Important update for colleges and academies on confidentiality clauses and severance payments

Firstly, both Handbooks have been updated to say that the use of confidentiality provisions in connection with the making of severance payments will make the transaction novel, contentious or repercussive and DfE approval will be needed. It should be assumed that these provisions apply to both settlement agreements and ACAS COT3s.

The section on confidentiality clauses also states that such clauses must not prevent an individual’s right to make disclosures in the public interest (whistleblowing) under the Public Interest Disclosure Act 1998 (which was in last year’s Handbooks) and must not be used to prevent the DfE from obtaining sufficient information from colleges/trusts to fully assess such payments under its regulatory role (which is new).

Whilst it has been common practice to state in settlement agreements that the terms do not prevent the making of protected disclosures, the requirement to obtain prior consent from the DfE for confidentiality provisions, even in relation to the terms of the agreement, is a new and significant step.

Secondly, the College Financial Handbook has been update to reflect HM Treasury thresholds that DfE approval is no longer needed when the proposed staff severance payment includes a non-statutory or non-contractual element of equivalent to 3 months’ salary or more (this rule did not apply to trusts).

The requirement for approval remains where the college is proposing to make a severance payment where

• The payment includes a non-statutory or non-contractual element of £50,000 or more; or
• The payment is at, or above, £100,000 and includes a special severance payment; or
• The employee earns over £174,000.

These provisions are effective immediately.