Sharon Shoesmith , the former Haringey council children's services director sacked in the wake of the controversy surrounding the death of Baby P, has agreed a settlement for unfair dismissal with her former employers.

The BBC reported that the sum could be as much as £600,000, but sources close to Shoesmith said this was wrong and "a long way off". The agreement comes just days before Shoesmith was about to return to the courts in an attempt to force Haringey to agree a payout, 15 months after the court of appeal declared she had been "scapegoated". Haringey council and Shoesmith have agreed a confidentiality clause preventing disclosure of the total.

Shoesmith became the focus of media blame for one of the most extensive child protection controversies of recent years following the death of 17-month-old Peter Connelly, known as Baby P, in July 2007.

Peter, who was on Haringey's child protection register, died after months of abuse. His mother, Tracey Connelly, her boyfriend, Steven Barker, and his brother, Jason Owen, were convicted in November 2008 of causing or allowing his death.

Although Haringey social workers – employed in the children's services department that Shoesmith ran – were blamed by the media for failing to intervene to protect Peter, subsequent inquiries showed that Metropolitan police officers, and Great Ormond Street hospital doctors had all made serious errors.

The deal ends over four years of court action to clear her name and be compensated for wrongful dismissal by Shoesmith, who earned £133,000 a year at Haringey.

Shoesmith was sacked by Haringey almost five years ago, in early December 2008, just days after then children's secretary Ed Balls declared that she should be dismissed without compensation. But Shoesmith subsequently took Haringey, Balls and Ofsted – which carried out a hurried emergency inspection report for Balls in November 2008 criticising the performance of Haringey's child protection services – to court.

In a interview with the Guardian in February 2009 she accused Balls of "breathtaking recklessness" and political opportunism and said Ofsted's report was misleading and lacked balance. Although Shoesmith lost the first round of her case, she was triumphant in the court of appeal which concluded in July 2011 that she had been "unfairly scapegoated". It said her removal from office in December 2008 by Balls had been "intrinsically unfair and unlawful".

The Department for Education is understood to have made a contribution to the settlement, after the appeal judge Lord Neuberger declared in his ruling that Balls was in part to blame for Haringey's decision to sack Shoesmith without compensation.

The BBC reported that education secretary, Michael Gove, who as Ball's successor continued to contest the case brought by Shoesmith, was furious about the confidentiality clause, believing it to be "indefensible".