Employers to be banned from using confidentiality clauses in Settlement Agreements

Government tables amendments to the Employment Rights Bill to prevent NDA’s

As part of the government’s overhaul of workers’ rights, it was announced on 8 July 2025 that there are plans to prevent Employers in the UK from the widespread practice of using non-disclosure agreements to silence employees who have suffered harassment and discrimination in the workplace. 

If the amendment is passed it would null and void confidentiality clauses contained in future  Settlement Agreements that would normally prevent an employee for talking about an allegation of harassment, this would also include sexual harassment and discrimination.

According to the Government press release, Employees would no longer have to ‘suffer in silence’ and would be able to speak freely about their experiences and colleagues who witness unacceptable behaviour by others in the workplace will be able to call it out, without the fear of reprisal.

Harassment definition in the Equality Act 2010

The Equality Act 2010, Section 26 states:

1. A person (A) harasses another (B) if—

(a) A engages in unwanted conduct related to a relevant protected characteristic, and

(b) the conduct has the purpose or effect of—

1. violating B’s dignity, or
2. creating an intimidating, hostile, degrading, humiliating or offensive environment for B.

2. A also harasses B if—

(a) A engages in unwanted conduct of a sexual nature, and

(b) the conduct has the purpose or effect referred to in subsection (1)(b).

What are Protected Characteristics?

The Equality Act 2010 legally protects individuals from discrimination who fall within 9 specific protected characteristics, they are:

• age,
• disability,
• gender reassignment,
• marriage and civil partnership,
• pregnancy and maternity,
• race,
• religion or beliefs
• sex, and
• sexual orientation.

Based on these characteristics, the Equality Act aims to prevent unfair treatment and harassment in settings such as employment, education, and access to goods and services.

What was the original purpose of a Settlement Agreement?

Settlement Agreements formerly known as Compromise Agreements, were introduced in the UK in 1993. The name was changed in 2013 with the introduction of the Enterprise and Regulatory Reform Act.

A Settlement Agreement is a legal document used to bring an end to an employment relationship between the employer and employee on mutually agreed terms.  The employee waives their rights to pursue a claim in the employment tribunal in exchange for a compensation payment which will vary depending on the employee’s circumstances.

Originally used to protect intellectual property or other sensitive commercial information, according to CIPD data, 22% of employers now use Settlement Agreements specifically for sexual harassment allegations to prevent employees from speaking out about unpleasant experiences they have faced in the workplace. 

Confidentiality clauses in the Settlement Agreement

Confidentiality clauses in settlement agreements generally restrict disclosing the agreement’s existence and terms, including the financial settlement and circumstances surrounding the agreement to third parties.

However, certain exceptions exist currently, allowing disclosure to close family, professional advisors (solicitors and accountants), and in some cases, prospective employers to explain employment history. Disclosure may also be required by law or for reporting criminal offenses.

When will the amendment be passed?

The Settlement Agreement amendment is part of the Employment Rights Bill and is expected to pass into law in the autumn of 2025, after parliamentary summer recess. The bill was debated in the House of Lords on 14 July 2025 and is currently in the report stage. It is expected to receive Royal Assent later in the year. The changes will then be phased in, most of which are expected to take effect from April 2026.

Legislative changes have already been made in Ireland, Canada and the US so that Settlement Agreements cannot prevent disclosure of sexual harassment, discrimination or bullying without it being the expressed wish of the employee.

How will the changes affect employers?

While some employers welcome the changes to improve workplace culture and transparency, others may be concerned about the implications for settling disputes and protecting their reputations. The amendments will require employers to review their existing practices and potentially offer more training to managers on handling grievances and disciplinary matters.

Take steps now to prevent sexual harassment from arising

If you would like support in complying with your duty to prevent sexual harassment, including implementing and/or reviewing a sexual harassment policy, risk assessment or you would like to arrange sexual harassment awareness training, please do not hesitate to contact a member of our team on 01983 897003.