Settlement agreements usually include a confidentiality clause requiring an employee to keep the existence and terms of a settlement confidential.

Including such a clause should, in theory, prevent reputational damage and discourage other employees from making claims (with or without merit) in the hope of receiving a financial settlement.


The case of Duchy Farm Kennels Limited v Steels led to an important ruling on the consequences of breaching a settlement agreement confidentiality clause. It is an important reminder that where the confidentiality aspect of a settlement agreement is particularly important to an employer, they should ensure it is adequately protected.


The Settlement Agreement had contained a fairly standard confidentiality clause and the key issue for the High Court to consider was whether the confidentiality clause was:


  • a condition of the contract, a breach of which would entitle the innocent party (Duchy) to bring the contract to an end; or
  • an intermediate term, where a breach may or may not be a repudiatory breach (allowing the innocent party to terminate the contract) depending on the circumstances and nature of the breach.

The High Court decided the confidentiality clause was not a condition of the contract; it was not expressly stated to be so nor was confidentiality the main driver for Duchy in entering into the Agreement.

Having found that the confidentiality clause was an intermediate term instead, the Judge considered whether there had been a repudiatory breach. On the basis that the breach was never likely to, and did not, cause any commercial embarrassment or other commercial problems for Duchy and the risk of copy-cat claims was remote, this did not amount to a repudiatory breach. If there had been any financial loss, then an award of damages would have sufficed.

This case highlights the potential problems of enforcing confidentiality clauses in a settlement, particularly where the settlement payment is paid all at once (which is usually the case) and the breach of confidentiality happens after the payment has been made. When this happens, it can be difficult to quantify the financial loss (if any), potentially leaving an innocent ex-employer without a remedy in damages.

Therefore, when confidentiality is a core concern for you as an employer, before issuing a standard settlement agreement you should always consult us first for expert legal advice.