The National Audit Office analysed over 5,000 emails held by the Treasury and estimated that, in the three years to 31 March 2013, the Treasury approved 1,053 special severance payments (those above basic contractual entitlements) totalling around £28.4 million. Separate NAO research found that 88% of settlement agreements contained a confidentiality provision. These are interesting statistics but it seems unlikely that the direct suppression of embarrassing information about wrongdoing was the primary motivation for more than a handful of these settlement agreements. Confidentiality and non-disparagement provisions are standard "boiler plate" clauses in most settlement agreement templates, usually aimed at preventing employees sharing the amount of their pay-off with their former colleagues.
The Report begins "We are deeply concerned about the use of compromise agreements and special severance payments to terminate employment contracts in the public sector. The lack of transparency, oversight and proper accountability over their use has allowed taxpayers’ money to be used to reward failure and to avoid management action, disciplinary processes, unwelcome publicity and reputational damage". The issues addressed in the Report are therefore wider than merely gagging whistleblowers: they are about a culture of using settlement agreements to expedite change even where existing Treasury guidance states that compromise agreements should not be used as an alternative to management action or disciplinary processes.
The Report recommends, amongst other things that the Cabinet Office should issue guidance on the appropriate use of compromise agreements and special severance payments, the governance arrangements that should be in place to approve them, and who is accountable for their use. That guidance should:
- require public sector organisations to secure approval from the Cabinet Office for all special severance payments and associated compromise agreements where they relate to cases of whistleblowing;
- set out standard terms and conditions to be used in compromise agreements, including a provision in all compromise agreements stating that nothing within the agreement shall prejudice employees’ rights under the Public Interest Disclosure Act;
- set out how lessons are going to be learnt across government to prevent reoccurrence where a failure of process has occurred within an organisation.
There are also recommendations for the Treasury including:
- when the Treasury does approve special severance payments, it should ensure that its decisions are based on the principles of economy, efficiency and effectiveness, not simply on cost alone;
- revising the reporting requirements in the Financial Reporting Manual to ensure the mandatory and consistent disclosure of special severance payments in public sector annual accounts. This should include disclosure of the number of individual payments, the size of payment and the requirement for individual payments for members of the Senior Civil Service or equivalent to be publically disclosed;
- making it clear what it expects from private sector employers when they enter into contracts to deliver publically funded services including whistleblowing policies and disclosure of special severance payments.
There is frequently a tension between individual employment rights and a need for decisive action where there are failures in public services. In this context the settlement agreement is often seen as a panacea. This is as much about paying to by-pass proper process as it is about rewarding failure. The Public Accounts Committee's concern is that failures in public services may not come to light if settlement agreements are used to cover up those failures (or inadvertently have that effect) without appropriate centralised scrutiny. Hopefully the Cabinet Office guidance will help to improve the situation rather than merely adding delay and administration into cases which should rightly be settled.