Confidentiality in settlement agreements – why is it so important?

Any settlement agreement is likely to contain an obligation of confidentiality on you. This could be in terms of confidential information obtained during employment and/or the terms of the agreement itself.

In terms of confidential information obtained during employment the settlement agreement is likely to place restrictions on your disclosure and use of this information. The clause may require you to undertake that you have deleted and destroyed any information held in hard copy form or as data. If you were to breach this undertaking and cause your previously employer loss, then it is likely that they will be able to take action against you. Such action would be likely to be in the form of an injunction or a civil claim.

If your employer is attempting to impose such a covenant within the settlement agreement and your contact of employment did not contain such an obligation, then you may be able to negotiate compensation in return for this. This will depend heavily on a number of factors which our specialists will be able to advise upon.

In respect of the terms of the agreement itself, your employer may wish to keep the terms of this confidential for a number of reasons. The principal reason being that they may not want clients, customers, business contacts and your former colleagues knowing the settlement package that has been agreed. This is a common feature with public sector organisations such as councils, the NHS and the BBC where public money and thus, public opinion, is a key consideration.

The employer may also wish the terms of the agreement to remain confidential if they have failed to follow best employment practice. For example, if they have not followed a fair procedure in dismissing you. This may create bad publicity.

The confidentiality may also benefit you, especially if the reasons for your dismissal could harm your prospects of finding alternative employment. If the employee is bound to keep the terms of the agreement confidential and/or an agreed reference will ensure that they cannot disclose the reasons for your leaving to any prospective employer.

Confidentiality clauses can therefore be considered a necessary evil and their terms and incorporation into the settlement agreement should be carefully and professionally negotiated.

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