Settlement agreements and confidentiality clauses (part 1)
When a dispute arises between two or more parties, the parties may want to try to reach an agreement which is a reciprocal compromise for both parties. The terms of such an agreement are often contained within a settlement agreement. Reaching an agreement and entering into a settlement agreement can help avoid litigation costs and provides more certainty in a matter.
It is common for settlement agreements to contain a confidentiality clause that requires both parties to keep the terms of the settlement agreement and the circumstances concerning termination confidential. As a result, sometimes settlement agreements can be referred to as non-disclosure agreements as they often seek to prevent the disclosure of certain information. Over the last year such agreements and the confidentiality clauses contained within them have come into sharp focus.
There are usually a handful of exceptions to the general rule that the terms of the agreement and circumstances surrounding it will be kept confidential by the employee signing the agreement. These exceptions are wide and varied and some examples of this can be seen below. The examples below particularly focus on situations where the employee tells the following people or bodies about the terms of the agreement or the circumstances leading up to it:
- Their spouse, civil partner, partner or immediate family;
- any person owing the employee a duty of confidentiality in respect of information the employee discloses to them, including their legal or tax advisers or persons providing them with medical, therapeutic, counselling or support services;
- the employee’s insurer for the purposes of processing a claim for loss of employment;
- the employee’s recruitment consultant or prospective employer to the extent necessary to discuss their employment history; and
- any government benefits agency for the purposes of a claim being made for benefits.
Whilst an employer may want to ensure the terms and circumstances surrounding a settlement agreement remain confidential it is important to ensure that the agreement and particularly the confidentiality clauses are well drafted. This means that the agreement is less likely to be disputed and helps to ensure that there isn’t any unfavourable publicity in the future or any breach of an employer’s legal obligations to the employee.
In part two of this briefing I will discuss how to keep more general information, such as key business information, confidential and the general exceptions to this that are often found in settlement agreements.
For more information call Emma Monk on 0121 312 5178 or email Emonk@thursfields.co.uk
Thursfields has a team of Employment Law Experts with offices in Birmingham, Halesowen, Kidderminster, Solihull and Worcester. Whether you are an employer or employee, it’s important you get the right advice at the outset.
DISCLAIMER: The materials in this guidance are provided for general information purposes and do not constitute legal or other professional advice. While the information is considered to be true and correct at the date of publication, changes in circumstances may impact the accuracy and validity of the information. Thursfields Solicitors are not responsible for any errors or omissions, or for any action or decision taken as a result of using the guidance.