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School academies explained: a beginners guide to setting up academies

As the number of academies continues to grow, an increasing number of local authorities are turning to Weightmans to guide them through the start up…

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.

Eve Holt, Solicitor, Local Government, Weightmans LLP
eve.holt@weightmans.com