Skip to main content

What is a Non-Disclosure Agreement

Workplace Gagging – Know Your SA from Your NDA – Part 2

Settlement Agreement and Non Disclosure

Settlement Agreements and Non-Disclosure Agreements

Following on from last month’s blog discussing NDA’s in business, we wanted to look at Settlement Agreements. As the two are sometimes confused, we aim to explain what they are and when they are used. But above all, why it is important you seek the correct professional guidance before agreeing to either.

What is a Settlement Agreement?

A Settlement Agreement or Compromise Agreement – as they were previously known, is a legally binding contract between employer and employee. The main purpose of the agreement is to relinquish an employee of their rights under the Employment Rights Act 1996.

The agreement would offer an employee the opportunity to negotiate a severance pay on their exit of your company. In return, they would enter into a legally binding contract which prevents them from taking tribunal action. Therefore, a mutually beneficial way to protect your business.

Settlement Agreement
Workplace Gagging

The Legal Requirements

There are many legal requirements to validate such an agreement, such as;

  • The agreement must be in writing.
  • It must relate to a specific complaint.
  • The document must identify the independent legal advisor.
  • It must state said advisor has given the employee advice and is covered by a contract of insurance.
  • Confirm the Statutory provisions governing settlement agreements has been met.

When would a Settlement Agreement be used?

Disputes between employers and their staff can be inevitable in business. Most of the time such disputes are resolved internally in an informal manner. However, if an employee makes a substantiated claim that you have breached their employment rights, a formal approach is required. Furthermore, a settlement agreement should be considered.
Attempting to negotiate a mutually beneficial agreement now, could save you a lot of money and litigation costs. In addition, such an agreement would be completely confidential. Therefore, allowing the matter to be dealt with privately, rather than in the public eye.

Are Negotiations “Without Prejudice”?

Since July 2013, an employer has the right to have a “protected conversation” with their employees about the termination of employment. As stated in Section 111A of the Employment Rights Act 1996. While it is advisable that negotiating correspondence is stated to be “without prejudice” it does not mean you are protected.

However, due to the complex legislation surrounding such agreements. Simply stating something is without prejudice, does not enforce the rule. In certain cases, the negotiations can be used as evidence against you at a tribunal. Therefore, it is vital both parties receive professional advice before the agreement is signed.

If you are an employer with questions about Settlement Agreement contact our team today on 01708 770 770. Alternatively, click below to view our employer services.

So, what is a Non-Disclosure Agreement?

We are glad you asked! You can find out more about Non-Disclosure Agreements by clicking the link below;

Workplace Gagging - Know Your SA from Your NDA - Part 1

Workplace Gagging – Know Your SA from Your NDA – Part 1

Non-Disclosure Agreements

Workplace Gagging - Know Your SA from Your NDA - Part 1

Non-Disclosure Agreements and Settlement Agreements

With all the recent talk of NDAs in the media, there has been confusion and controversy surrounding such agreements. Often getting confused with a Settlement Agreement (SA) which are usually used in the termination of employment contracts. Therefore, we wanted to write a two-part blog to clarify the difference between Non-Disclosure and Settlement Agreements. Most importantly, we want to highlight why in both matters, it is vital to get professional guidance. This month we will focus on the controversial Non-Disclosure Agreements (NDA).

What is a Non-Disclosure Agreement

 What is a Non-Disclosure Agreement (NDA)?

A Non-Disclosure Agreement is also known as an NDA, “confidentiality agreement” or “gagging order”. It’s a legally binding contract of confidentiality which protects you when it’s necessary to share confidential information about your business. For example, you may require advice from accountants, financial advisors or marketing agencies. In order to give such advice, they may require details about your business you wouldn’t usually provide. As such you could be leaving your company vulnerable to such data being shared. A good NDA allows you to share ideas and information in confidence.

Types Of NDA

The non-disclosure agreement can offer one-way protection or mutual. You would use the one-way NDA when only one party is disclosing sensitive information. However, if more than one party is sharing information then you would enter a mutual NDA.

NDA Benefits vs Controversy

NDA has been notoriously used to protect individuals from criminal charges. This has been highlighted in recent media stories. Consequently, they have come under a moral question. But realistically, without them, many businesses would leave themselves vulnerable. How can you develop ideas without involving others? Ultimately despite its controversy, the NDA is a necessary business tool.

The Risks of Non-Disclosure Agreements.

As the agreement is legally binding it is imperative that all parties understand their obligations. From the very start of the agreement, it is important to know what you are asking and be clear. The document must be precise and detailed in its purpose. Remember, the permitted purpose can be widened at any time, however, you cannot narrow the restriction of use post-agreement.

This is just the basics, there are many factors which must be reviewed before entering into a Non-Disclosure Agreement. Such as location; if both parties do not reside in the same country the NDA must state which law governs the agreement. This coupled with the ongoing controversy are very good reasons you should seek professional advice. If you are an employer with questions about NDAs, you can view our services below or call 01780 770 770.

So What’s a Settlement Agreement?

Good question! We will be covering settlement agreements in next month’s blog. So, watch this space. You can follow our social media below to see the announcement of our next blog.