Confidential Terms in Redundancy Settlements

Confidentiality clauses are a common element in redundancy settlement agreements. These clauses set out what information the parties agree to keep private following termination, including whether they can discuss the agreement or its terms with others. While confidentiality can protect business interests and reputations, it must operate within the bounds of UK law and cannot override statutory rights or compulsory disclosures. This article explains the nature of confidential terms in redundancy settlements, legal limits, how they operate in practice, common exceptions, and key considerations for employees and employers in England and Wales.

What Is a Confidentiality Clause in a Redundancy Settlement?

A redundancy settlement (or settlement agreement) is a legally binding contract between an employer and employee that sets out the terms on which employment ends, including any enhanced payments in return for waiving certain claims. As part of that agreement, parties often include a confidentiality clause (sometimes called a non‑disclosure agreement or NDA) requiring the employee - and sometimes the employer - to keep the existence and terms of the agreement private. These clauses typically restrict disclosure of:

• The fact that a settlement has been made;
• The financial terms of the redundancy package;
• Details of negotiations and the circumstances leading to the settlement.

Confidentiality clauses are voluntary and only apply if expressly agreed by both parties as part of the settlement contract.

Why Employers Include Confidentiality Terms

Employers commonly seek confidentiality in redundancy settlements for several reasons:

• To maintain morale and fairness among remaining staff by preventing disclosure of enhanced packages that may cause resentment.
• To protect business interests, commercial reputation or sensitive information disclosed during negotiations.
• To manage public perception, especially in high‑profile redundancy exercises.

Confidentiality is often negotiated alongside reference terms, payment schedules and waivers of claims, forming part of a mutually agreed exit package.

Legal Framework and Requirements

Settlement Agreement Validity

For any settlement agreement to be valid, including its confidentiality terms, several statutory conditions must be satisfied under the Employment Rights Act 1996:

• The agreement must be in writing;
• It must relate to a specific complaint or proceedings;
• The employee must receive independent legal advice on its effect and the legal rights they are waiving.

These legal protections extend to the confidentiality clause, meaning the adviser must explain how confidentiality affects the employee's ability to discuss or disclose information.

Without Prejudice and Pre‑Termination Negotiations

Settlement discussions are often conducted on a “without prejudice” or protected basis under section 111A of the Employment Rights Act 1996, meaning they generally cannot be used as evidence in a tribunal or court claim. This legal protection supports open negotiations but is distinct from confidentiality obligations in the final written agreement.

What a Confidentiality Clause Can and Cannot Cover

Permissible Confidentiality Terms

Confidentiality clauses can reasonably cover:

• The existence of the agreement and that a settlement was reached;
• The terms of the redundancy package;
• The negotiation process and any commercial information shared during settlement.

Such clauses should be clear, specific and reasonable in scope, identifying what information must be kept confidential and who may receive permitted disclosures (such as advisers or immediate family).

Statutory and Public Policy Limits

Confidentiality clauses cannot prevent or lawfully restrict the following:

• Whistleblowing and protected disclosures under the Public Interest Disclosure Act 1998, where reporting wrongdoing in the public interest is protected by law.
• Reporting criminal offences to the police or cooperating with enforcement bodies.
• Disclosing information to legal, financial or tax advisers, or immediate family members where necessary.
• Making statutory disclosures, such as reporting health and safety concerns.

Confidentiality clauses must be consistent with statutory rights and cannot be drafted so broadly that they discourage lawful reporting of misconduct or prevent employees from exercising their legal rights.

Proposed Legal Reforms

The UK Government has proposed reforms in the Employment Rights Bill to ban the use of NDAs that silence victims of harassment or discrimination. If enacted, this would mean confidentiality terms that seek to prevent employees speaking about such abuses would be invalid.

Common Exceptions and Permitted Disclosures

Settlement agreement confidentiality clauses typically provide exceptions allowing the employee to disclose information to:

• Professional advisers (e.g., solicitors, accountants);
• Immediate family when necessary for personal planning;
• Tax authorities such as HM Revenue & Customs where required;
• Courts, tribunals and statutory bodies under legal obligation.

Clear wording in the confidentiality clause helps avoid disputes about interpretation later.

Practical Impact and Enforcement

Breach of Confidentiality

If an employee breaches a valid confidentiality clause, the settlement agreement usually provides for enforcement remedies, which may include:

• Repayment or clawback of some or all of the settlement payment;
• Injunctions to prevent further disclosure;
• Damages for financial or reputational loss caused to the employer.

It is therefore important to consider carefully what is agreed before signing the settlement.

Negotiating Confidential Terms

Confidentiality clauses are negotiable, and employees can request amendments, clearer wording on permitted disclosures, or limitations on the duration and scope of confidentiality. Employers should tailor such clauses to the specific context of redundancy rather than include them automatically.

Risks and Considerations

Overly Broad Clauses

Confidentiality terms that are too broad or unclear may be unenforceable and, in extreme cases, affect the validity of the settlement. They must not attempt to prevent disclosures required by law or protect employers from accountability for unlawful conduct.

Employee Awareness

Employees should fully understand the implications of confidentiality before signing a settlement. Independent legal advice is a requirement for enforceability and helps explain rights being waived and the limits of confidentiality.

Business Transparency vs Confidentiality

Employers need to balance the business case for confidentiality with transparency and duty of care, particularly in collective redundancy contexts where stakeholders may be affected. Blanket secrecy is not standard practice and should be justified and proportionate to specific interests.

Common Questions

Can a confidentiality clause stop me from talking about my redundancy to colleagues?
If you have signed a settlement agreement with a confidentiality clause, you are usually legally bound not to disclose the existence or terms of the agreement to colleagues or others, subject to exceptions for advisers and legal obligations.

Can confidentiality prevent whistleblowing?
No. Clauses cannot lawfully prevent you from reporting wrongdoing, misconduct, or making protected disclosures under whistleblowing statutes.

Is redundancy confidential without an agreement?
There is no automatic legal requirement to keep redundancy confidential unless a settlement or other contract includes a specific confidentiality clause.

Can I negotiate confidentiality terms?
Yes. Confidentiality is voluntary and negotiable, and you can ask for clearer wording or narrower scope during settlement discussions.

Key Takeaways

Confidentiality clauses in redundancy settlement agreements in England and Wales are contractual provisions that restrict disclosure of the agreement's existence and terms. They are commonly included to protect business interests and manage reputational risk, but must be reasonable, clearly drafted and compliant with statutory rights. Confidentiality cannot override legal duties such as whistleblowing or compulsory disclosures to authorities, and employees should obtain independent legal advice before agreeing to such terms. Understanding what confidentiality can and cannot cover, and negotiating appropriate scope and exceptions, helps both employees and employers achieve fair and enforceable settlement terms.