Confidentiality clauses and severance payments in FE colleges and Academy Trusts: important update
On Wednesday 26 November 2025, the government published its updated Guidance on Public Sector Exit Payments: Use of Special Severance Payments. It follows updates in October 2025 to its College Financial Handbook and the Academy Trust Handbook. This guidance has removed any ambiguity about the approach FE colleges and academy trusts must take in respect of including confidentiality clauses when making a special severance payments. We now know that DfE approval and legal advice are required.
What does the Guidance on Public Sector Exit Payments say?
The guidance explains at clause 3.4 that treasury approval is required if the payment is novel, contentious or repercussive, regardless of its value. It provides examples of circumstances which will be considered novel, contentious or repercussive, one of which is a settlement agreement that contains a confidentiality clause.
This reflects the position in clauses 5.12 of the College Financial Handbook and 5.13 of the Academy Trust Handbook which were recently updated to state that confidentiality clauses associated with staff severance payments are novel, contentious or repercussive and should not be used unless the college/trust has obtained prior Department for Education (DfE) approval.
When can we include confidentiality clauses in settlement agreements?
The Government and Treasury guidance indicates that confidentiality clauses should not be used as a matter of course when entering into a settlement agreement. You should therefore assess the need for inclusion based on the specific facts of the case.
If you decide that it is appropriate to include a confidentiality clause as part of a staff severance payment, DfE consent is required. Also, the guidance states that legal advice must be obtained on the use of a confidentiality clause before one is used.
The guidance is clear that any confidentiality clause:
- Should not prevent an individual's right to make disclosures in the public interest under the Public Interest Disclosure Act 1998 (whistleblowing); and
- Should not be used to prevent DfE from obtaining sufficient information from colleges/trusts to fully assess payments under its regulatory role. Nothing in the agreement should restrict financial reporting obligations.
Standard confidentiality provisions are usually compliant with these principles, so this is not contentious. The treasury standard clause is compliant and the updated guidance states that this should be used. We are of the view that clauses which do not go beyond those standard principles are more likely to be approved than others.
According to the guidance, there are a number of circumstances where the use of confidentiality clauses is higher risk. These include where:
- A staff member has made allegations of bullying, harassment or discrimination (at any grade); and
- A decision to dismiss a staff member based on disciplinary, performance or attendance issues has been overturned on appeal.
The guidance doesn’t say that consent will not be given in those circumstances, but they will attract greater scrutiny. Legal advice will assist colleges and academy trusts to assess whether it’s appropriate to include a confidentiality clause and draft the clause to protect you, without undermining the public sector principles outline above. For example, in our view, preventing the employee from disclosing the “circumstances” that led to the severance arrangements is likely to be more contentious than limiting a clause to confidentiality as to the terms and effect of the agreement.
You’ll need to keep clear records of the legal advice you’ve received to demonstrate that you complied with the obligation to take legal advice and that advice indicated that the clause was justified.
Does this relate to all confidentiality clauses?
We don’t think so. If the confidentiality clause relates to the disclosure of confidential information obtained during employment (as opposed to confidentiality on the severance terms themselves), our view is that this is not in scope, and you don’t need to obtain consent from the DfE. This is because it is no more onerous than that which would have been in place during the relationship as part of the implied, and sometimes express, terms in the employment relationship. As such, it is not novel, contentious and repercussive in the same was as a wider confidentiality clause.
For other confidentiality clauses in agreements which also provides for an employee’s termination of employment, the guidance applies, whether under a COT3 or settlement agreement. It is less clear how this applies for confidentiality clauses in COT3 when settling ET claims that arise post-employment. We recommend that you take specific legal advice, as it will depend on the circumstances.
Can we use non-derogatory comments clauses?
Colleges and academy trusts often want to include a non-derogatory comments clause in a settlement agreement, alongside any confidentiality clause. The guidance does not expressly say that a non-derogatory comment clause needs prior DfE consent, although it encourages it. Either way, such clauses should be carefully considered and must not stifle or discourage staff from raising concerns about wrongdoing or poor practice with a regulatory or other statutory body.
The view that confidentiality clauses are novel, contentious and repercussive in nature isn’t new, nor is the need to ensure that a confidentiality clause does not prevent an individual's right to make disclosures in the public interest. But this change alters the practice that clauses which meet reasonable principles, aligned to public sector values, also now need consent. In addition, legal advice is a requirement, not a recommendation.
We remain concerned as to the practicality of seeking consent for each standard confidentiality clause.
Please speak to Jenny Arrowsmith for more information.
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