Settlement agreements remain a well-established method for resolving employment disputes within the education sector. However, recent developments concerning the use of confidentiality clauses and the requirement for greater Department for Education (DfE) oversight surrounding them, has led to the material change of the legal landscape within which these agreements operate.
The Role of Settlement Agreements In Schools
A settlement agreement is a legally binding contract under which an employee agrees to waive specified employment clams, typically in exchange for compensation and agreed exit terms. Such agreements must meet statutory requirements, including the provision of independent legal advice to the employee.
Within schools, such agreements are commonly used in circumstances including:
For those within the education sector, settlement agreements can offer a confidential and speedier method of resolving workplace disputes while reducing the risk of litigation and reputation exposure.
Confidentiality Clauses: A Significant Shift in Approach
Confidentiality clauses have traditionally been regarded as standard provisions within settlement agreements. Prior to the recent changes, the key limitation was that such clauses could not prevent whistleblowing or disclosures in the public interest.
However, updated guidance reflected in the Academy Trust Handbook now states that any confidentiality clauses linked to staff severance payments which could be categorised as “novel, contentious or repercussive”, must receive prior DfE approval or risk falling foul of the new rules and being subject to fines.
In April 2026, Schools Week reported on the first known case of an academy trust being found in breach of the updated rules after entering into a settlement agreement containing a confidentiality clause without securing DfE approval.
In that case, the trust was not granted retrospective approval by the DfE, despite arguments that the guidance had been updated shortly before the settlement was finalised. This outcome underscores that:
This highlights the importance of staying informed of recent changes and ensuring you receive legal advice where necessary and that trusts could inadvertently breach academy rules if they continued established practices without adjusting to new guidance.
Continued Requirement for DfE Approval for High‑Value Settlements
Alongside the recent focus on confidentiality clauses, schools and academy trusts should also remain mindful of the existing requirement to obtain prior DfE approval for staff severance payments of £50,000 or more. While this threshold is not new, it continues to apply alongside the updated confidentiality guidance and remains a key compliance consideration. Settlement agreements which meet or exceed this financial limit must still be justified, demonstrably in the trust’s interests, and supported by an appropriate legal assessment. Failure to secure approval at the required stage may place a trust in breach of the Academy Trust Handbook, regardless of whether confidentiality provisions are included.
Implications Of Changes for Schools and Academy Trusts
Increased Administrative and Procedural Burden
The requirement to obtain DfE approval before using confidentiality clauses introduces additional procedural steps and potential delays. Settlement agreements, which have historically been used as a swift resolution tool, may now require longer lead‑in times and more detailed internal governance scrutiny.
Trusts will also need to ensure alignment between HR, legal advisers, trustees and accounting officers before progressing discussions that contemplate confidentiality provisions.
Greater Emphasis of Transparency
These reforms reflect a broader policy objective of increasing transparency in the use of public funds. The DfE has made clear that confidentiality clauses must not prevent the Department from obtaining sufficient information to assess severance payments in its regulatory capacity.
This shift sits alongside wider public sector concerns around the perceived misuse of NDAs and reinforces the expectation that financial decisions within academy trusts are capable of public scrutiny.
Ongoing Areas of Uncertainty
Despite updated guidance, several areas remain unclear and continue to generate concern across the sector.
Legal commentators have noted uncertainty around:
It has also been observed that the guidance does not distinguish between full NDAs and more limited confidentiality wording, raising questions about proportionality and practical drafting approaches.
Further clarification from the DfE is anticipated, but in the meantime trusts must operate within an evolving and, at times, ambiguous framework.
Practical Considerations for Education Employers
In light of these developments, schools and academy trusts should consider:
Failure to do so carries not only legal risk, but also the potential for regulatory criticism and public scrutiny.
While recent regulatory developments have significantly reshaped their use, it is clear
settlement agreements continue to play an important role in managing employment relationships in schools. With the changes in regards to confidentiality clauses and funding approval, the framework within which these agreements sit is becoming more complex. As further guidance emerges, educational institutions will need to navigate this evolving landscape with careful attention to both compliance and practical implementation.
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