The Queen has reportedly banned the staff from repeating any private royal matter with family or friends in a bid to preserve privacy.
The gagging order was said to further force caretakers to return all royal mementoes, letters and gifts once they quit.
The memorabilia included seemingly harmless thank-you notes from the royals, "even simple handwritten labels on Christmas presents, plus their own personal diaries- when they leave their post".
Those not wiling to abide by the new rules would allegedly be shown the door, reports News of the World.
The Monarch had purportedly brought in new regulations to prevent embarrassing acts such as those pulled by former servants who traded their royal connections to make a fortune.
However, the contract, thought to be the proposal of Master of the Household David Walker, has incurred the wrath of the workers, who were reportedly planning on talking about the matter with the Queen personally.
A palace insider said us: "Some of the Queen's longer-serving staff are up in arms about this and have so far refused to sign. In fact, only about half have signed it.
"They're hoping to have the chance of a word in Her Majesty's ear to get it dropped."
While Buckingham Palace spokesman decline to "discuss staff contracts", an insider added: "Everyone talks about their job but a lot of staff are now scared and don't know what to say.
"It's like we're working for MI5, not the royal family.
"A lot of us believe this oversteps the mark and will fight it all the way to the very top. It's a breach of our human rights."