Employment settlement

NDA in a UK Settlement Agreement: What the Confidentiality Clause Covers

Settlement agreements — formerly called compromise agreements — almost always include a confidentiality clause that functions as an NDA. This guide explains what a UK settlement agreement confidentiality clause can and cannot cover, how the Employment Rights Act 2025 changes the rules, and when independent legal advice is required before signing.

By Richard Wood, Founder9 min readUpdated 18 June 2026Last reviewed 18 June 2026settlement agreementNDAemployment lawUK law

When a UK employment dispute is resolved without a tribunal, the parties usually sign a settlement agreement — a legally binding contract in which the employee gives up the right to bring specified employment claims in exchange for a payment and agreed terms. Almost every settlement agreement includes a confidentiality clause, and that clause functions in practice as a non-disclosure agreement: it restricts what the departing employee can say about the payment, the circumstances of their departure, and sometimes the employer's broader business affairs. Understanding what that clause can and cannot lawfully cover is essential before signing.

This is general information, not legal advice

NDASafe is a document preparation service, not a law firm. Our templates are legally reviewed against applicable UK law at the point of release, but every situation is different. Where significant value, unusual risk or a cross-border element is involved, take independent legal advice before you sign.

What a settlement agreement and its confidentiality clause are

A settlement agreement (previously called a compromise agreement before the Employment Rights Act 2013 renamed it) is a statutory contract under section 203 of the Employment Rights Act 1996. It is the only mechanism by which an employee can validly waive employment rights — claims for unfair dismissal, wrongful dismissal, discrimination and other statutory entitlements cannot be compromised by a simple contract; they require a formal settlement agreement with independent legal advice.

The confidentiality clause within a settlement agreement is typically one of two or three operative provisions. It usually restricts the employee from disclosing: (a) the fact and amount of the settlement payment, (b) the circumstances and reasons for the termination, and (c) any wider confidential business information of the employer. Some employers also request a mutual confidentiality clause — binding both the employee and employer — though in practice the restrictions are asymmetric, with the employee's obligations typically more detailed.

A settlement agreement confidentiality clause is not a standalone NDA — it is a provision within a broader contract that also waives employment claims, agrees a reference, and provides payment. The NDA element cannot be extracted from the agreement and treated as an independent document.

What the confidentiality clause can cover

Settlement agreement confidentiality clauses typically restrict disclosure of the following, and these restrictions are generally enforceable:

The financial terms of the settlement: the amount paid, any breakdown between contractual and ex gratia payments, and any non-financial benefits agreed (continuation of health insurance, equity treatment, and so on).
The circumstances of departure: the reason employment ended, any disputed matters that led to the settlement, and the fact that any disputed claim was resolved. Employers are particularly concerned to protect reputational information.
Business information shared during employment: trade secrets, client lists, financial data, strategic plans, and other genuinely confidential employer information the employee encountered in their role. This extends the obligation beyond the settlement itself to the broader employment relationship.
The existence of the agreement itself: some agreements include a clause preventing the employee from confirming or denying that a settlement was reached, not just its terms. The enforceability of this is narrower, particularly where the employee needs to disclose the fact of settlement to a prospective employer or for benefit purposes.

What the confidentiality clause cannot lawfully cover

Regardless of what the agreement says, certain disclosures cannot be restricted by a settlement agreement confidentiality clause:

Independent legal adviser: you must be free to disclose all terms to the solicitor or adviser advising you on the agreement — this is a precondition of validity under the Employment Rights Act 1996.
HMRC and tax purposes: disclosure to HMRC for a tax return or tax investigation cannot be prevented.
Spouse or civil partner: most settlement agreements expressly permit disclosure to a spouse or civil partner. If the clause does not include this carve-out, it is worth negotiating before signing.
Prospective employers and benefits: the employee must be free to confirm to a new employer or Job Centre that their employment has ended and the date of termination.
Protected disclosures (PIDA 1998): a settlement agreement cannot prevent a qualifying protected disclosure under the Public Interest Disclosure Act 1998. Any clause purporting to do so is void.
Reporting a criminal offence: a clause purporting to prevent the employee reporting a criminal offence to the police or another appropriate authority is void as contrary to public policy.
Cooperation with regulators: disclosure to the FCA, SFO, CMA, ICO, or any other statutory regulator in the course of regulatory functions cannot be contractually restricted.
Victim reporting (Victims and Prisoners Act 2024): a clause preventing the employee reporting harassment, abuse, or a related criminal matter protected under the Victims and Prisoners Act 2024 is void.

ERA 2025 changes are coming for harassment and discrimination clauses

Section 202A of the Employment Rights Act 2025, expected to come into force in 2027, will make void any clause in a settlement agreement that purports to prevent an employee or worker disclosing information about workplace harassment, bullying, or discrimination. The 2026 government consultation proposes 'excepted agreements' with strict conditions — independent legal advice, a 14-day cooling-off period, and a permitted disclosure list — for the narrow category of agreements that can still apply to these disclosures. Commercial confidentiality clauses are entirely unaffected.

The independent legal advice requirement

For a settlement agreement to be legally binding, section 203 of the Employment Rights Act 1996 requires the employee to have received independent legal advice from a qualified adviser — typically a solicitor or barrister — before signing. The adviser must be named in the agreement and hold current professional indemnity insurance.

This requirement cannot be waived. A settlement agreement signed without independent legal advice is not binding, even if the employee agreed to waive their right to it. Employers almost always contribute to the cost of the employee's legal advice as part of the settlement — typically £250–£500 as a standard contribution.

The adviser's role is to explain the terms of the agreement (including the confidentiality clause), advise on the claims being waived, and confirm in writing that they have given that advice. They are not required to negotiate the terms, though they often do.

A 10-day reflection period is the standard recommended minimum between receiving the settlement agreement and signing. The 2026 government consultation on Employment Rights Act 2025 regulations proposes extending this to 14 days as a mandatory minimum for the new ‘excepted agreements’ category covering workplace harassment and discrimination.

Difference between a settlement NDA and a standalone employee NDA

A settlement agreement confidentiality clause and a standalone employee NDA are different instruments that serve different purposes.

A standalone employee NDA is signed during the employment relationship — at the start of employment or before a sensitive project. It protects the employer's confidential information and trade secrets during and after employment, independently of any subsequent termination.

A settlement agreement confidentiality clause is signed at the end of employment as part of a legally prescribed contract. It addresses the terms of departure specifically — the payment, the circumstances, any disputed claims — alongside broader employment confidentiality obligations. It cannot be extracted from the settlement agreement and treated as a standalone NDA.

The two instruments can coexist: an employee might have signed a standalone NDA at the start of employment, and then a settlement agreement with its own confidentiality clause at the end. Both are independently enforceable over their respective subject matter.

Standalone employee NDA templates for UK businesses

If you need a standalone employee NDA — for use at the start of employment, before a sensitive project, or as an agreement that is not part of a settlement — NDASafe's Employee NDA includes mandatory whistleblowing carve-outs (PIDA 1998), victim-reporting carve-outs (Victims and Prisoners Act 2024), and optional non-compete and IP-assignment blocks. £29, editable Word document delivered instantly.

Step by step

1
Review the scope of the confidentiality clause
Read exactly what the clause covers: the terms of the agreement, the settlement payment, the circumstances of departure, or all three. Some clauses are narrow (just the financial terms); others are broad (all information relating to the employment relationship). Understand what you are agreeing not to disclose and to whom before signing.
2
Identify what the clause cannot lawfully restrict
A settlement agreement confidentiality clause cannot prevent you disclosing to your solicitor, to HMRC, to a prospective employer for a reference check, to a Job Centre for a benefits claim, or to any regulator, the police, or the courts. It also cannot prevent a protected disclosure under PIDA 1998 or disclosure protected under the Victims and Prisoners Act 2024. Any clause purporting to restrict these disclosures is void.
3
Take independent legal advice before signing
A settlement agreement is only legally binding if you receive independent legal advice from a qualified adviser (typically a solicitor) before signing — this is a statutory requirement under section 203 of the Employment Rights Act 1996, not optional. Your adviser must be named in the agreement and hold professional indemnity insurance. Employers typically contribute £250–£500 towards the cost of that advice as part of the settlement.
4
Check the duration of the confidentiality obligation
Most settlement agreement confidentiality clauses run indefinitely for the financial terms and circumstances of departure. This is generally acceptable. Where the obligation extends to broader business information, check whether an indefinite term is proportionate — trade secrets warrant indefinite protection; ordinary business information typically warrants a fixed term of 2–5 years.
5
Understand the consequences of breach
Read the repayment clause carefully. Some repayment obligations are triggered by any breach regardless of whether the employer suffers loss; others require proportionate repayment linked to actual loss. If you need to make a disclosure — for example, to a regulator or a new employer — and are uncertain whether this would constitute a breach, take legal advice before making it.

Frequently asked questions

Can a settlement agreement NDA prevent me from discussing my dismissal with anyone?

No. A settlement agreement confidentiality clause cannot prevent you disclosing the terms to your legal adviser, to HMRC for tax purposes, to your spouse or civil partner (unless the agreement specifically restricts this), to a prospective employer or Job Centre for the purpose of seeking work or benefits, or to any regulator, the police, or the courts. It also cannot prevent a protected disclosure under the Public Interest Disclosure Act 1998.

Do I need a solicitor to sign an NDA in a settlement agreement?

Yes. For a settlement agreement to be legally binding under section 203 of the Employment Rights Act 1996, the employee must have received independent legal advice from a qualified adviser — typically a solicitor or barrister — who is named in the agreement and holds professional indemnity insurance. Without that advice, the settlement agreement is not valid, regardless of what it says. This requirement cannot be waived.

Can a settlement agreement confidentiality clause prevent me from whistleblowing?

No. The Public Interest Disclosure Act 1998 makes it unlawful for any contractual clause — including one in a settlement agreement — to prevent a worker making a qualifying protected disclosure. If you have information about a criminal offence, a failure to comply with a legal obligation, a health and safety risk, or similar matters that qualify for PIDA protection, you can disclose to the appropriate person regardless of what your settlement agreement says.

What happens if I break the confidentiality clause in my settlement agreement?

Most settlement agreements include a clawback or repayment clause: if you breach the confidentiality obligation you must repay the settlement payment or a portion of it. The employer may also sue for breach of contract and seek damages for any financial loss caused by the disclosure. Breach does not invalidate the settlement agreement itself — you cannot recover your waived employment claims because you breached the NDA.

Is a settlement agreement the same as a compromise agreement?

Yes. The Employment Rights Act 2013 renamed 'compromise agreements' to 'settlement agreements'. They are the same document under different names. An agreement signed before the change and labelled a 'compromise agreement' is still valid and enforceable. The substantive requirements — independent legal advice, the adviser being identified, the claims being specified — are the same.

Does the Employment Rights Act 2025 affect settlement agreement NDAs already signed?

Section 202A of the Employment Rights Act 2025, once commenced (expected 2027), will make void any clause in a settlement agreement that purports to prevent an employee or worker disclosing information about workplace harassment, bullying, discrimination, or related conduct. Clauses in signed agreements will cease to be enforceable from the commencement date — but only the offending clause, not the settlement agreement as a whole. Commercial confidentiality clauses covering trade secrets, financials, and business information are entirely unaffected.