Academy trusts in England may already know that, until recently, Department for Education (DfE) approval was required where non-contractual payments under a settlement agreement for departing employees exceeded £50,000 (gross). Trusts may also be familiar with how slow this process can be and the strict requirements to justify such payments, with the Government taking an increasingly firm stance on approvals.

However, the latest version of the Academy Trust Handbook introduces a significant change: DfE approval is now required for any agreements that are ‘novel, contentious or repercussive’ (NCR), regardless of value. The handbook specifically states that any confidentiality clauses associated with staff severance payments fall into this category. This means they must not be used unless the trust has obtained prior DfE approval.

Previously, the guidance only required that confidentiality clauses did not prevent whistleblowing disclosures. Standard confidentiality clauses, commonly included to protect both parties, typically to prevent disclosure of the agreement’s existence or terms or the circumstances leading to termination, were permissible. Under the new rules, if a settlement agreement includes these routine standard confidentiality clauses and involves a special staff severance payment above statutory or contractual entitlements (which is most settlements), DfE approval is now required regardless of the payment amount.

This change will inevitably lead to more trusts seeking approval, causing potential delays in completing settlement agreements. With strict notice periods under the Burgundy Book, delays could mean employees become entitled to longer notice payments, often until the end of the next school term.

This update is both unexpected and significant. It seems unreasonable that standard confidentiality clauses, long considered routine and balanced, should now trigger DfE approval. Further clarification from the Government is being sought.

Important distinction: This article is only intended to cover the scenario of settlement agreements which bring about the termination of existing employees, i.e. special staff severance payments. For the rules on other types of settlement payments, which may include Compensation Payments, Ex-Gratia Payments or otherwise, please get in touch for further advice, as different rules may apply. 

Please note this advice applies to academies in England only. For maintained schools in England, local authority consent for any non-contractual payments made to staff under settlement agreements, or to former employees for settling Employment Tribunal claims, should almost always be sought. It is then for the local authority to consider if the payment is NCR such that approval from the Department for Education or HM Treasury is required under Managing Public Money, or whether authorising such payment is within the local authority’s delegated authority. 

If you are in any doubt about whether DfE approval is needed, or if you need assistance justifying any payment, please get in touch. We will continue to keep our network updated as further clarification from the Government becomes available.