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NDAs are legal contracts used to protect confidential information. In employment law, they often appear in settlement agreements, but they’ve also come under increased scrutiny. We’ll help you understand what a non-disclosure agreement is, how they work, when they’re used and what employers need to consider.  

Explore the role of NDAs and their ethical implications in settlement agreements and dispute resolution.

<p>In a previous article, we discussed <a href="https://www.linnearlegal.co.uk/resources/non-disclosure-and-confidentiality-agreements-for-businesses/" target="_blank" rel="noopener">confidentiality and non-disclosure agreements</a> (NDAs) in commercial law and how they can be legitimately used by businesses to protect sensitive commercial information. But as we noted, NDAs have, in recent years, become a controversial topic in an employment law context. This was particularly the case in light of the #MeToo movement, when reports of their misuse made headlines around the world, highlighting how confidentiality agreements can be used to silence victims of sexual harassment and protect offenders.</p>
<p>In response to these reports, jurisdictions including Ireland, Canada and the United States have all passed laws in the past few years restricting the use of NDAs in cases involving allegations of discrimination and harassment. And recent headlines<a href="https://www.theguardian.com/law/2025/jan/17/labour-ban-ndas-sexual-misconduct-employers-gagging-clauses-work" target="_blank" rel="noopener"> suggest the UK government is considering following suit</a> by banning the misuse of gagging clauses by employers.</p>
<p>These so-called NDAs are markedly different to the confidentiality agreements used by businesses to protect commercial information, and in essence are better viewed as a form of settlement agreement.</p>
<h2>What is a settlement agreement?</h2>
<p>Settlement agreements are contracts that bring an employment-related dispute to an end, usually with terms including compensation to the employee in exchange for waiving the right to pursue legal claims. Though in the media they are often associated with the improper use of NDAs, settlement agreements are distinct legal instruments governed by specific statutory rules.</p>
<p>In UK employment law, these agreements play a legitimate role in resolving disputes without resorting to litigation. However, their ethical use – particularly where confidentiality clauses are involved – must be carefully considered.</p>
<h2>The legal framework</h2>
<p>Settlement agreements are governed by <a href="https://www.legislation.gov.uk/ukpga/1996/18/section/203" target="_blank" rel="noopener">section 203 of the Employment Rights Act 1996</a>. To be valid (i.e. enforceable), they must:</p>
<ul>
<li>Be in writing</li>
<li>Relate to a particular complaint or legal claim</li>
<li>Be signed by the employee</li>
<li>Be signed by an independent adviser (e.g. a solicitor)</li>
<li>State that the statutory conditions have been met</li>
</ul>
<p>This framework ensures that employees have legal advice before waiving their rights to make a claim against their employer, distinguishing settlement agreements from private contracts that could otherwise be used coercively.</p>
<h2>The role of confidentiality clauses</h2>
<p>It is common for settlement agreements to include confidentiality provisions. These may cover:</p>
<ul>
<li>The fact and terms of the agreement</li>
<li>The nature of the dispute</li>
<li>Restrictions on disparagement of the employer</li>
</ul>
<p>However, the inclusion of such clauses has drawn public scrutiny, particularly in the wake of the #MeToo movement. The concern is that these provisions can be used to silence whistleblowers and victims of harassment.</p>
<h2>Ethical boundaries and public interest</h2>
<p>The Solicitors Regulation Authority (SRA) and Advisory, Conciliation and Arbitration Service (ACAS) have both issued guidance to ensure that settlement agreements are not used to cover up misconduct.</p>
<p>Employers must not:</p>
<ul>
<li>Prevent employees from reporting crimes or regulatory breaches</li>
<li>Mislead individuals into believing they cannot disclose information to police or regulators</li>
<li>Use settlement terms to hinder cooperation with investigations</li>
</ul>
<p>A clause that purports to prevent such disclosures is likely unenforceable and may breach professional and regulatory duties.</p>
<h2>Common scenarios for using settlement agreements</h2>
<ul>
<li>Redundancy settlements</li>
<li>Resolving grievances or disciplinary issues</li>
<li>Ending employment after a breakdown in working relationships</li>
<li>Settling claims during or after tribunal proceedings</li>
</ul>
<h2>Drafting considerations</h2>
<p>When advising on settlement agreements, the following should be considered:</p>
<ul>
<li><strong>Specificity</strong>: vague or all-encompassing waivers are likely unenforceable</li>
<li><strong>Clarity of language</strong>: legal terms should be explained to ensure employee understanding</li>
<li><strong>Confidentiality clauses</strong>: must be drafted narrowly and ethically</li>
<li><strong>Tax treatment</strong>: payments should be structured to reflect statutory and contractual rights</li>
</ul>
<h2>Risks of poor drafting or misuse</h2>
<ul>
<li>Agreements that try to silence whistleblowing are not only unethical but likely illegal</li>
<li>Poorly drafted agreements may not prevent future claims</li>
<li>Employers may face reputational damage and regulatory action</li>
</ul>
<h2>Final thoughts</h2>
<p>Settlement agreements are a useful tool for managing the end of an employment relationship, offering certainty to both parties. However, their use must always be transparent, lawful and fair.</p>
<p>The inclusion of confidentiality clauses demands particular care. At Linnear Legal, we advise both employers and employees on <a href="https://linnearcms.wpenginepowered.com/employment/">employment law matters</a>.</p>
<p><a href="https://linnearcms.wpenginepowered.com/get-in-touch/">Contact us today</a> for expert employment law advice tailored to your situation.</p>


Non-disclosure agreements (NDAs) have sparked controversy. We explore their misuse, legal framework  and ethical boundaries in settlement agreements involving confidentiality clauses.

Settlement agreements in employment law

Learn how UK settlement agreements work, when NDAs cross the line, and what makes confidentiality clauses legal, fair and enforceable.

Settlement agreements in employment law | Linnear Legal

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Settlement agreements in employment law

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