A proposed settlement agreement may offer welcome financial certainty, but its confidentiality wording can affect what you are able to say long after your employment ends. A confidentiality clause settlement agreement should protect legitimate private information without leaving you unclear, isolated or unable to speak to the people you need to speak to.
For employees, the concern is often simple: “Will I be allowed to tell my partner, explain my departure to future employers, or raise serious concerns?” For employers, the aim is usually to secure a discreet, dignified exit and reduce the risk of damaging public dispute. Both are reasonable objectives, but the wording needs to be precise and legally appropriate.
What is a confidentiality clause in a settlement agreement?
A confidentiality clause is a contractual term that restricts the sharing of specified information. In a settlement agreement, it commonly covers the existence of the agreement, its financial terms, the circumstances of the employee’s departure, and information about the employer’s business.
It may also include a non-disparagement provision. This is different, although the two are often placed together. Confidentiality concerns sharing information; non-disparagement concerns making negative or damaging statements. Neither should be drafted so broadly that an employee cannot discuss ordinary matters necessary for life and work after leaving.
The clause may be mutual, meaning the employer also agrees not to disclose or make adverse comments about the employee. A mutual obligation can be especially valuable where a workplace dispute has affected the employee’s professional reputation.
Confidentiality provisions are common, but they are not simply standard wording to accept without question. The scope, exceptions and duration can have real practical consequences.
What a confidentiality clause should cover – and what it cannot prevent
A well-drafted clause identifies the information that is genuinely confidential. This could include the settlement sum, the negotiations, customer information, trade secrets and sensitive personal data. It should not use vague wording that appears to cover every aspect of the employee’s experience indefinitely.
The agreement should also state clearly who the employee may speak to. In most cases, sensible permitted disclosures include discussions with a spouse, civil partner or close family member, legal advisers, accountants or tax advisers, medical professionals and, where relevant, a prospective employer. Those people may need to keep the information confidential themselves.
There are important legal limits. A settlement agreement cannot lawfully stop someone from making a protected disclosure, often called whistleblowing. It also cannot prevent a person from reporting suspected criminal conduct to the police, co-operating with a regulator or complying with a legal duty, court order or tax requirement.
These protections should not be left to assumption. Clear written carve-outs reduce the risk that an employee feels intimidated from raising a legitimate concern. If the clause suggests that no disclosure can ever be made to anyone, it requires careful review.
Confidentiality is not the same as silence about your career
A confidentiality clause should allow an employee to give a straightforward explanation of their departure when applying for a new role. The agreed wording might be as simple as saying that employment ended by mutual agreement, or that the employee left following a restructure.
This is closely connected to the reference clause. If the employer has agreed a reference, the wording should be attached to the agreement or otherwise settled in writing. It is far easier to manage questions from recruiters when the agreement gives a clear and accurate account of what may be said.
Checking a confidentiality clause settlement agreement
The key question is not whether confidentiality is included. It is whether the obligation is proportionate and workable in your circumstances. An employee leaving after a minor redundancy exercise may need a different clause from a senior executive involved in commercially sensitive negotiations or a serious workplace complaint.
When reviewing the wording, focus on these points:
- What information is covered? The definition should be specific. A clause covering the agreement and its terms is very different from one covering all information relating to your employment, colleagues and experiences.
- Who can you speak to? Ensure there are express exceptions for your adviser, immediate family and appropriate professional support. Consider whether you need to tell a mortgage lender, insurer, medical practitioner or prospective employer.
- Is the obligation mutual? If you are restricted from discussing the circumstances of your departure, consider whether the employer and named individuals should give the same undertaking.
- Are legal and regulatory disclosures protected? The agreement should preserve your ability to whistleblow, report crime, co-operate with regulators and comply with legal obligations.
- How long does it last? Some obligations may reasonably continue indefinitely, particularly for trade secrets. A broad restriction on personal discussion may be harder to justify and should be considered carefully.
A clause can also contain a financial remedy for breach, such as repayment of the settlement sum or an indemnity for the employer’s losses. These provisions deserve particular attention. A remedy that is disproportionate or unclear can create unnecessary pressure and may be a point for negotiation.
When it may be sensible to negotiate the wording
Negotiation is not necessarily confrontational. Often, a targeted amendment gives both sides greater certainty. The employer receives proper protection for sensitive business information, while the employee knows they can obtain support and move forward professionally.
For example, an employee who has experienced discrimination, harassment or a dispute about health may reasonably ask for express permission to speak to their GP, therapist or support network. A senior employee may need permission to disclose limited information to a future employer carrying out due diligence. Someone with a complaint already raised internally may need the clause to confirm that they can continue to co-operate with an investigation or regulator.
The settlement payment can also influence the discussion. Where an employer seeks a wider confidentiality commitment than usual, the employee may decide that additional compensation is appropriate. There is no fixed formula. The right approach depends on the seniority of the role, the sensitivity of the information, the circumstances of the exit and the restrictions being requested.
Do not overlook existing contractual duties either. Many employees are already bound by obligations concerning confidential business information, intellectual property or restrictive covenants. A settlement agreement should make clear whether those duties continue, are replaced or are varied. Overlapping clauses can create confusion where clarity is needed.
The role of independent legal advice
For a UK settlement agreement to validly waive statutory employment claims, the employee must receive advice from an independent adviser on the terms and effect of the agreement, including its effect on their ability to pursue claims. The adviser must also meet the relevant legal requirements, and the agreement must identify them.
That advice is not a formality. It is the opportunity to understand what you are giving up, assess whether the compensation reflects the claims and rights being waived, and identify terms that should be changed before you sign.
An adviser can explain the confidentiality clause in plain English, distinguish reasonable business protection from unnecessarily broad restrictions, and raise amendments on your behalf where appropriate. Employers commonly contribute towards the cost of this advice, but the adviser’s duty is to the employee, not the employer.
Arcos Settlement Agreements can review the full document, including confidentiality, references, compensation, tax treatment and post-termination restrictions, so you can make an informed decision rather than sign under pressure.
A practical approach before you sign
Read the clause alongside the rest of the agreement, rather than in isolation. Check whether the agreed reference matches what the employer can say externally, whether any announcement wording has been agreed, and whether your obligation conflicts with a future role or ongoing complaint.
It is also wise to avoid discussing the proposed deal widely before it is finalised. Confidentiality during negotiations may apply even if you ultimately do not sign. Keep copies of the draft, any relevant correspondence and the proposed reference, then share them with your independent adviser.
A fair confidentiality clause should give you protection as well as impose responsibilities. If its wording leaves you uncertain about getting advice, caring for your wellbeing or explaining your next career move, ask for clarity before you commit to it.