Does a settlement agreement have to be confidential?

The terms of a settlement agreement will be confidential.

Settlement agreements usually include a clause requiring the employer and employee to keep the existence and terms of the agreement confidential. Employers are often particularly keen to ensure that word doesn’t get out about compensation payments because they won’t want it to be common knowledge that they are prepared to reach settlement deals. There is concern that confidentiality is used to sweep conduct like harassment under the carpet, because it serves to enable the employer to keep quiet the situation that led to the agreement.

What is the standard confidentiality clause in a settlement agreement?

A settlement will usually say that the employee can’t disclose any confidential information or trade secrets, and must comply with the terms of the confidentiality clause in their contract of employment. It should define what “confidential information” means in the context of the settlement agreement. In addition, the settlement agreement will also require the employee not to disclose the terms and existence of the settlement agreement.

Bear in mind that whatever the settlement agreement says, employees will already have confidentiality obligations to their employer.  A duty to keep trade secrets and information that amounts to a trade secret confidential is implied into all contracts of employment.  Most well drafted contracts of employment will include an expressly set out confidentiality clause defining what counts as “confidential information”.

What are the exclusions to the confidentiality agreement?

Confidentiality clauses will usually have “carve outs” or things that would usually be confidential, but which are excluded from the confidentiality obligations. For instance, it is usual to say that the employee mustn’t tell anyone except their spouse/civil partner, immediate family, HMRC, recruiters and prospective employers, and “as required by law” (this last one is a catch all that covers things like the Courts/Employment Tribunals, or other bodies where the employee would be obliged to disclose the confidential information).

The settlement agreement would also usually say that if information becomes public – but not by the employee breaching their obligations – then the employee can talk about that information. There’s no reason to prevent the employee talking about something that is now public – as long as it wasn’t because of the employee’s actions.

Can you disclose a settlement agreement?

As outlined above, a settlement agreement will contain a confidentiality clause banning the employee from talking about the agreement. However, assuming that some groups of people are excluded from the confidentiality clauses, the employee remains free to talk to them.

This would normally include spouse/civil partner, immediate family, HMRC, recruiters and prospective employers, but you can include anyone relevant.  For instance, we’d often ask to include close friends to whom the employee has turned for support, and people like the employee’s companion at meetings with the employer under a grievance procedure.

Settlement agreements may include terms that try to dissuade you from whistleblowing.

Can you whistleblow after a settlement agreement?

No confidentiality clause can validly prevent you from blowing the whistle, provided you comply with the whistleblowing regime in terms of who you report to, and whether you make a “protected disclosure” in line with the whistleblowing laws.

That said, settlement agreements may include terms that try to dissuade you from whistleblowing, by making it difficult for you to make protected disclosures, or making it appear that you’ll take a financial risk if you go ahead. By the time you are negotiating a settlement agreement, usually there’s a good reason to want to put the whole situation behind you.  As such, you may be content to move forward even if you are prevented from blowing the whistle.

However, if you plan to make whistleblowing disclosures after signing the settlement agreement, your solicitor will need to advise you on the implications of doing so, and on any potential costs and risks involved.

Any questions on confidentiality?

These are some of the common issues and queries that relate to confidentiality in settlement agreements.  If you have any questions about these or anything else, just get in touch with our Employment law solicitors at employment@qlaw.co.uk or on 03300 020 863.

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