If you have been offered a settlement agreement, it will almost certainly contain a confidentiality clause — sometimes called a non-disclosure agreement (NDA) or, more bluntly, a “gagging clause”. This guide explains what these clauses can and cannot do, what the law requires employers to permit, and what recent legislative changes mean for you.
1. What is a Confidentiality Clause in a Settlement Agreement?
There are two main types of confidentiality clause. First, clauses that protect an employer’s commercial information — trade secrets, client lists and so on. Second, clauses that restrict what the employee can say about the settlement itself and the dispute that led to it. This guide focuses on the second type.
Confidentiality clauses are intended to restrict what an employee can say about the settlement agreement and the circumstances surrounding it. Employers typically include these clauses in template agreements to protect their business and reputation. They are also referred to as non-disclosure agreements (NDAs).
Whether it is a straightforward redundancy settlement or a more contested exit, a confidentiality clause is almost always part of the package.
2. Bad NDAs — and Why They Still Exist
NDAs can be controversial, and questionable practices unfortunately persist. In my experience as a solicitor who regularly advises employees on settlement agreements, this largely stems from employers and HR teams using outdated agreements that do not reflect current law or good practice.
I still encounter NDAs drafted so widely that they would prevent an employee from seeking medical advice from a doctor, or from going to the police to report a suspected crime. Most people would agree that goes far too far. Including such an over-reaching NDA risks damaging the employer’s reputation — and can create legal or regulatory liability.
When I raise NDA concerns with the HR manager who sent the draft, they usually agree to amend the wording — either themselves or after seeking legal counsel. A diligent solicitor has a duty to raise these issues on the employee’s behalf. From HR’s perspective, an “oven-ready” settlement agreement that can be signed without amendments saves everyone time and cost.
3. Good NDAs — What a Fair NDA Looks Like
A legal and ethical NDA can genuinely protect both parties. It can protect the employer’s reputation, facilitate early settlement, and avoid a public dispute in the tribunal system, while ensuring employees remain free to speak out about wrongdoing through appropriate channels, and to seek any advice and support they need.
Getting the balance right has never been more important. Regulatory and legislative changes are already in force, and further changes are coming — including a new regime that will restrict the use of NDAs in relation to discrimination and harassment (see “Law Changes in the Pipeline” below).
4. Drafting an NDA in a Settlement Agreement
It is almost certain that a settlement agreement will contain a clause requiring the employee not to disclose or use the employer’s confidential information — about its business, its people and its contacts. Those clauses protect commercial interests and are largely uncontroversial.
The NDA proper will say, subject to certain exceptions, that the employee agrees not to disclose: (a) the fact that a settlement agreement exists; (b) its contents; or (c) the circumstances that led to it.
If the settlement agreement contains a blanket NDA with no exceptions — no permitted disclosures — whoever drafted it either does not understand current law or has knowingly drafted an agreement that oversteps ethical and legal boundaries.
5. Permitted Disclosures
There are broadly two categories of permitted disclosures found in settlement agreements: practical ones, and those that exist for the public good — such as the ability to report a crime or make a whistleblowing disclosure.
Practical Permitted Disclosures
Most settlement agreements should allow the employee to make certain necessary disclosures, including to:
- Immediate family — typically a spouse, partner or immediate family member, usually on the basis that they also agree to keep information confidential.
- Legal, tax and financial advisers — who are bound by professional duties of confidentiality, for the purpose of seeking advice.
- A recruiter or prospective employer — to the extent necessary to discuss work history or the agreed reason for leaving. Many agreements also include an agreed employment reference.
- A doctor, therapist or counsellor — bound by professional confidentiality, for the purpose of seeking medical or therapeutic support.
- Benefits agencies — for the purpose of making a state benefits claim.
- Insurers — for the purpose of making an income protection insurance claim.
Permitted Disclosures with a Societal Benefit
Some permitted disclosures are legal requirements. A confidentiality clause will be deemed void (unenforceable) to the extent it purports to prevent them. Others come from codes and warning notices issued by regulators or supervisory bodies.
Whistleblowing
A settlement agreement cannot prevent an employee from making a protected disclosure under the whistleblowing legislation (the Public Interest Disclosure Act 1998). Any NDA clause that purports to do so is unenforceable insofar as it relates to that disclosure.
Reporting to the Police or a Law Enforcement Agency
Workers signing a settlement agreement must be permitted to report a suspected crime, or to assist with an investigation or prosecution. Law enforcement agencies include — but are not limited to — the police, the National Crime Agency, UK Border Force, Immigration Enforcement, HMRC and the Gangmasters and Labour Abuse Authority.
Reporting to Regulators, Supervisory Bodies, Ombudsman Services and HMRC
Workers must be free to report misconduct, wrongdoing or serious regulatory breaches to relevant bodies — and to cooperate with them when required. This applies to sector regulators, professional supervisory bodies and ombudsman services.
Giving Evidence in Court or Tribunal
If a worker is required (summoned) to give evidence at a court or employment tribunal, a confidentiality clause cannot prevent them from doing so.
Disclosures to HMRC about Pay or Tax
Workers must remain able to disclose information to HMRC for the purpose of establishing, paying or recouping tax and National Insurance arising from their employment or its termination. See our guide to tax and settlement payments for more detail.
Victims of Crime
Where a worker has been a victim of crime — or reasonably believes they have been — nothing in a settlement agreement can prevent them from making the following disclosures, provided they are not made primarily to release information into the public domain:
- To any person with law enforcement functions, for the purpose of those functions being exercised in relation to the relevant conduct;
- To a qualified lawyer, for the purpose of seeking legal advice;
- To any individual entitled to practise a regulated profession, for the purpose of obtaining professional support;
- To any individual who provides a service to support victims;
- To a regulator of a regulated profession, for the purpose of cooperating with that regulator;
- To a person authorised to receive information on behalf of those listed above; or
- To their child, parent, spouse, civil partner, or person they are in a significant intimate personal relationship with, for the purpose of obtaining support.
These provisions come from Section 17 of the Victims and Prisoners Act 2024. The terms “victim”, “relevant conduct”, “regulated profession” and “regulator” have specific statutory meanings under that Act.
6. Regulated Employers
Regulated employers — including law firms, banks and financial services firms — are subject to additional sector-specific rules on NDAs.
Higher Education
English higher education providers are now bound by legislation — the Higher Education (Freedom of Speech) Act 2023 — that bans the use of NDAs with staff, students, members or visiting speakers in connection with complaints of sexual abuse, sexual harassment, sexual misconduct, or other bullying or harassment.
Academy Schools
The Academy Trust Handbook (updated 2025) now requires Trusts to seek approval before using NDAs in severance agreements. Approved NDAs must not prevent adequate public scrutiny, including scrutiny by the National Audit Office and the Public Accounts Committee.
Financial Services Firms
FCA-regulated firms must comply with strict requirements when using NDAs with employees. Under SYSC 18.5 of the FCA Handbook, any settlement agreement must expressly state that workers may still 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 COCON conduct rules for all SMCR firms. This broadens the scope of “reportable concerns” considerably.
Critically, the guidance confirms that serious NFM must be disclosed in regulatory references under SYSC 22 — something that settlement agreements cannot prevent. Firms should review existing NDA templates now to ensure they remain compliant.
7. Inappropriate Warranties in Settlement Agreements
Warranties are contractual statements that something is true. They are routinely used in settlement agreements to confirm that the employee has no other claims, has taken the required legal advice, and so on. A breach of warranty can entitle the employer to demand repayment of the settlement sum.
A warranty requiring a worker to confirm they are unaware of anything constituting a criminal offence or a whistleblowing disclosure should not be used in a settlement agreement. Such a warranty:
- Puts the worker under pressure to agree even if they are aware of relevant information — and can have the same silencing effect as an unlawful confidentiality clause;
- May improperly prevent or inhibit permitted disclosures — for example, by triggering a clawback clause if the worker later makes a protected disclosure.
Sources:
1. Equality and Human Rights Commission, Guidance on the use of confidentiality agreements in discrimination cases (October 2019).
2. Solicitors Regulation Authority Warning Notice on NDAs
8. Non-Disparagement Clauses
Most settlement agreements also contain a non-disparagement clause (sometimes called a non-bad-mouthing or derogatory comments clause), requiring the employee not to make any written or oral derogatory comments about the employer, its directors or its staff.
These clauses must be drafted carefully so they do not indirectly prevent the types of permitted disclosures described above. They will almost always apply to social media — so be cautious about any posts that could identify your employer, even cryptic ones that colleagues will “get”.
It is also worth asking whether the employer will agree to a reciprocal non-disparagement obligation — preventing it (or specific named individuals) from saying anything negative about you. Employers are often reluctant, but it may belegitimate ask depending on the circumstances.
9. Confidentiality Law Changes in the Pipeline
The Employment Rights Act 2025 will introduce significant further changes. Confidentiality clauses will no longer be permitted to prevent the disclosure of allegations relating to discrimination and harassment — unless they meet specific conditions to qualify as an Excepted Agreement (also called an Excepted NDA). This is one of the most important changes to NDA law in many years and affects both employees and employers negotiating settlement agreements.
The without prejudice rule and the protected conversations regime under s.111A of the Employment Rights Act 1996 remain relevant to whether a settlement offer or negotiation can be used in tribunal proceedings.
10. FAQs: Confidentiality in Settlement Agreements
What happens if I badmouth my employer after signing a settlement agreement?
Most settlement agreements include a non-disparagement clause preventing derogatory comments about the employer, its directors or employees. If you breach it, your employer may take legal action against you — and depending on how the agreement is drafted, could seek repayment of the settlement sum.
Can I ask for a reciprocal non-badmouthing promise from my employer?
Yes, you can ask. In practice, it is difficult for large employers to bind all their staff, but it may be possible to agree that specified individuals (such as your manager) are instructed not to make disparaging remarks.
How long does a confidentiality obligation last?
Usually indefinitely — most settlement agreements have no time limit on confidentiality. However, if information enters the public domain through means other than your own breach, it generally ceases to be confidential.
Who can I tell about my settlement agreement?
Usually your spouse or partner and immediate family (on the basis they keep it confidential), your solicitor, and your accountant or financial adviser. There are also various statutory permitted disclosures — your solicitor will advise you on these. You cannot generally inform colleagues or former colleagues. But your solicitor should advise you on your settlement agreement confidentiality terms.
Can I tell colleagues about the settlement offer?
Probably not without breaching confidentiality. One practical solution is to negotiate an agreed announcement about your departure, set out in the settlement agreement itself. This gives you something to say to colleagues without breaching the NDA, and can take the pressure off considerably.
What can I tell a new employer or recruitment agency about why I left?
Confidentiality clauses typically prevent you from disclosing the settlement agreement itself, but many agreements do allow you to confirm your reason for leaving — for example, redundancy. Most agreements also include an agreed employment reference, which you and the employer agree before the agreement is signed.
Does confidentiality apply to LinkedIn and social media?
Yes. Confidentiality and non-disparagement obligations in settlement agreements apply to social media. Do not assume a post is safe because your privacy settings are restricted — if colleagues and ex-colleagues can identify who you mean, a court may well find you are in breach.
Once I have been paid, can my employer take action if I breach confidentiality?
Yes. Depending on the nature of the breach and how your agreement is drafted, you may be required to repay the termination payment. If confidential information has been misused — for example, to poach a client — the employer may have a financial loss claim. In serious cases it may also seek a court order requiring the return of confidential information, with the prospect of paying the employer’s legal costs if the order is granted.
Is taking confidential data a criminal offence?
It can be. Misusing personal data — such as copying a client database — may constitute a criminal offence under section 170 of the Data Protection Act 2018. The Information Commissioner’s Office (ICO) has prosecuted former employees who wrongly accessed or took personal data, and employers are legally required to report serious data protection breaches.
Can an NDA prevent me from speaking to my doctor?
No — and any clause purporting to do so is likely unenforceable and reflects poor drafting. Disclosures to medical professionals for the purpose of seeking health support are a standard permitted disclosure in well-drafted settlement agreements. If your draft settlement agreement lacks this exception, speak to your solicitor to include it.
Legal Disclaimer
The contents of this article are intended to 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.
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