Getting A Job After A Settlement Agreement (31 July 2026)

How Settlement Agreements Affect Future Employment

One of the most common questions employees have after signing a settlement agreement is what happens next, specifically, how the terms of the agreement might affect their ability to find their next job. Settlement agreements typically include a number of clauses that can have a practical impact on your job search and new employment, including confidentiality obligations and restrictive covenants. Understanding what you have agreed to, and what your former employer can and cannot do, is essential before you start looking for a new role.

Does a Settlement Agreement Affect Future Employment?

A settlement agreement is a legally binding contract between you and your former employer. Once signed, it is enforceable, and breaching its terms can have serious consequences.

Whether and how a settlement agreement affects your ability to work after a settlement agreement will depend on the specific terms negotiated and included within the agreement. The two areas that most commonly affect future employment are the confidentiality clause and any restrictive covenants.

The Confidentiality Clause: What It Means for Your Job Search

Settlement agreements normally include a confidentiality clause, often described as a non-disclosure obligation, that prevents you from disclosing the terms of the agreement to third parties. Standard practice for the employer is to include a clause requiring you to keep both the existence and the terms of the settlement agreement confidential. In some cases, the obligation extends only to the financial terms; in others, it covers the existence of a settlement agreement entirely.

Do You Have to Disclose a Settlement Agreement to a New Employer?

Whether you are required to disclose a settlement agreement to a new employer will depend on the wording of the confidentiality clause. In most cases, you are not obliged to tell a prospective employer that you signed a settlement agreement with a previous employer, and the confidentiality clause may in fact prevent you from doing so. If a future employer asks directly why you left your last job, you are generally entitled to give a reason that does not disclose the terms or existence of the agreement, provided your answer is not misleading in a way that itself causes legal problems.

Some settlement agreements include a specific carve-out permitting disclosure to a new employer to the extent necessary to comply with their employment contract, for example, if the new role requires you to declare any ongoing legal obligations. Your employment law solicitor can advise on the precise scope of the confidentiality obligation in your specific agreement.

What Your Former Employer Can Say About You

A confidentiality clause typically binds both parties. Your former employer also has a legal obligation under the agreement not to make disparaging statements about you or disclose more than has been agreed. Settlement agreements often include an agreed reference, a form of words that your former employer has committed to use when contacted by prospective employers. Where an agreed reference has been negotiated as part of your settlement agreement, your former employer should provide that reference consistently, and any deviation from it could be a breach of the agreement.

When a prospective employer contacts your previous employer for a reference, they will typically receive only basic factual information, your job title and dates of employment, unless a more detailed agreed reference has been negotiated. It is worth ensuring that the agreed reference forms part of your settlement agreement negotiations, as this can make a real difference to your job search.

Restrictive Covenants: What They Are and How They Affect Your Next Job

Many settlement agreements include, or incorporate by reference, restrictive covenants from your original contract of employment. Restrictive covenants are clauses designed to protect legitimate business interests of your former employer by limiting what you can do after leaving. Common types of restrictive covenant include:

• Non-compete clauses: preventing you from working for a competitor or setting up a competing business for a defined period after leaving
• Non-solicitation clauses: preventing you from approaching former clients or customers of your previous employer
• Non-dealing clauses: preventing you from doing business with former clients even if they approach you
• Non-poaching clauses: preventing you from recruiting former colleagues

Restrictive covenants in settlement agreements must be reasonable to be enforceable. The courts in England and Wales will not enforce a restrictive covenant that goes further than is reasonably necessary to protect a legitimate business interest. Clauses must be reasonable in terms of their geographical scope, the activities they restrict, and their duration. A covenant that is too wide, for example, one that prevents you from working in your entire industry for two years across the whole country, is unlikely to be enforceable.

However, a covenant that is properly scoped and reasonable in its terms can prevent you from working in certain roles or for certain employers for the duration of the restriction. Before you sign a settlement agreement, your employment lawyer should review any restrictive covenants carefully and, where possible, negotiate to minimise any restrictions that might affect your ability to find your next job.

Negotiating a Settlement Agreement to Protect Your Future Employment

One of the most important things you can do when negotiating a settlement agreement is to consider the impact of its terms on your future employment before you sign. This is one of the reasons why taking independent legal advice before signing is not just a legal requirement, it is practically essential.

There are several steps your employment solicitor can take during negotiations to protect your ability to work after a settlement agreement:

• Negotiating to reduce or remove restrictive covenants that would prevent you from working in your field.
• Ensuring the confidentiality clause is limited to the terms of the agreement rather than its existence, so you can be open about the fact that you left by mutual agreement without disclosing the financial details.
• Securing a strong agreed reference, including specific wording about your role, performance, and the circumstances of your departure, that you can rely on during your job search.
• Checking that the reason for leaving your employment is framed in a way that supports rather than hinders your future job search.
• Ensuring that any garden leave or PILON period has been properly calculated so that restrictive covenant periods run from the correct date.

Starting a New Job: What to Bear in Mind

Once you have signed your settlement agreement and are ready to find your next role, keep the following in mind:

• Re-read your settlement agreement before starting any job search, particularly the restrictive covenant and confidentiality clauses, so you know exactly what you can and cannot do.
• If a new employer asks you to sign an employment contract, check whether any of your existing obligations conflict with the new role before signing.
• If you are in any doubt about whether a prospective new role would breach a restrictive covenant, take legal advice before accepting the offer rather than after, employers can seek injunctions to enforce valid covenants.
• If your new employer needs to know about your obligations, for example, to assess whether a conflict exists, check the confidentiality clause to understand what you are permitted to share.