Confidentiality and Legal Protections in Settlement Agreements: What Employees Should Know

Confidentiality plays a central role in almost every settlement agreement. These clauses protect both the employee and the employer. They can influence reputation, future employment opportunities and legal rights. Yet many employees sign confidentiality terms without fully understanding what they mean, how far they reach or what rights they still retain.

It’s important to know how NDAs fit into settlement agreements and what happens if confidentiality is breached. You should understand the legal protections employees must be aware of before signing.

Why Confidentiality Matters in Settlement Agreements

Confidentiality clauses exist to protect both parties. For employers, they prevent information about the dispute, the settlement amount and internal processes from becoming public. For employees, they can protect their reputation and ensure matters are resolved quietly and professionally.

Confidentiality is also linked to the idea of a “clean break.” Once the agreement is signed and payments made, both sides agree not to revisit the dispute or discuss it externally.

You can learn more about why confidentiality plays such an important role in settlement discussions in our article on Why settlement agreements should remain confidential.

What Is a Confidentiality Clause?

A confidentiality clause sets out what can and cannot be shared about the agreement. This typically includes:

• The settlement amount
• The reasons for termination
• The circumstances leading to the agreement
• Any allegations, dispute history or grievance discussions
• Internal processes relating to the case

These clauses usually restrict disclosure to third parties. However, they often include exceptions allowing disclosure to:

This ensures employees can still seek advice and support while maintaining confidentiality.

NDAs vs. Confidentiality Clauses: What’s the Difference?

While the terms are often used interchangeably, an NDA (non-disclosure agreement) is simply a form of confidentiality clause.

In a settlement agreement context, an NDA usually applies to:

• The dispute or allegations
• Company information, clients and trade secrets
• The settlement terms

Most NDAs in settlement agreements are standard and lawful, provided they do not attempt to silence protected disclosures or restrict employees unfairly.

If you are unsure whether your NDA is fair or enforceable? We can advise you before you sign. Request a review from our settlement agreement lawyers.

What Should a Fair Confidentiality Clause Include?

A well-drafted confidentiality clause should clearly explain:

• What information is confidential: This prevents overly broad restrictions.
• Who the employee can speak to: Most agreements allow disclosure to advisers, close family, HMRC, regulators, and medical professionals.
• Whether confidentiality is mutual: Confidentiality should apply to both parties, not just the employee.
• How long the confidentiality lasts: Many clauses are indefinite; others specify a duration.
• Whether future employers can be told why the employee left: This links to the reference clause and the reason for termination.

What Does Confidentiality Not Stop Employees From Doing?

Confidentiality clauses have limits. They cannot prevent employees from:

• Reporting discrimination
• Raising concerns about criminal activity
• Whistleblowing
• Disclosing information to a regulator
• Reporting safeguarding issues
• Reporting health and safety breaches

Under the Public Interest Disclosure Act 1998, any clause attempting to prevent protected disclosures is unenforceable.

Employees also retain the right to pursue personal injury claims that have not yet arisen or been identified.

If you’re worried that a confidentiality clause goes too far, we can check that it complies with the law. Book a consultation with our settlement agreement lawyers.

What Does “Without Prejudice” Mean?

“Without prejudice” discussions allow employers and employees to negotiate exit terms without those conversations being used as evidence later.

These discussions often include:

• Settlement offers
• Reasons for termination
• Negotiated compensation
• Draft agreement terms

Once you’ve signed the agreement, the confidentiality rules then apply. You then decide what you can and can’t talk about. You must decide what you can and cannot talk about before signing the settlement agreement, because confidentiality rules will apply immediately after you have signed it. 

Read more about when without prejudice rules apply in our guide to without prejudice conversations in settlement negotiations.

What Happens If You Breach Confidentiality?

A breach of confidentiality can have serious consequences.
Common outcomes include:

• Repayment of settlement funds: Many agreements require repayment of part or all of the compensation if confidentiality is breached.
• Employer legal action: The employer may seek damages if the breach caused reputational or financial harm.
• Loss of agreed reference: If the reference clause is linked to conduct obligations, a breach may void it.
• Injunctions: Employers may apply for urgent injunctions to prevent further disclosures.

For a full breakdown, see what happens if you breach a settlement agreement, including examples of real-world consequences.

Can Employers Breach Confidentiality Too?

Yes, employers can breach confidentiality, too. Confidentiality in a settlement agreement is mutual unless stated otherwise.

If an employer:

• Discloses your settlement terms
• Makes negative comments about you
• Reveals details of your grievance
• Discusses your departure internally without justification

…they may be in breach and could face legal consequences.

Our settlement agreement solicitors can advise whether you have grounds to take action.

What are Restrictive Covenants?

Confidentiality clauses often sit alongside restrictive covenants. These clauses limit what an employee can do after their employment ends. They are designed to protect the employer’s business interests, such as client relationships or commercial stability.

While these obligations sit alongside confidentiality clauses, they restrict your future actions rather than just sharing information.

Common Restrictive Covenants Include Limits On:

• Working for a competitor (Non-compete)
• Contacting former clients (Non-solicitation of clients)
• Approaching former colleagues (Non-solicitation of employees)
• Sharing commercially sensitive information (Non-disclosure of trade secrets)

Restrictive covenants must be reasonable in scope, duration, and geography to be enforceable.

Can You Be Forced to Sign a Confidentiality Clause?

No employee can be forced to sign a settlement agreement, including confidentiality terms.

Signing must be voluntary. An employer may strongly encourage you to sign, but the final decision is yours.

You should never sign a settlement agreement under pressure, without understanding:

• Your legal rights
• The effect of the confidentiality clause
• What information you’re allowed to share
• The consequences of a breach

How to Protect Yourself Before Signing

Employees should take several steps before signing a settlement agreement with confidentiality obligations:

• Get independent legal advice: Your solicitor must confirm the agreement is fair and lawful.
• Understand what can still be disclosed: You cannot be prevented from whistleblowing or reporting wrongdoing.
• Make sure confidentiality is mutual: Both parties should be bound equally.
• Negotiate unreasonable terms: Confidentiality clauses can be narrowed or reworded.
• Check the reference wording: Ensure it aligns with the confidentiality terms and departure reason.

Protecting Yourself Before You Sign

In summary, confidentiality, NDAs and post-termination obligations are some of the most significant parts of a settlement agreement. They can have long-lasting effects on your career and legal rights.

These clauses must be fair, lawful and balanced. They should never prevent you from making protected disclosures or reporting wrongdoing. Restrictive covenants, repayment terms and agreed references can also shape what happens after your employment ends. It’s essential to understand every obligation before you sign. 

Get the Right Legal Advice

With the right legal advice, you can ensure that your confidentiality terms are reasonable, your ongoing obligations are clear and your rights remain fully protected. 

If you need clarity or reassurance before signing, our settlement agreement solicitors can review your document. We can explain every clause and help you negotiate fairer terms. 

You are legally required to receive independent legal advice from an employment solicitor before you sign a settlement agreement. 

With the right legal advice, you can ensure that your confidentiality terms are reasonable, your ongoing obligations are clear, and your rights remain fully protected. Our settlement agreement solicitors can review your document, explain every clause, and help you negotiate fairer terms.