Ministers are to bring forward a consultation on the use of non-disclosure agreements in employment disputes, after a newspaper was blocked from naming a businessman accused of silencing alleged victims of sexual and racial harassment.

Theresa May told the Commons that it was important that the government tightened up the use of NDAs, saying “it is clear that some employers are using them unethically”.

The prime minister was speaking after the Daily Telegraph reported that an unnamed “leading businessman” had used NDAs to pay off former employees who had accused him of bullying, sexual harassment and racial abuse, in what it described as “a British #MeToo scandal”.

The court of appeal granted a temporary injunction on Tuesday blocking the newspaper from identifying the man, overturning an earlier finding by the high court that to do so was in the public interest. According to the ruling, in five cases “substantial settlements” were made to employees as part of NDAs.

The case will now be heard in full at the high court.

The Telegraph said its reporters had spoken to more than two dozen former employees of the businessman and had heard allegations of bullying, sexual harassment and racial abuse of staff.

“Non-disclosure agreements cannot stop people from whistleblowing, but it is clear that some employers are using them unethically,” May told MPs at prime minister’s questions. She said the government was going to bring forward its consultation “to seek to improve the regulation around non-disclosure agreements and make it absolutely explicit to employees when a non-disclosure agreement does not apply and when it cannot be enforced”.

She was responding to a question from Labour’s Jess Phillips, who said: “It seems our laws allow rich and powerful men to do what they want as long as they pay to keep it quiet”.

NDAs have have come under particular scrutiny since serious allegations of sexual abuse last year against the American former film producer Harvey Weinstein sparked the worldwide #MeToo movement. Zelda Perkins, a former aide of the producer, decided last year to break an NDA to expose how he had used the gagging contracts to silence harassment victims.

Speaking to MPs from the women and equalities select committee in March, Perkins said the agreement she had been forced to sign by Miramax was “morally lacking”, while alleged victims of Weinstein had to sign their own gagging contracts in his presence.

The committee’s report, published in July, said NDAs “must be better controlled and regulated” and that lawyers must be held to account if using them unethically.

Maria Miller, the chair of the committee, told the Guardian that May’s pledge to act swiftly on the issue was “really welcome”. “The case that has hit the headlines this week has really thrown a spotlight on the way NDAs can be used repeatedly to cover up alleged wrongdoing... If an NDA hadn’t been used in this case then maybe the managers and the board of the company involved could have taken action to avoid this repeated behaviour, and that is what is so concerning about the way NDAs are being misused.”

Miller said she personally would like to see NDAs outlawed in employment severance agreements. Labour has pledged to ban NDAs that stop employees disclosing discrimination, harassment or victimisation.

There had been speculation that Phillips was intending to use parliamentary privilege to name the businessman, but she said she did not know his identity or have the consent of his alleged victims. “While I would absolutely do it, I would feel no fear doing it, it isn’t my own fear I have to be concerned about,” she told the Guardian. “Powerful men with lots of money won’t come after me.

“I never said I would name this person, I said he should be named. This is somebody using the law, or the spirit of the law, to protect themselves from facing our laws. This is David and Goliath, and if parliament is for anything it is to act on behalf of David.”

There has been concern within the legal profession itself about the way NDAs are used; earlier this year the Solicitors Regulation Authority, the regulator in England and Wales, issued a warning notice to its members saying there was no excuse for the inappropriate use of the agreements.

Adele Edwin-Lamerton, a specialist employment and discrimination lawyer at Pattinson & Brewer, said she believed the contracts were open to abuse.

“I do think that agreements could be clearer in the way they are currently drafted, [in terms of] what someone is and isn’t allowed to do without breaching that agreement. They just shouldn’t be used in cases like this, because they make people feel that they can’t disclose what happened to them without being in breach of contract.

“The thing is, you can’t cover up illegal activity with an NDA, but that’s not clear to everybody. So I think it’s great that this has been brought out into the open by this movement.”

David Taylor, a partner at Hanne & Co and a specialist employment and regulatory lawyer who sits on the Law Society council, questioned the prime minister’s use of the word “unethical”. “A solicitor has a duty to their client, and if a client is asking you to do something which is not illegal, it may be distasteful but not illegal, then, equally, you have a professional duty to act on those instructions.”

However he agreed that such agreements could be clearer in making plain, for instance, that employer-employee NDAs are unenforceable if the employee has not been allowed to obtain their own legal advice.