Confidentiality Clauses in Settlement Agreements

Settlement Agreements are widely used by employers to bring the employment relationship with an employee to an end on agreed terms.

These legally binding contracts typically include a financial settlement, a waiver of legal claims, and confidentiality clauses.

In this article employment solicitor, Laura Colebook, explains that while confidentiality clauses in Settlement Agreements serve legitimate purposes, they must be used lawfully and proportionately. 

She explains the legal framework governing confidentiality clauses in Settlement Agreements, clarifying when such clauses are enforceable, when they are not, and what employees and employers alike need to understand.

Need to have your settlement agreement reviewed to see if it is fair? Contact Laura Colebrook now.

What are Confidentiality Clauses in Settlement Agreements?

A Settlement Agreement is a legally binding contract between an employer and employee, used to settle employment-related claims. In most cases, the employee agrees to waive their right to bring legal action, such as an unfair dismissal or discrimination claim, in return for financial compensation or other agreed terms.

To be valid and enforceable under the Employment Rights Act 1996, a Settlement Agreement must meet the following criteria:

• It must be in writing.
• The employee must have received independent legal advice e.g. from a solicitor.
• The legal adviser must be identified in the agreement and have professional indemnity insurance.
• The Settlement Agreement must state that it satisfies the relevant statutory conditions.

Settlement Agreements are frequently used during redundancy processes, disputes, or negotiated exits. Most will contain confidentiality provisions designed to protect both parties’ interests.

Why are Confidentiality Clauses Included in Settlement Agreements?

Confidentiality clauses are among the most common features of Settlement Agreements. They are typically included for several legitimate reasons:

• To prevent the employee from publicly discussing the terms of the settlement.
• To protect sensitive business information or trade secrets.
• To avoid reputational damage for either party.
• To facilitate a clean break and avoid future disruption or disputes.
• To preserve the dignity of both parties in the context of employment termination.

These provisions may apply to both the substantive allegations (such as workplace grievances or claims of unfair treatment) and the financial and procedural details of the settlement itself.

In many cases, confidentiality offers mutual reassurance. Employers benefit from the protection of their reputation, and employees can avoid being drawn back into workplace conflict or asked about the terms of their departure.

What is admissible in a confidentiality clause in a Settlement Agreement and what is not?

Although confidentiality clauses in Settlement Agreements are legal and commonly used, they are not without limits. There are clear restrictions under the law on how far they can go.

A confidentiality clause in Settlement Agreements must not prevent an individual from:

• Reporting criminal offences to the police.
• Making a protected disclosure under the Public Interest Disclosure Act 1998, commonly known as whistleblowing.
• Co-operating with regulatory or enforcement agencies.
• Seeking independent legal advice.
• Making disclosures to medical, legal and tax professionals, or close family members.

If a clause attempts to prevent any of the above, or creates the impression that it might, it may be found to be unenforceable. This can not only void the clause but also risk undermining the entire agreement if misused or coercively applied.

Importantly, no wording in a Settlement Agreement can override statutory protections or criminal law obligations. That includes the right to raise concerns in the public interest through appropriate legal channels.

What is the law regarding Whistleblowing and Protected Disclosures? 

A critical exception to any confidentiality clause is the right to blow the whistle under the Public Interest Disclosure Act 1998. This legislation protects workers who report wrongdoing that is in the public interest, such as:

• Criminal offences.
• Health and safety risks.
• Environmental damage.
• Breaches of legal obligations.
• Miscarriages of justice.

An employer cannot contract out of this right, even if the employee has signed a Settlement Agreement. Clauses that purport to restrict or discourage whistleblowing are unenforceable.

Employees who are unsure whether their concerns are protected disclosures should consult their legal adviser before acting.

What should Confidentiality Clauses in Settlement Agreements contain?

A properly constructed confidentiality clause in a Settlement Agreement should be:

• Clear and specific about what must be kept confidential, typically limited to the terms and existence of the Settlement Agreement, along with the circumstances surrounding the termination of employment.
• Reciprocal, where appropriate, so that the employer is also restricted from making disparaging or damaging statements about the departing employee.
• Accompanied by explicit carve-outs, confirming that the clause does not prevent:
  • Disclosures required by law.
  • Whistleblowing in accordance with the Public Interest Disclosure Act 1998.
  • Reports to the police or regulatory bodies.
  • Communications with lawyers, tax advisers, and healthcare providers.

Vague, overly broad, or intimidating language can lead to confusion or legal challenge, especially if it could be interpreted as discouraging lawful reporting of misconduct.

What is the ACAS Guidance on Settlement Agreements?

ACAS (the Advisory, Conciliation and Arbitration Service) has published guidance to help employers and employees understand the appropriate use of confidentiality clauses in Settlement Agreements.

Its key principles include:

• Confidentiality clauses should be reasonable in scope and understandable to a layperson.
• They should never be used to silence victims of harassment, bullying, or criminal behaviour.
• Individuals must be allowed time to consider the terms of the Settlement Agreement, typically at least 10 days.
• The Settlement Agreement should make clear what disclosures remain permitted under law.

While ACAS guidance is not legally binding, it is widely followed and often referenced by Employment Tribunals in disputes concerning Settlement Agreements.

What should employees should look for in Settlement Agreements?

Employees reviewing a Settlement Agreement containing confidentiality clauses should:

• Read carefully what is being asked of you, especially in terms of what you can and cannot say after leaving.
• Confirm carve-outs are present for legal reporting, whistleblowing, and personal support.
• Seek clarity if any wording is ambiguous or intimidating.
• Ask your solicitor to explain in plain language what the clause actually means in practice.
• Ensure the clause is not one-sided or excessive in scope.
• Keep a signed copy of the final Settlement Agreement for future reference.

If there are any doubts about whether the clause restricts lawful reporting or personal rights, it should be challenged during the negotiation process. Legal advisers have a professional duty to raise these issues.

When might a Confidential Clause in a Settlement Agreement be unenforceable?

In light of the above, a confidentiality clause may be deemed to be unenforceable, if it is found to be:

• Unclear or misleading.
• Too broad in scope.
• Inconsistent with public policy.
• Contrary to statutory protections.

How our Employment Solicitors can help with Settlement Agreements

Confidentiality clauses are a common feature of Settlement Agreements and can serve useful purposes when used appropriately. They help protect reputations, ensure closure, and support a clean break.

However, they are not a tool to suppress the truth, intimidate employees, or prevent lawful disclosures.

Both parties must approach confidentiality clauses with clarity, fairness, and an understanding of their legal boundaries. Otherwise, the clauses will be deemed unenforceable. Settlement Agreements are about resolving disputes. The goal, therefore, should be a lawful and transparent resolution.

We Help You Receive a Fair Agreement

Legal advice is essential for a Settlement Agreement to be considered valid and gives you clarity, protection, and peace of mind.

Your legal adviser works for you, not your employer. Their job is to make sure the terms are fair and that you understand what you are signing.

You can negotiate, often with your adviser’s assistance to try and improve the offer or secure better post-employment protections. Your employer usually contributions towards your legal costs.

If you would like more information on Settlement Agreements or have one reviewed by a solicitor to check it is fair, please contact: 

Laura Colebrook in our Employment Department

Email: l.colebrook@thpsolicitors.co.uk 

T: 0118 975 6622

You can also listen to Laura’s podcast about Settlement Agreement’s here.

We can also assist with settlement negotiations and help you understand your rights around refusing to sign a settlement agreement and what the alternatives or consequences are.

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