Home Legal Services Employment Settlement Agreements for Employees
Written by:Â Owen John, Employment Law Partner, Darwin Gray | Last updated: 24/10/2026 | Reviewed by: Owen John
This is one of the most common worries, and the reassuring news is that, handled properly, a settlement agreement rarely gets in the way of your next role. There’s no register of settlement agreements, nothing on your record, and no way for a future employer to find out you signed one unless you choose to tell them. It’s a private agreement between you and your former employer.
So the anxiety people feel, that a settlement is some kind of black mark, is usually misplaced. What actually matters for your next job comes down to two practical things: what your reference says, and whether you’ve agreed to any restrictions on where you can work. Both of those can be sorted out in the agreement itself, which is exactly why getting the terms right matters.
Your reference is the thing most likely to affect your next role, so don’t leave it to chance. Here’s the key point: there’s generally no legal obligation on an employer to give a reference at all, and no obligation to make it a good one (beyond it being true and fair). That means you want the reference dealt with in the settlement agreement itself.
A well-drafted settlement can:
Getting this agreed up front turns your reference from a risk into a known quantity. It’s one of the most valuable things we negotiate, and it costs the employer nothing, so there’s usually room to secure it. We cover the wider negotiation in negotiating a settlement agreement.
The other thing that can affect your next job is any restrictive covenants you’re bound by, clauses stopping you joining a competitor, approaching former clients, or poaching colleagues for a period after you leave.
These are the terms most likely to genuinely limit your options, so they’re worth real attention before you sign. The good news is that they’re often negotiable, and sometimes unenforceable if they’re too wide. We can frequently get them narrowed, shortened, or removed, and where you’ve been on garden leave, that time can sometimes be offset against them. If your next move is in the same field, this is the part to focus on.
Most settlement agreements include a confidentiality (or non-disclosure) clause, meaning neither you nor your employer will discuss the terms or the circumstances of your departure. People sometimes worry about these, but they usually work in your favour: they stop your former employer talking about why you left. The clause is typically mutual, and it’s normal to carve out the people you obviously need to tell, your spouse, your legal and financial advisers, and anyone you’re legally required to inform. We make sure these carve-outs are in place so the confidentiality clause protects you without tying your hands.
You’re not usually obliged to disclose that you signed a settlement agreement, and the confidentiality clause often means you shouldn’t discuss its terms anyway. For the simple question “why did you leave your last job?”, a straightforward, honest, neutral answer, consistent with your agreed reference, is almost always fine: the role ended, you reached a mutual agreement to move on, you were made redundant, whatever genuinely fits. You don’t need to volunteer the detail. If you’re ever unsure how to frame it, we’re happy to talk it through.
No, not unless you tell them. There’s no register or record of settlement agreements, and they don’t appear on any background check. A settlement is a private agreement between you and your former employer, and most include a confidentiality clause that stops either side discussing it. So the common worry that a settlement is a visible black mark is misplaced, what matters for your next job is your reference and any restrictions, both of which can be sorted in the agreement.
Yes, and the best way is to agree the exact wording in the settlement agreement itself. There’s generally no legal duty on an employer to give a reference, or to make it glowing, so leaving it to chance is risky. A well-drafted settlement can attach an agreed reference, require your employer to stick to it, and specify who provides it. This is one of the most valuable things to negotiate, and it usually costs the employer nothing to agree.
They can limit it, if you’re bound by covenants preventing you from joining a competitor or approaching former clients, that can affect your options in the same field. But these are often negotiable, and sometimes unenforceable if they’re too wide or too long. We can frequently get them narrowed, shortened, or removed in the settlement, and time spent on garden leave can sometimes be offset against them. If your next move is in the same sector, this is the key thing to address before signing.
You’re not usually obliged to disclose that you signed a settlement, and confidentiality clauses often mean you shouldn’t discuss its terms. For “why did you leave?”, a simple, honest, neutral answer that matches your agreed reference is almost always fine, the role came to an end, you agreed to move on, you were made redundant, or whatever genuinely applies. You don’t need to go into detail. If you’re unsure how to phrase it, we can help you find the right words.
If you want to make sure your settlement protects your future, agreed reference, workable restrictions, sensible confidentiality, we’ll negotiate those terms for you. We’re Darwin Gray, one of Wales’ leading employment law firms. You’ll deal directly with your solicitor, and as the only firm in Wales offering full Welsh language employment advice at every level, we can help in Welsh or English.
Get a free, no obligation chat with our employment team. Call 02920 829 100 or use our contact form.
Settlement agreements for employees
Negotiating a settlement agreement
Disclaimer: This guide is general information, not legal advice, and employment law changes. For advice on your situation, please speak to a qualified employment solicitor.
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