If you’ve been offered a settlement agreement your immediate reaction may be: ‘I’ve no problem keeping everything confidential’. However, some settlement agreements go further than some employees would like when it comes to gagging them.
Breach the agreement and you may lose the termination payment. You may even face court action for an injunction, damages for losses your employer has suffered and/or the legal costs your employer has racked up with its solicitors.
Confidentiality and Non-Disclosure Arrangements in Settlement Agreements
Be careful about what you sign up to!
What this guide covers
- The types of confidentiality and non-disclosure arrangements in settlement agreements.
- Non-badmouthing clauses.
- What can I tell a new employer?
- What can tell a recruitment agency?
- Social media and settlement agreements.
- What happens if I breach confidentiality / non-badmouthing?
- Can breaching confidentiality be a criminal offence?
- Can I still be a witness in a court case?
- Can I still blow the whistle?
- Can I still report a complaint (like harassment) to the police or a regulator?
- Seeking amendments / common amendments to non-disclosure terms
- Protected Conversations and the Without Prejudice Rule.
- Industry specific rules (financial services, care, solicitors, public sector).
1. You only skim read the confidentiality clauses.
If you don’t read the clauses or understand them you risk breaching the settlement agreement in ignorance.
Understandably, employees focus on the clauses at the start of the agreement dealing with payment of wages, holiday pay and termination payments and skim the detail in relation to clauses that come later dealing with the likes confidentiality.
An obvious but important point: make sure you read the all of the settlement agreement slowly and carefully. And then come back to it, the next day, and reread it. If you’re still unsure ask your solicitor to clarify.
The types of confidentiality and non-disclosure arrangements in settlement agreements.
Many settlement agreements require an employee not to disclose:
- General Confidential Information you learned during your employment. For example, information about your employer’s customers.
- Confidential stuff in the settlement agreement. For example, how much your employer is paying.
- The fact your settlement agreement even exists.
- The stuff leading up to the settlement agreement (for example a grievance or dispute you may have raised).
2. You bad-mouth your ex-employer and get found out.
Most settlement agreements contain a clause that requires the employee not to say or write anything derogatory or negative about the employer, its directors or employees. These are sometimes known as non-bad-mouthing or slagging-off clauses.
The list of people you’re usually required not to say anything bad about tends to vary – and can be ridiculous sometimes. For example, how are you supposed to know who is (and isn’t) an employee of a large employer with multiple sites and 1000 or more employees? If you don’t know who they are how can you agree not to badmouth them? Standard clauses can make bad clauses if they are applied for every employer / employee situation. This is something you can discuss with your solicitor.
If you’re unsure about whether to sign up to one of these clauses, or you’ve been accused of breaching one, read this guide: Derogatory Comments Clauses in Settlement Agreements.
3. You assume you can’t ask for a reciprocal non-badmouthing promise from your employer.
If the agreement is one-sided, ask your lawyer about getting an amendment so your employer agrees not to say anything derogatory about you. Or at least see if the employer will agree to take reasonable steps to ensure its staff (possibly in some cases specific named in the agreement) will not say anything awful about you. For example if you’ve fallen out with your line manager and you are concerned he/she will badmouth you, they could be named in he agreement as someone the employer will speak to about not bad-mouthing you. There are limits on what can be achieved, but the aim is to deter your manager from saying anything negative about you (because their employer has told them not to).
4. You think enough time has passed that your employer won’t care or find out.
Confidentiality and non-derogatory comment clauses are not time limited. There is no period after which you will be free to bad-mouth your employer.
5. You assume you are safe to disclose to your new employer / prospective employer.
This is a dangerous approach. There are many ways that a breach of confidence may come to the attention of your employer. Sharing confidential information with your new employer may be the worst kind of breach of confidence if they are competitive and/or in the same industry.
Who can you tell?
Normally you will be allowed to speak to your spouse or partner and your legal adviser about the existence, terms and circumstances surrounding the settlement agreement. This exception is usually subject to your spouse / partner agreeing to keep the information confidential.
Can I tell my Colleagues?
Probably not without breaching the agreement. Sometimes, agreeing an announcement about you leaving is a good idea. The agreed announcement can be set out in the settlement agreement so that when its signed, it can be released. This solves the dilemma about how to respond to interested colleagues when they ask what’s going on. The agreed announcement fills that vacuum and can help to take the pressure off the employee.
What can I say to a new or prospective employer or recruitment agency?
Confidentiality clauses normally prevent you from telling a new employer about the settlement agreement. Sometimes the agreement will say you can tell a new or prospective employer the reason you left your employment, for example if you’ve been made redundant. Many settlement agreements also include an agreed job reference.
5. You Assume Social Media Doesn’t Count.
Confidentiality and non-badmouthing obligations in settlement agreements will almost always apply to social media. So be careful what you write!
6. – You think you’re okay because only your friends can see your social media messages.
It only takes a mistake, or for a friend to innocently share your message, and its out there, potentially being seen by your employer or its staff.
You don’t want your ex-employer’s solicitor writing to you with a screen grab of that ‘late night’ Facebook message slagging off your employer.
7. You think keeping it vague or being cryptic will mean you’re okay.
Some employees think the cryptic social media post (that their friends, ex colleagues and followers will ‘get’) is the smart way of getting around the non-badmouthing obligation. Be careful. If the recipients of your message/tweet/update know who you’re talking about, it may not be that difficult for your employer to convince a court you’re in breach.
8. Once I’ve been paid, there’s nothing the employer can do to get it back?
Not true. Depending on the nature of the settlement agreement breach and how your settlement agreement is drafted, you may be legally required to pay back the termination payment.
If you’ve used or disclosed confidential information, your employer may instruct a solicitor to write to you, asking for the confidential information to be returned. But if the breach has caused the employer a loss, for example you’ve used confidential customer information to poach a customer, there may be a clear financial loss your employer can sue you for.
Worse still, if you don’t take a breach seriously, and if the employer is concerned it could suffer continued harm, it may go to the court for an Order compelling you to return confidential information and not breach your obligations. If that happens, an employee could be ordered to pay some of the employer’s legal costs, which will probably run into the thousands.
Most employees will be prepared to sign-up to a non-bad-mouthing clause if the rest of the settlement (and the severance payment) is good enough.
Even if something bad has happened at work, many employees will be prepared to treat the settlement agreement as a clean break and move on with their lives. This may include agreeing not to bad-mouth the employer and its employees.
Sometimes employees feel better if they can secure a mirror / reciprocal obligation from an employer. However, because the employer is usually a company rather than a living person, there are limits on what the company can do to prevent its staff from bad-mouthing you. Usually, the employer will therefore only agree not to encourage or induce its staff not to saying about bad, or to use its reasonable endeavours to stop them doing so.
9. You assume taking confidential information can’t be a criminal matter.
If a breach of confidentiality involves taking or misusing personal data, for examples the names and details of individual customers, an employee could face criminal prosecution. With the introduction of much tougher data protection laws in the UK (effective from 25 May 2018) employers will be legally required to report serious data protection breaches, which will include an ex-employee taking personal data.
The information commissioner has prosecuted ex-employees from GP’s secretaries that accessed patient data to recruitment consultants that took a database of candidates. Criminal prosecutions are usually brought under section 55 of the Data Protection Act 1998 (‘DPA’) (soon to be updated when the General Data Protection Regulation is introduced int law on 25 May 2018).
Section 55 of the DPA details how and when a person is guilt of the offence of unlawfully obtaining personal data.
The ICO has warned employees it is against the law to take client’s personal information to a new company.
10. You think signing up to confidentiality means you can’t be a witness in a legal case.
Most confidentiality terms make clear they do not stop an employee disclosing information (even if it is confidential) they are required to disclose as a matter of law.
If you are ordered to give evidence at court you must comply with that order. Volunteering to give evidence is not the same thing, however. It is sensible to get legal advice if you want to be a witness.
11. You assume you can’t blow the whistle on your employer (because you’ve signed up to a confidentiality clause).
The legislation law concerning whistleblowing out trumps a contractual confidentiality agreements. That means employees (and ex-employees) may make a protected disclosure (the technical name for whistleblowing) even if they’ve signed a settlement agreement.
In recognition of this many settlement agreements will contain a clause along the lines “nothing in this agreement shall prevent an employee from making a protected disclosure under section 43A of the Employment Rights Act 1996’ or words to that effect.
IMPORTANT WARNING. There are very strict definitions as to what is and is not a protected disclosure. The nature of the things you disclose, why they are being disclosed, and to whom you disclose them, as all relevant to establishing whether it’s a protected disclosure. So, if you are intending on blowing the whistle after you have signed a settlement agreement you should first seek independent legal advice to be very sure of your position.
12. If I sign a settlement agreement, I can’t report a concern to a regulator can I?
Many settlement agreements are drafted in a way that would prevent an employee reporting confidential issues (even if they were concerns) to a regulator, unless they fall under the definition of a protected disclosure (see number 11 above).
If the ‘concern’ is about a breach of a legal obligation, it may potentially fall under the definition of a protected disclosure (whistleblowing). But is it lawful to stop an employee raising a concern to a regulator, if that concern falls short of being a protected whistleblowing disclosure?
Recent developments and commentators have begun to move in the direction of saying it is wrong to inappropriately stop this kind of reporting. For example, the regulator for solicitors (the Solicitor Regulation Authority) issued a warning in March 2018 to all solicitors about settlement agreements being used to deter reporting of harassment or other misconduct towards employees or others. A failure by a solicitor to comply with professional standards could result in that solicitor facing misconduct proceedings brought against the solicitor.
“We consider that NDAs would be improperly used if you sought to use an NDA [Non-Disclosure Agreement] as a means of preventing, or seeking to impede or deter, a person from:
- reporting misconduct, or a serious breach of our regulatory requirements to us, or making an equivalent report to any other body responsible for supervising or regulating the matters in question
- making a protected disclosure under the Public Interest Disclosure Act 1998
- reporting an offence to a law enforcement agency
- co-operating with a criminal investigation or prosecution.”
(Extract from SRA Warning on Non-Disclosure Agreements 12 March 2018).
This means an employee working in a regulated sector, for example solicitor practices, care and financial services, may be able to report relevant concerns to the regulator, even if they have signed a settlement agreement containing non-derogatory or confidentiality terms. But the law in this area is far from clear and the employer may claim you are in breach of the settlement agreement terms.
We strongly recommend you seek legal advice before doing so, to ensure the precise circumstances of your case (and the settlement agreement terms) are considered to properly understand what (if any) risks you have by going to a regulator or the authorities.
13. You think the settlement agreement wording can’t be amended.
Negotiating a better settlement agreement is not just about the financial terms. It often important to negotiate the written terms to protect the employee and avoid risks and problems later on.
Speak to your solicitor about any concerns you have or changes you’d like to make.
Don’t sign up to promise to do something you’re not going to be able to deliver on. And consider seeking changes to the commitments you’d prefer not to sign-up to.
Think about changes to the agreement as falling into two categories: ‘deal breakers’ or ‘would likes’.
14. Misunderstanding the terms ‘protected conversation’ and ‘without prejudice’.
These cover the admissibility of the settlement offer in a court or tribunal case. Often a conversation about an offer won’t be ‘protected or without prejudice’, even if it’s marked as such.
But whether its protected or not won’t matter if you accept the offer and sign the settlement agreement.
If you turn down the offer and you are thinking about using what was said in a settlement agreement offer against your employer, read our: ‘Protected Conversations Guide’.
15. It doesn’t matter what industry I work in.
In some industries or sectors there are specific rules on what an employer has to disclose about the employee, to a prospective employer, and what an employee must be able to disclose to the regulator. The Finance Conduct Authority, for example, has specific rules for regulated financial institutions to support whistleblowers and change the culture with the introduction of whistleblowing champions.
Whistleblowing and confidentiality in financial services
The FCA Handbook, SYSC 18 sets out rules on the drafting of settlement agreements, including:
“A firm must include a term in any settlement agreement with a worker that makes clear that nothing in such an agreement prevents a worker from making a protected disclosure…
Firms must not request that workers enter into warranties which require them to disclose to the firm that they have made a protected disclosure; or they know of no information which could form the basis of a protected disclosure.
Firms must not use measures intended to prevent workers from making protected disclosures.”
If you work in a regulated sector, you can speak to one of our solicitors for sector specific legal advice on your settlement agreement.
Further Reading and Resources
- The Employee’s Ultimate Guide to Settlement Agreement Guide
- 15 Mistakes Employees make Negotiating a Settlement Agreement
- Am I entitled to a job reference?
- Financial Conduct Authority Whistleblowing Guidance
- Care Quality Commission Guidance on Reporting Concerns
- Solicitor Regulation Authority Guidance on Use of Non-Disclosure Agreements.
IMPORTANT: The contents of this page are for guidance only and are not intended to be (and do not constitute) legal advice. You are recommended to seek independent legal advice from an employment solicitor that advises employees, on your situation without delay.