler said that “The deed clearly speaks for itself. It establishes that after its execution and upon payment of the $123,618 any liability which the employer may otherwise have had for any claim under the Act was extinguished and at an end”
“In the result, the employer (Gunns) did not have a liability to pay compensation upon the worker’s subsequent death”
You can read the full legal case here: C. -v- Gunns Limited (Ref No.301/06)  TASWRCT 32 (8 August 2006)