5 min read

NDAs and Settlement Agreements

Non-disclosure agreements and settlement agreements can limit what you can say — and what you can do legally — for years after you leave. Most workers sign them without fully understanding what they're giving up.

What an NDA covers

A non-disclosure agreement typically prohibits you from discussing the terms of a settlement, the underlying facts of your complaint, or both. Confidentiality clauses in settlement agreements often go further — prohibiting you from saying anything negative about your employer, its leadership, or the events that led to the dispute (sometimes called a non-disparagement clause).

What you generally keep

NDAs cannot prevent you from filing a charge with the EEOC or cooperating in a government investigation — those rights cannot be waived by private agreement. Some states (including California and New York) further limit what employers can require workers to keep confidential, particularly in harassment and discrimination cases.

Tax implications

Settlement payments are not always tax-free. Payments for emotional distress or punitive damages may be taxable income. Payments specifically for physical injury or sickness generally are not. The allocation of a settlement matters — ask before you finalize any agreement.

Red flags to watch for

NDA prohibits you from filing a future EEOC charge or cooperating with investigators (likely unenforceable)
Non-disparagement clause is one-sided — applies to you but not the employer
Agreement requires you to keep the facts of harassment or discrimination confidential (restricted in many states)
No carve-out for truthful statements to government agencies
Settlement was offered quickly, before you had a chance to assess the value of your claim

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Unemployment Benefits After Wrongful Termination