Preparing for academies and free schools

The government’s flagship policies in education involve allowing a far greater number of schools to become academies, and helping a wave of free schools to come into being. Graham Richardson and Tracy Walsh outline some of the employment and pensions issues that local authorities will have to consider.

The new government’s proposals are likely to lead to the creation of a large number of new academies, with many expected to be set up this September. The Education Secretary, Michael Gove, has said that nearly 70% of secondary schools rated outstanding by inspectors have already written to the Department of Education expressing an interest in leaving local authority control.

What is more, under the government’s proposals there will be no requirement for the local authority to be supportive of the academy’s foundation, which creates the prospect of academies being set up in circumstances where the local authority is not the driver behind the change and may even oppose it.

Local authorities need to be prepared in the coming months to deal with the creation of new academies at short notice. From our experience advising on many academy transactions over recent years, employment and pensions issues are often the most difficult to resolve.

The purpose of this note is to flag up some of the difficult employment and pensions issues that commonly arise. Local authorities would be well advised to give careful thought to these issues at the earliest stage to ensure that the local authority’s position is protected and to avoid difficult last-minute negotiations as the transfer date approaches.

Employee issues

• TUPE will almost certainly apply bringing with it the requirement to consult with employee representatives on the proposed change of employer. Staff will have protected employment rights under TUPE.
• Where restructuring is envisaged, careful thought will need to be given to who will deal with any redundancy process and who will bear any costs or liabilities associated with redundancy. This may potentially include substantial pensions costs and unfair dismissal liabilities. The local authority may need to consider obtaining indemnity protection. The fact that many new academies are likely to be rated as ‘outstanding’ may however mean that restructuring of staff on the change of status is less common in the future.
• Previously academies have generally been indemnified by local authorities for pre-transfer liabilities. However, in this new landscape, authorities may wish to reconsider this approach and consider giving only limited or no protection. This would be to treat academies in the same way as trust schools (which are in a similar position of choosing to move away from the local authority, albeit they remain maintained schools).
• There are some categories of staff where an apportionment of risk and liabilities may still need to be considered. Where the local authority is to supply the services of cleaning/catering staff to an academy, a TUPE transfer may take place when this arrangement ceases, in which case this will need to be addressed in a transfer agreement or service level agreement. There may also be issues around residential caretakers, particularly if their accommodation is not located on the school site but is part of the authority’s general housing stock.
• Negotiation will need to take place as to who will bear the cost of existing and future equal pay claims. Academies may look for indemnities against pre- and post-transfer liabilities  (where such claims arise out of the local authority’s pay structure). Local authorities will need to consider whether they are willing to provide indemnity protection and, if so, the extent to which they are willing to do so.
• Consideration should also be given as to the extent to which academies will be required to comply with single status agreements entered into by local authorities currently or in the future. And what about future changes to such agreements?
• Local authorities should also consider whether they wish to reserve the right to handle equal pay claims brought against academies as part of their conduct of the wider equal pay proceedings.

Pensions issues

Over the last few years it has become apparent that the pensions position on the setting up of an academy is not straightforward. Points to consider include:

• Academies cannot choose whether or not to offer non-teaching staff membership of the LGPS (or teaching staff membership of the TPS) and cannot decide to offer a different pension arrangement. This does present academies with risks around past service deficits in relation to the LGPS. Most local authorities seek to pass the past service deficit on to the academy. There are arguments that can be made to both support and resist this position.  Most administering authorities regard this as a commercial matter to be agreed between the relevant local authority and the academy.
• Academies may plan to outsource any number of the services necessary to run the academy e.g. cleaning, catering etc. They are not required to demand that a service provider provides comparable pension provision after the staff have transferred. Those local authorities who are concerned about the possible “watering down” of pension provision, and complaints from former members of staff, may consider imposing additional pension obligations on any onward transfer.
• There is likely to be a pensions angle to any agreement on equal pay. One key issue likely to need consideration is the employee and employer contributions due on back pay and who pays this where single status agreements are agreed after the transfer date. Furthermore, any increase in salaries of LGPS members will have an impact on past service pension liabilities, because of the nature of the final salary benefits. If academies inherit a deficit, this will include any such increase in the liabilities caused by single status.

Free Schools

The government has now also launched a “free schools” programme, inviting teachers or parents to set up their own schools funded by the taxpayer. Education Secretary Michael Gove has stated that he wants to the first school to open by September 2011, referring to similar projects in Sweden and the USA as examples of success.

A total of £50m has been allocated to the programme initially, for the period up to April 2011, and some planning and building regulations will be relaxed to allow schools to be set up in existing buildings, which are currently, for example, private houses.

Free schools will be subject to Ofsted inspections. They will not be subject to local authority control, but the Department for Education does advise interested groups to discuss their plans with the local authority.

Applicants are required to set out their proposals for the school’s aims and objectives in a business plan, prove there is evidence of demand, set out teaching methods, outline a curriculum, and identify possible school sites.

This raises interesting questions about whether or not TUPE will apply in each case, depending for example, on where teachers are recruited from.

Conclusion

The creation of an academy or a free school can present a number of legal traps for the unwary and it is important for local authorities to be prepared as far as possible in advance.

Graham Richardson are directors in the employment and pensions teams respectively at Dickinson Dees. Graham can be contacted via This email address is being protected from spambots. You need JavaScript enabled to view it. or on 191 2799456, while Tracy can be reached via This email address is being protected from spambots. You need JavaScript enabled to view it. or 0191 279 9946.