Local Government - July 2009
Special report – Academies
Academy Start Ups: The Legal Processes and Potential Pitfalls
for Councils: People, Places and Policies
As the number of academies continues to grow an
increasing number of Local Authorities are turning to Weightmans to
guide them through the academy start up process and to provide the
specialist legal advice required across Employment, Property and
Education law. Jessica Baden-Daintree, Karen English and Eve Holt
set out the relevant legal processes and the potential pitfalls for
Local Authorities.
What are
academies?
The Academies Programme was introduced in a
speech by the then Secretary of State, David Blunkett, in March
2000 on transforming secondary education. The first academy
projects were announced in September 2000, when the government
committed to opening 400 academies, 200 by 2010. The programme has
since expanded, and on 30 June 2009 the White Paper ‘Your child,
your schools, your future’ confirmed the government’s intention to
accelerate the creation of academies – to 200 by September 2009,
with a further 100 the next year.
Academies are semi-independent local state
schools that provide a free education for all abilities. They are
established by sponsors from business, faith or voluntary groups
working with partners from the local community. Academies can be
brand new schools in areas which need the extra school places, and
are a viable option to many local authorities dealing with a school
in special measures, or subject to an improvement notice.
Historically academies were introduced to replace existing weak or
underperforming schools. However this is no longer the case and the
current list of academies includes successful schools and some
which were previously private paying. Sponsors may also enter an
academy proposal in any of the competitions now required under the
Education and Inspections Act 2006 for most new and replacement
schools.
An academy is owned and run by the Academy Trust,
which is a company set up as a charity (save that the land and
school buildings remain vested in the Local Authority who then
demise both to the academy by way of a 125 year lease). The
responsibility for the day-to-day running of the school is held by
its governing body. After initial sponsor input, however, the
majority of the funding for academies comes from the Department for
Children Schools and Families (DCSF) and the government therefore
maintains some degree of control over the academy through the
Funding Agreement. There is also usually some funding from the
Local Authority and it is important therefore that Local
Authorities are fully aware of the extent of their powers and
obligations in relation to both the setting up and running of
academies in their area.
Legal
Framework
The legal framework for establishing an academy,
as well as the conditions necessary to its status, are contained in
the Education Act 1996, as substituted by the Education Act 2002.
The Learning and Skills Act 2000 provides for the transfer of
teaching staff and continuity of employment when staff move from a
maintained school to an academy, as discussed in greater detail
below. The Funding Agreement, Memorandum of Understanding and
Articles of Association form the basis of the legal relationship
between the Secretary of State and the Academy Trust. Academies are
trusts and have charitable status and must comply with company law
as set out in the Companies Act 2006, charity law and the
requirements, if applicable, of the Charity Commission. This
ensures that the academy’s finances are transparent and non
profit-making.
Processes and Procedures : Local Authorities’ obligations and
powers in setting up a new Academy
The process of setting up an academy can take
between one and four years from the point at which the sponsor puts
forward an Expression of Interest. A Project Steering Group
normally oversees the feasibility and implementation stages and
consists of sponsor representatives, a local authority
representative, a DCSF representative, a project manager, a
construction project manager, architects etc.
The government has expressed a commitment to free
academies from unnecessary bureaucracy and is looking at the
processes and procedures for establishing academies with a view to
reducing red tape. The DCSF guidance notes for Local Authorities
and sponsors, last updated in May 2009, provide a useful
introduction to the academy development process for Local
Authorities and sponsors. There are three key stages to the process
as set out in brief below.
Expression of Interest
Local Authorities, sponsors and other potential
partners who are interested in the Academies Programme should, in
the first instance, contact The Office of the Schools Commissioner
(OSC) and DCSF for informal discussions. The OSC will support the
development of partnerships between Sponsors and Local Authorities
to enable them and the DCSF to assess their secondary education and
decide if a new Academy is the right solution for their needs. The
OSC will then issue a Statement of Intent letter.
The government has a statutory duty to consult
each Local Authority before opening an academy. Once the site and
sponsor have been identified, the government must work with the
Local Authority and sponsor to develop the vision and specification
for the academy in what is called a formal Expression of Interest.
This Expression of Interest has to be signed by the local authority
and must demonstrate the need for a new Academy in the area
proposed and provide more details about the proposed Academy , such
as the age range and pupil numbers, for the DCSF’s
consideration.
Feasibility Stage
The feasibility stage begins once the Secretary
of State agrees support for an academy project, following
submission of the Expression of Interest. It lasts for
approximately 6 - 18 months, depending on the complexity of
individual project. During this stage, the project team prepares
detailed plans, including an educational vision and model, and an
outline building design, and formally consults with the local
community.
Once detailed plans for the new academy and core
documents (e.g. Memorandum and Articles for the new Company) are
complete, they need to be submitted to the DCSF. At this stage the
Secretary of State must, by law, also formally consult the Local
Authority in whose area the Academy is based, and any other Local
Authority if it is likely that a significant proportion of the
pupils who might attend the new Academy live there.
Once the Secretary of State is content with the
proposals, the Funding Agreement is signed by the Academy Trust and
Secretary of State. This document contains all the formal
information necessary for the opening and funding of the new
Academy - and is a binding contract between the Secretary of State
and the Academy Trust for an Academy to open on a specified
date.
The Implementation Stage
From the beginning of the project, detailed plans
for school improvement are developed by all the stakeholders.
During the implementation stage many of these plans will be ready
for trying out in the classroom. The most noticeable feature of
this stage, however, will be the building works, as set out in more
detail below.
The government has announced that the Young
People's Learning Agency (YPLA) will act on behalf of the Secretary
of State to deliver routine academy functions. The DCSF will retain
responsibility for the commissioning and opening of new academies.
The Secretary of State will also still remain ultimately
responsible for Academies. The YPLA is due to come into existence
in 2010 and will carry out academies functions such as payment and
calculation of grants and performance management on behalf of the
Secretary of State. The YPLA will form part of the wider 16-19
system, together with Local Authorities - working in their regions
and sub-regions - and Government Offices.
For further advice or assistance with regards to
setting up an academy please contact Morris Hill in our Local
Government Group at Morris.Hill@Weightmans.com.
People: Employment law aspects of Academy start ups: potential
traps for councils
TUPE indemnities
The academy will usually provide the draft
transfer agreement, which contains in the main the employment
clauses. The devil really is in the detail with many of these
agreements, which often provide a very poor deal for the council
initially, in relation to carving up liabilities for future
employment claims.
Particular care needs to be taken over the
wording of the indemnities required by the transferee education
company. Typically, the indemnity required of the council will be
much broader than that offered by the education company. In
particular, the council should ensure that it only provides
indemnities in relation to:
- its own acts or omissions and
- liabilities which would transfer as a result of
the operation of the TUPE Regulations.
The education company may try to get the council
to agree to indemnify the education company for constructive
dismissal claims based on proposed contractual changes by the
education company or other anticipatory breaches. Care needs to be
taken to ensure that such claims are excluded from the council’s
indemnities (and included in the education company’s
indemnities).
The council should only provide the indemnity for
the education company dismissing “unidentified” employees to the
extent that the dismissals are procedurally fair and free from
discrimination (they are likely to be substantially unfair). It is
worth asking the education company to limit the council’s indemnity
for claims from persons who were not on the list of transferring
employees to e.g. 12 months after the transfer date.
The education company will typically ask the
council to indemnify subsequent contractors, for example in the
event that it contracts out catering and gardening. However,
typically, no indemnities are provided by such contractors. This
needs to be addressed so that the agreement represents a fair
bargain, perhaps either by removing the contractor provisions
entirely or adding indemnities by them.
Criminal Records Bureau
checks
The education company may provide that employees
who have not been checked by the Criminal Records Bureau will be
removed from the list of employees who will transfer to the
academy. This should not be accepted by the council, as the
relevant employees should transfer as a matter of law, irrespective
of their CRB status. The clause is a particular problem for
councils who employ very long serving employees where historically
police checks were not undertaken on recruitment. The CRB clause
can be re-negotiated to provide for a separate schedule of
employees in respect of whom the council will submit CRB check
applications by a certain date. The council may agree to indemnify
the education company in relation to any dismissal and other
associated costs, should the CRB check reveal that any employee has
a criminal record which makes him or her unsuitable to work with
children. The council should ensure that its indemnity is provided
only to the extent that any dismissal carried out by the education
company is fair and without discrimination.
Single Status and equal pay
In relation to many councils, there will be a
strong likelihood of future equal pay claims linked to Single
Status. Councils need to ensure so far as possible that they limit
their liability for equal pay claims to the period up to the
transfer date. This can be achieved in several ways, for example,
by:
- limiting the council’s indemnities to its own
acts and omissions
- providing that the education company will
indemnify the council for its acts and omissions relating to any
equal pay claims, and/or
- expressly providing that the council shall not
be liable for any differences in pay on or after the transfer date
and that any settlements or awards shall be apportioned
accordingly.
Pensions
The Teachers’ Pension Scheme and Local Government
Pension Scheme should continue to apply to teachers and support
staff. The education company may ask the council to agree to be
responsible for any Local Government Pension Scheme deficit
relating to transferring employees up to the transfer date. The
education company should be asked to explain or itemise the
"deficit". The council should also contact scheme administrators to
quantify any deficit. A common outcome is for transferor and
transferee to allocate liability for meeting the cost and then
agree a series of payments with the scheme over a period of time.
If no deficit is being claimed by the scheme administrators, then
the education company should agree to the clause being removed.
For further advice or assistance with regards to
TUPE transfers and employment issues please contact Jessica
Baden-Daintree in our Employment team at
Jessica.Baden-Daintree@Weightmans.com .
Places: Property law aspects of Academy start ups
From a property perspective, legal advice is
required from the initial stages of the establishment of an academy
i.e. the feasibility stage right through to the implementation
stage and beyond. Whilst Academies are given the independence to
run the School, the land and buildings remain vested in the
ownership of the Local Authorities who will ultimately grant a long
leasehold interest (of up to 125 years) to the Academy Trust.
The Initial Short Term Lease
The Academy Trust will, at the same time as
negotiating a Funding Agreement with the DCSF enter into
negotiations with the Local Authority for an Agreement for ‘short
term’ Lease (“the Initial Lease”). The length of this lease is
often between 7-10 years, its length dictated by and large in
accordance with the termination provisions in the Funding Agreement
between the Academy and the DCSF and to account for the time that
it takes for the parties to enter into the Development Agreement
for the new school buildings.
The Agreement for Lease is entered into before
the academic school year and provides the Academy with confirmatory
evidence to the DCSF of a firm commitment to enter into the Funding
Agreement. The Initial Lease (in accordance with the Agreement for
Lease) is granted by the Local Authority to the Academy on the day
the Academy is established, the start of the new academic year -
September.
The Initial Lease is essentially a stop gap
between the Academy and the Local Authority prior to the entering
into of the Development Agreement and long term lease (normally for
a term of 125 years).
The form and content of the Agreement for Lease
and Initial Lease are bespoke and legal advice is required to
ensure that the interests of the Local Authority are protected,
particularly, in relation to the Academies repairing obligations -
which differ from standard commercial leases in that they are
minimal. The Academy, at this stage, and before agreement has been
reached with regard to the Development Agreement, will want to
restrict the covenant to repair the school building under the
Initial Lease so that it is not required to put the building into
any better state of repair than as evidenced, normally, by a
Schedule of Condition.
The Development Stage
Once the Agreement for Lease and Initial Lease
have completed, the Local Authority will, by then, be in
negotiations with the Academy Trust regarding the refurbishment (or
re-construction) of the new Academy School which will involve
negotiations of a Development Agreement and Occupational
Licence.
In circumstances where a new school is built then
for a period of time - ‘the defects liability period’ - the Academy
will enter into an Occupational Licence for the new building with a
view to entering into the Long Term Lease (125 years) between the
Local Authority and the Academy Trust once the defects liability
period has expired.
Legal advice is required on the standard form of
“Partnerships for Schools’ Development Agreement” and its
implications, highlighting issues of concern and tailoring the form
of draft on behalf of the Local Authority.
The final stage – the Long Term
Lease
The final stage of the process involves the Local
Authority granting to the academy a long term lease of the new
school building (normally a 125 year lease). This is granted once
the defects liability period has expired and again, legal advice is
required to offer advice on the form and content of the long term
lease.
In addition to the contractual documentation
regarding the property assets, the Local Authority must deduce
title of the school land and buildings to the Academy Trust prior
to the entering into of the Agreement for Lease and Initial Lease.
This involves ensuring that covenants, easements and charges are
dealt with and approval issues are addressed early on in the
pre-procurement phase.
Further, if, the existing school has, for
example, foundation status, such that the school land and buildings
are vested in a Board of Governors rather than the Local Authority,
then a full title due diligence exercise will be required on behalf
of the Local Authority (given that the land and buildings may not
have been vested in the Local Authority for many years). This then
enables the Local Authority to deduce title to the Academy.
For further advice or assistance with regards to
the conveyancing please contact Karen English in our Property team
at Karen.English@Weightmans.com
Policies & Practices: Education policies for Academy
start-ups
Before opening, an academy will need to have a
full set of education policies in place. The majority of an
academy’s policies will be determined by the Funding Agreement
which includes policies on grant conditions, governance, school
development plan, pupils, teachers and other staff, curriculum,
assessment, meals, charging, provision of information, grants,
termination, admissions arrangements, special educational needs and
behaviour, and annexes covering the Memorandum of Understanding and
Articles of Association.
All Academies’ admissions arrangements must be
agreed with the Secretary of State as a condition of the funding
agreements, following local consultation, and be consistent with
the School Admissions Code. All applicants for school places must
be considered, though the Code allows faith schools to give
priority for admission to children on the basis of religious
affiliation. Academies must have regard to the SEN code of practice
and statutory guidance on inclusion, and an academy’s independent
status does not affect parents’ rights to appeal to the SEN and
Disability Tribunal. It is expected that most pupils at schools
replaced by academies will have the option of transferring to the
academy.
The government has always made it clear that it
was never its intention that pupils attending an academy would
benefit from a lower level of human rights protection than would be
the case at a maintained school. Academies receive direct funding
from the DCSF and contribute to the UK’s delivery of the right to
an education, so, despite their semi-independent status, the
presumption now is that academies should therefore comply with the
provisions of the Human Rights Act as do schools in the maintained
sector.
The responsibility for the day-to-day running of
an academy is held by its governing body. As academies are
independent schools they have flexibility in deciding how to
organise their governing bodies. The governing body has a wide
range of influence, from the employment of the academy’s principal
and staff to the approval of personnel policies and procedures.
There are usually 13 governors on an academy governing body. Of
these, the sponsor is able to appoint the majority, giving it the
control of the school, and its philosophy and direction. Local
Authorities will usually therefore have very little input into the
formulation of the school’s policies and procedures. The Local
Authority does however have a seat on an academy’s governing body
and will thereby continue to have some say into its policies. Much
of the DCSF guidance however remains helpful to academies and Local
Authorities can therefore help provide training to academies at a
cost. A local authority may also have further direct input by
becoming a co-sponsor of an academy. As a co-sponsor it would have
some influence on shaping the ethos of the new academy. Academies
should be responsive to parents, pupils and the community and
should be actively encouraged to work constructively with the Local
Authority and to share resources with other local schools.
Academies ultimately remain accountable and are inspected by Ofsted
against both the maintained school framework and the Independent
School Standards, as they apply to Academies.
For further advice or assistance with regards to
an Academy’s policies and practices please contact Morris Hill in
our Local Government Group at Morris.Hill@Weightmans.com