The use of Confidentiality Clauses and Derogatory Statement Clauses within Settlement Agreements: The rights and responsibilities of NHSScotland employees and employers

Section 3. Why include a confidentiality clause or a derogatory statement clause in a settlement agreement?

Confidentiality clause

A confidentiality clause is commonly used in settlement agreements by employers across all sectors. In NHSScotland, there is a presumption against the use of confidentiality clauses. Such clauses are therefore optional rather than included as standard. The clear policy is that a confidentiality clause will only be included in any settlement agreement where it is explicitly discussed and agreed between the employee and the employer, and where there are sound reasons for this.

In the main a confidentiality clause is used to:

• Cover the terms of the agreement, prohibiting any party from reporting the detail about the terms of agreement - for example, disclosing to former colleagues any compensatory payment.
• To protect confidential information gained by the employee as part of their employment, such as business-sensitive data or patient records. It should be noted that the duty to maintain confidentiality is covered by an employee's contract of employment, and will persist after the expiry of that contract.

Derogatory statement clause

This type of clause is also commonly found in settlement agreements and is used to protect both employee and employer from disparaging and derogatory remarks being made by either party.

This can be important in drawing a line under the circumstances leading to a settlement agreement being necessary and ensure that both parties can move forward without fear of there being any disparaging/derogatory remarks made about them.

Use of confidentiality and/or derogatory statements clauses

The potential reasons for inclusion of confidentiality clauses and/or derogatory statement clauses described above are examples, as each case has to be considered on its own merits. However, in all cases, the use of a confidentiality clause and/or derogatory statement clause must be for sound and transparent reasons. The precise terms would be agreed by both parties on a case-by-case basis.

The reasons for the inclusion of a confidentiality clause and/or derogatory statement clause should also be recorded by the employer in a clear and transparent statement and copied to the employee.

If it is mutually and explicitly agreed that a confidentiality clause and/or derogatory statement clause is to be included in a settlement agreement, it must also be made clear to the employee, and within the written agreement itself, that this does not prevent the employee from raising any genuine concern about a patient safety issue, or any other issue which is in the public interest under the terms of PIDA (see Section 5).

A draft confidentiality clause and derogatory statement clause have been developed for this purpose, and these are available at Annex A. These drafts can of course be revised by both parties to the agreement until an agreed form of words has been arrived at. However, NHSScotland employers must ensure that, whatever the agreed wording of the clause(s), paragraphs 1.5 and 1.6 are included unchanged. Use of this form of wording will ensure that all the parties signing the agreement are left in no doubt that they are encouraged to freely speak up about legitimate concerns.

It should be noted that when a settlement is first drafted, this is the starting point for negotiation between employee and employer. None of the content in an agreement is binding until it is fully agreed and signed by both parties.

Any clause in a settlement agreement which is aimed at preventing the individual from raising a genuine whistleblowing concern would be invalid under PIDA.

Where a confidentiality clause and/or derogatory statement clause is used in a settlement agreement, the Scottish Government expects to see evidence from the Health Board that the member of staff has agreed to its inclusion. This provision has been built into the strengthened process for settlement agreements, with NHS Boards being required to provide a specific assurance that where a confidentiality clause and/or derogatory statement clause has been used, the wording has been discussed and agreed with the employee, either directly or through their representative and/or ACAS.

It is important to note that the inclusion of a confidentiality clause and/or derogatory statement clause is voluntary. Individuals can at any time, prior to finalisation of the settlement agreement, ask for a confidentiality clause and/or derogatory statement clause to be removed.

When the employer and employee sign a settlement agreement, ALL its terms become binding on both parties, and so it is imperative that when signing the employee knows, understands and agrees to the terms contained within the agreement - including any agreed confidentiality/derogatory statement clause.