Confidentiality and Settlement Agreements

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Introduction

This article is for employees, employers and HR professionals dealing with confidentiality clauses in settlement agreements, also known as non-disclosure agreements (NDAs). These NDAs are common and require the worker to keep the settlement agreement and related matters secret.

What you’ll learn in this article is how far NDAs can legitimately go, and how out of date and excessive NDAs are bad for everyone, with legal, regulatory and reputational risks, as well as unnecessary friction in the settlement agreement process.

Bad NDAs

NDAs can be controversial and sadly questionable practices still exist. In my experience as a solicitor that regularly advises employees on settlement agreements, I think that largely comes from employers and HR teams using outdated agreements that do not reflect current law or good practice.

As an example, I still see NDAs which are drafted in a way that would prevent an employee seeking medical advice and support from a doctor, or going to the police to report a suspected crime. Most people would agree that goes too far and including such a wide ranging NDA risks damaging the employer’s reputation (and even legal or regulatory liability in some cases).

When I speak to the HR manager that sent over the draft settlement agreement about the NDA issues, they usually agree to amend the NDA wording themselves or after they have sought legal counsel. A diligent solicitor has a duty to raise this issues.

From HR’s perspective, and mine as the solicitor acting for the employee, the best scenario is to have a first draft ‘oven ready’ settlement agreement that can be signed without amendments. Avoiding requests about changes to the NDA, is one less headache, saves HR’s time and costs associated with HR running the changes past the employer’s own solicitor.

Good NDAs

We’re on a mission to help and encourage employers and HR teams to stay up to date with these NDA issues, and get the balance right from an ethical and legal perspective, to ensure all parties benefit from reasonable confidentiality terms.

This is perhaps important now than ever, with regulatory and legislative changes recently introduced, and more legal changes coming that will ban NDAs in relation to relevant discrimination and harassment, unless the NDA meets the criteria to be an Excepted Agreement (also known as an Excepted NDA).

A legal and ethical NDA can protect the employer, facilitate early settlement and avoid public spates in the tribunal system, while ensuring employees are remain able to speak out about wrongdoing through the appropriate channels, or seek advice and support they need.

What is a confidentiality clause in a settlement agreement?

There are two main types of confidentiality clauses can. First, those protecting an employer’s commercial information. Second, those about the settlement agreement and the associated dispute. The focus of this guide is the second type.  

Confidentiality clauses are intended to restrict what an employee can say about the settlement agreement and the circumstances or dispute, which led to the settlement agreement. Employers, and their legal teams, typically include these confidentiality clauses in their template settlement agreements, as a way of protecting their business and brand reputation. These clauses are also referred to as Non-Disclosure Agreements (NDAs).

Me Too

The Me Too campaign and a series of high profile cases sparked law makers and regulators to introduce laws and rules to limit the scope of these confidentiality or ‘gagging’ clauses, to enable employees to speak out about wrongdoing for specified reasons, and to obtain advice and support.

Confidentiality law changes in the pipeline

The Employment Rights Act 2025 will introduce further changes that mean confidentiality clauses will no longer be allowed to prevent the disclosure of allegations concerning discrimination and harassment claims unless they meet certain conditions to qualify as an Excepted Agreement, also called an Excepted NDA.

Why are confidentiality clauses important?

Most people accept some form of confidentiality is reasonable. It can protect the employer and the employee, if a dispute and settlement agreement is kept confidential. However, a confidentiality clause that goes too far and tries to prevent or deter legitimate kinds of disclosures is bad for everyone (it puts the employers reputation at risk, and can negatively impact on both an employees wellbeing and society in general).

It is usual for employers and their lawyers to include these confidentiality clauses (sometimes called NDAs – Non-Disclosure Agreements) in their standard settlement agreements. They are intended to restrict what an employee can say about the settlement agreement and the circumstances or dispute that led to the agreement.

Drafting an NDA in a Settlement

It’s very likely that a settlement agreement will contain a clause reiterating that the employee must not disclose or use the employer’s confidential information about its business, its people and its contacts. These clauses are there to protect commercial interests.

On the other hand, an NDA in a settlement agreement will likely say, in terms, that – subject to certain exceptions – the employee agrees to not disclose the fact they have a settlement agreement, or its contents, or the circumstances leading up to it.

If the settlement agreement contains a blanket NDA and does not provide for any exceptions, or permitted disclosures as they are known, whoever drafted that settlement agreement either does not know what they are doing, or worse, they have drafted an agreement knowing that it oversteps and could be seen as unethical and enforceable insofar as it prevents legitimate disclosures.

Permitted disclosures

There are broadly two categories of permitted disclosures typically found in settlement agreements: practical permitted disclosures, and those which are for the public good, i.e. with a societal benefit – such as whistleblowing, and being able to go to the police to report a crime.

Practical permitted disclosures

Most settlement agreements should contain a clause saying the employee can still make certain disclosures that are necessary and appropriate, including to:

• Immediate Family – typically the agreement will allow the employee to speak to their partner, spouse or immediate family. However, this is usually on the basis that they too agree to maintain confidentiality;
• Legal, tax and financial advisers – who are bound by a professional duty of confidentiality for the purpose of seeking advice;
• Recruiter or prospective employer – to the extent necessary to discuss their work history or the agreed reason for leaving.
• Doctor, therapist, counsellor – who are bound by a professional duty of confidentiality for the purpose of seeking medical support;
• Benefits agency – for the purpose of making a state benefits claim;
• Insurer – for the purpose of making an income protection insurance claim.

Permitted disclosures with a societal benefit.

Some of these permitted disclosures are a legal requirements. That is to say, a confidentiality clause would be deemed void (unenforceable) insofar as it purports to prevent certain disclosures. Others come from codes, rules and warning notices issued by regulators, or supervisory bodies applicable to their profession or sector. For example, Financial Conduct Authority (FCA) authorises certain financial organisations, or the Solicitors Regulation Authority (SRA) which regulates solicitors.

Whistleblowing

Disclosing information to the police or law enforcement agency

Workers signing a settlement agreement must be permitted to report a suspected crime, or assist with an investigation or prosecution. There are other law enforcement agencies other than the police, for example the National Crime Agency, UK Border Force, Immigration Enforcement, HMRC and Gangmasters and Labour Abuse Authority.

Reporting to regulators, supervisory bodies, Ombudsman and HMRC

Workers must be permitted to report misconduct, wrongdoing or serious breach of regulatory requirements to these organisations. They should also be permitted to cooperate with these organisations if and when required to do so.

Giving evidence in a court or tribunal

Workers that are required (summoned) to give evidence at a court or tribunal must be able to do so even though they have signed a settlement agreement with an NDA.

Disclosing information about pay or tax to HMRC

Workers should still be allowed to disclose information to HMRC for the purpose of establishing, paying or recouping tax and national insurance arising from their employment or its termination.

Victims of crime

Where a worker has been a victim of crime or reasonably believes they are a victim of crime, nothing in the settlement agreement must prevent them from making the following disclosures provided they are not made with the primary purpose of releasing the information into the public domain:

1. to any person who has law enforcement functions, for the purpose of those functions being exercised in relation to relevant conduct;
2. to a qualified lawyer, for the purpose of seeking legal advice about relevant conduct;
3. to any individual who is entitled to practise a regulated profession, for the purpose of obtaining professional support in relation to relevant conduct;
4. to any individual who provides a service to support victims, for the purpose of obtaining support from that service in relation to relevant conduct;
5. to a regulator of a regulated profession for the purpose of co-operating with the regulator in relation to relevant conduct;
6. to a person who is authorised to receive information on behalf of a person mentioned in the above bullet points, for the purpose mentioned in that paragraph; or
7. to their child, parent, spouse, civil partner or person they are are in an intimate personal relationship with which is of significant duration, for the purpose of obtaining support in relation to relevant conduct.¹

The terms ‘victim’, ‘relevant conduct’, ‘regulated profession’ and ‘regulator’ have specific meanings given to them in the Victims and Prisoners Act 2024, and the term ‘qualified lawyer’ shall mean a person who is an authorised person in relation to a reserved legal activity for the purposes of the Legal Services Act 2007.²

Regulated Employers

Regulated Employers, for example law firms, banks and firms in finance services, are subject to specific regulatory rules and codes regarding non-financial misconduct that touch upon the use, content and approach to NDAs.

Higher Education Sector

English Higher Education employers are now bound by new legislation³ banning the use of NDAs with staff, members, students or visiting speakers in connection with a complaint of sexual abuse, sexual harassment, sexual misconduct, or other bullying or harassment.

Academy Schools

The Academy Trust Handbook issued by the Department for Education was updated in 2025. In addition to Trusts needing approval for special severance payments, the new handbook stipulates that approval must be obtained when NDAs are used in a severance payment agreement. Trusts will be required to ensure NDAs, amongst other things, do not prevent adequate public scrutiny including by the National Audit Office and Public Accounts Committee.

Financial Services

FCA regulated firms must comply with strict requirements when using NDAs or settlement agreements with employees.

Under SYSC 18.5 of the FCA Handbook⁴, firms must ensure that any settlement agreement expressly states that workers may make protected disclosures. NDAs must not include warranties requiring employees to confirm they have no reportable concerns.

From 1 September 2026, new FCA guidance under PS25/23 will clarify that serious non-financial misconduct (‘NFM‘)—including bullying, harassment, and violence in work contexts—constitutes a breach of the FCA’s code of conduct (‘COCON‘) rules for all SMCR firms, such as banks, building societies, insurers, investment firms, including Independent Financial Adviser firms, amongst others.

This expansion is significant for NDAs because it broadens the scope of “reportable concerns” to the regulator.

Critically, the guidance confirms that serious NFM must be disclosed in regulatory references under SYSC 22, which settlement agreements cannot prevent. NDAs should not be used to suppress information about NFM when providing references for individuals moving between firms. Firms should review existing NDA templates to ensure they remain compliant with the expanded definition of reportable conduct and do not inadvertently restrict regulatory reference disclosures.

Inappropriate Warranties

Warranties are contractual statements or promises that something is true. They are routinely used in settlement agreements to confirm the employee has no other claims, has taken the required legal advice etc.

Warranties are drafted in such a way that a breach could result in the employee having to repay the settlement monies or be responsible for the employer’s costs.

A warranty that amounts to a promise that the worker is not aware of anything that would be criminal offence or whistleblowing disclosure should not be used in a settlement agreement.

This is because:

1. Their inclusion can “put the worker in a very difficult position; they may feel under pressure to agree to the warranty even though they are aware of such information. If the worker then discusses the information at a later date, the employer may say they have breached the warranty. In this way, the warranty will potentially have the same silencing effect as a confidentiality agreement”⁵ and
2. They can have the effect of “improperly preventing or inhibiting permitted reporting or disclosures being made. For example, asking a person to warrant that they are not aware of any reason why they would make a permitted disclosure, in circumstances where a breach of warranty would activate a claw back clause.” ⁶

Non-disparagement obligations

Another common feature of settlement agreements is the non-disparagement or derogatory comments clause, where the employee agrees not to make any written or oral derogatory comments about the employer or its directors, employees or workers. It is important that these clauses do no indirectly prevent the types of permitted disclosures I detail above.

Admissibility of Settlement Offers

Whether a settlement offer is admissible in an employment tribunal case comes down to the deciding whether the offer falls under the without prejudice rule, or is a protected conversation as per Section 111A of the Employment Rights Acts 1996.

FAQs

About the Author

John Hassells is an employment solicitor and Head of Legal at settlementagreement.co.uk. John acts for senior executives and employees in relation to settlement agreements and related legal issues. Before setting up his own law firm, John was an employment solicitor at one of the UK’s top law firms in the UK, and a partner and Head of Employment for a leading commercial law firm. John is a qualified solicitor, acting for individuals as a consultant solicitor through a fully authorised and regulated law firm. With over 20 years’ experience advising employees and employers on employment law matters, employment disputes and settlement agreements, John takes a leading role is producing and reviewing our legal content. John is member of the Employment Lawyers Association, regularly delivers employment law training and provides media comment on developments in employment law.

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Legal Disclaimer

The contents of this article are intended to be be for general information purposes only and do not amount to (nor are they intended to be) legal, tax or financial advice or a complete or authoritative statement of the law nor should they be treated as such. No warranty or promise is given, express or implied, as to accuracy of the information on this page and no liability is accepted for any error or omission. You should instruct a specialist employment solicitor to advise you on your particular situation and not act or rely on the information on this page.