A key component of a settlement agreement is normally the requirement that the parties keep the terms of the agreement, and the underlying facts, confidential. Whether this is because the employer does not want to be seen to be setting precedent, or is making a commercial payment to avoid the cost of litigation, care should be taken to ensure appropriate drafting. Businesses will be subject to criticism if it appears they are flouting discrimination laws and “buying off” claims under settlement agreements – indeed in some instances the confidentiality provisions may be unenforceable.
Breaches of clauses requiring confidentiality, or other common clauses, such as those requiring the parties not to make disparaging comments, might give rise to breach of contract claims.
In addition to a clause requiring that the agreement itself remains confidential, settlement agreement often include clauses that re-state the employee’s existing confidentiality obligations in respect of sensitive commercial information.
Confidentiality clause can have exceptions, for example, to ensure that the employee can discuss the agreement with their spouse or partner, professional advisers and as required by law. It should normally be made clear that confidentiality clauses do not prohibit whistleblowing.
