The deputy prime minister was quizzed over the episode, which dates from before he became an MP, in the Commons on Wednesday.
It comes as he faces new and separate accusations of bullying while working in government as both foreign secretary and justice secretary.
On Wednesday Labour MP Bambos Charalambous asked the deputy prime minister whether he could "tell the house if he has ever entered into a nondisclosure agreement connected to a complaint against him" – prompting gasps from other MPs.
Mr Raab replied: "He's referring to an employment dispute that was settled before I entered the house. It wasn't an NDA, but it did involve a confidentiality clause, which was standard at the time."
The Tory MP had previously been asked about the episode in 2019, when he stood in the contest to lead the Conservative party.
The agreement had come under scrutiny because the woman who also signed the clause said it made it impossible for her to reply to claims made by Mr Raab and his political allies about the alleged bullying incident.
Tory MP Maria Miller had told the BBC at the time that the claims were “vexatious”, but the other party to the agreement was unable to contest this in public.
At the time Mr Raab told the BuzzFeed News website that he was “subject to a claim of bullying” dating to 2007, three years before he became an MP.
"I vigorously denied the claims, which were independently investigated and found to be unsubstantiated,” he said.
“My employer decided to settle the case on confidential terms (as is common in employment disputes), to avoid the distraction of defending it before a tribunal.
"I signed the compromise agreement, although in practice I had no choice over the decision, and I did not pay anything towards the settlement."
The scrutiny of the confidentiality clause comes as two formal complaints are filed against Mr Raab for alleged behaviour while holding Cabinet roles.
The Tory is accused of losing his temper and throwing food across the room, while a top civil servant has said officials were too scared to enter the minister’s office. Mr Raab says he has acted professionally at all times and has called for Rishi Sunak to set up an independent inquiry into the claims.
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