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Academies Briefing October 2021

  • United Kingdom
  • Education - Briefings

07-10-2021

In this issue:

Academy Trust Handbook 2021

Academy Trust Governance Update

Redundancies – The importance of a fair procedure and the role of an appeal

Sharing your school of thought - Pensions issues for academy outsourcings

For full details of our upcoming education training webinars click here.

 

Academy Trust Handbook 2021

In June, the Education and Skills Funding Agency (ESFA) published the new Academies Financial Handbook. As usual the Handbook is effective from the start of the new financial and academic year, 1 September 2021.

The ESFA have issued a number of changes this year, not least the renaming of the Handbook to “The Academy Trust Handbook.” The then Academies Minister, Baroness Berridge explained that its renaming was to more accurately reflect the wide range of information the Handbook contains, which is not limited to purely financial matters given that it also covers responsibilities such as safeguarding, health and safety and estates management.

The ESFA want the Handbook to be a ‘one stop shop’ for Trustees, Governors and leaders of Trusts. In a similar vein, the ‘Financial Notice to Improve’ is being renamed the ‘Notice to Improve’ given that the ESFA is able to intervene in a broader range of areas than simply where there are financial concerns, for example, where the ESFA has concerns about governance more generally.

Other changes to the Handbook include:

• Placing an obligation on Trusts to ensure that their Members are not subject to a direction made under s128 of the Education and Skills Act 2008 which prohibits individuals from taking part in Trust management. This obligation already existed in respect of Trustees.

• A reiteration that Trusts should have places for parents and carers within their governance structure. Either two parent/carer governors on the Trust Board, or in the case of a multi academy trust, two parent/carer local governors on each local governing body. This is to ensure that there is a connection to the local community that the Trust serves.

• Setting out for clarity a Trust’s obligations in respect of safeguarding, health and safety and estates management.

• Stating that from 1 March 2022, any newly appointed senior executive leader can only be appointed as a Trustee if the members appoint them as such, the leader concerned agrees to be appointed as a Trustee and the Trust’s Articles permit it. There are some Trusts that will have their executive leaders appointed as ex officio Trustees which will no longer be permitted where the ESFA are approving new Articles. The Handbook also states that it is the ESFA’s “strong preference” for no other employees to serve as Trustees.

• Greater emphasis being placed on the importance of routine external governance reviews, and specifically before a Trust Board embarks on significant change (the examples in the Handbook being prior to a Trust growing significantly or where concerns about governance arise). ESFA consider this a stronger means of identifying potential improvements than self-assessment alone.

• Stating that when the senior executive leader of the Trust (the accounting officer) is to leave the Trust the Board should approach the RSC in advance to discuss their structure and options, including plans for recruitment.

• Making it clear that ESFA expects Trusts to monitor financial schemes of delegation annually and “immediately” when there has been a change in Trust management or organisational structure.

• A requirement for Trusts to publish on their website the number of employees whose benefits exceed £100,000. This includes individuals who receive this amount through an off payroll arrangements even though they are not employees.

• A requirement to obtain prior ESFA approval before making a staff severance payment where the exit package is at or above £100,000 and/or the employee earns over £150,000.

• Making it clear that the chair of Trustees should not be the chair of the audit and risk committee. For larger Trusts that have separate finance and audit and risk committees, these chairs should not be the same.

• Making it clear that internal scrutiny must be objective and cannot be performed by a Trust’s senior leadership team. The Handbook sets out in detail how internal scrutiny should be carried out.

• A new obligation on Trusts to provide ESFA with written authority giving permission for any third party to provide information and documentation to ESFA on request where the ESFA has concerns about financial management and/or governance at an academy trust.

• Trusts must be aware of the risk of cybercrime and to put in place proportionate controls and take action where a cyber-crime occurs and must obtain permission from ESFA before paying cyber ransom demands.

For more information please contact:

Helen Cairns

Principal Associate

helencairns@eversheds-sutherland.com

07740 396 961

Ben Wood

Partner

benwood@eversheds-sutherland.com

07876 780 298 

 

Academy Trust Governance Update

Many academy trusts have decided to outsource cleaning, catering and other services to external private contractors in order to save costs.

This article provides information on the key issues and risks that trusts should consider from a pensions law perspective.

The recent changes to the model Articles (June 2021) - Model articles of association for academy trusts - GOV.UK (www.gov.uk) and the Academy Trust Handbook 2021 (effective from 1 September 2021) represent a further reinforcement of some of the trends we have seen coming out of the DFE policy team on “better” governance. The letter from the then Academies Minister Baroness Berridge issued to all academy trust chairs in July, emphasises the Department for Education’s desire for academy trusts to adopt these changes as soon as possible.

Academy trusts should be regularly reviewing their governance arrangement to ensure their effectiveness and whilst there is no obligation on trusts to adopt the changes set out in the recent model, academy trusts diverging from the principles behind these changes will need to be able justify why they have chosen not to incorporate them into their constitution or otherwise in their governance policies. This is because although currently, the DfE has no contractual right to require an academy trust to adopt the most recent model articles, where an academy trust wishes to expand by taking on new academy trusts, or wishes to make a significant change, the DfE will often require the trust to adopt the most recent model articles as a condition to that expansion/change.

Effective governance requires a degree of separation between the academy trust members and the academy trustees to ensure academy trustees can be properly held to account (and it is the role of the members to hold trustees to account). For a number of years, this guiding principle has been articulated in the Academies Financial Handbook. The automatic right of the chair of trustees to be an ex-officio member has long since been removed from the DfE model articles, albeit that some trusts continue to have the chair as a member where the majority of members are independent from the board. The 2020 model articles now make it mandatory for there to be a majority of members who are not also trustees. As expressed in Baroness Berridge’s letter, this is important because “having members who do not sit on the board promotes objectivity and reduces the risk of unchecked ‘group think’ by the board”.

Interestingly, the DfE are not requiring complete separation such that none of the members can also be trustees. This is surely a recognition of some of the challenges academy trusts face in securing enough volunteers to assume these unpaid roles. There can also be some merit in an element of overlap as a means of allowing the members to be adequately informed as to the academy trustees activities. Academy trusts will have to assess whether some overlap between their members and trustees outweighs the advantages of complete independence.

Recognising that members need to have information and some level of oversight in order to fulfil their duty to appraise the board’s effectiveness, the new model articles also now make it compulsory for academy trusts to hold annual general meetings of its members (“AGMs”). In previous versions, this has been optional and many academy trusts have chosen other methods to ensure their members are engaged (and at the same time reduced the administrative burden of having to call yet another company meeting). There are no statutory requirements as to what business must be conducted at an annual general meeting although there are strict requirements around when and how they are held which academy clerks will need to be familiar with. AGMs are usually held to consider the company’s annual accounts and to re-elect directors but academy trusts should think about other items of business focussed on informing and engaging members.

Helpfully, the new model articles (23A and 23B), in recognition of the recent issues faced by academy trusts in holding face to face meetings during a pandemic, clarifies the ability for general meetings of the members to be held virtually. This should also improve levels of attendance – although note the increase in the quorum from just two members, to now a majority of members – more relevant to those academy trusts who follow the DfE’s recommendation to have five members.

Over the years, the role of the academy trust member has been clarified by the DfE and their importance entrenched in the articles and funding agreements. For a while now, the DfE have had the right to diligence a member’s suitability and require their removal if necessary. The new model articles go one step further by providing for automatic termination of a person’s membership in certain circumstances not dissimilar to those applying to a trustee’s disqualification (see Article 15). This should make it easier for academy trusts to remove members who fail to conduct themselves at the expected standard. Article 16A has also been supplemented to reflect recent caselaw that members must carry out their duties in furtherance of the academy trust’s charitable objects.

Updating the academy trust’s articles to incorporate these recent changes will require some administrative steps which the clerk (now referred to as the “Governance Professional” in the new articles) will need to co-ordinate and should be undertaken with appropriate legal advice. Even if the updates are not made to the articles immediately, academy trusts should attempt to incorporate these new principles into their policies and procedures as far as possible. Eversheds Sutherland academies team would be delighted to provide more information or advice on your options.

For more information please contact:

Morag Roddick

Principal Associate

moragroddick@eversheds-sutherland.com

07500 882 178

Helen Cairns

Principal Associate

helencairns@eversheds-sutherland.com

07740 396 961

 

Redundancies – The importance of a fair procedure and the role of an appeal

The recent Court of Appeal case of Gwynedd County Council v Barratt and another [2021] EWCA Civ 1322 has reminded employers that procedure is key when it comes to undertaking a redundancy exercise fairly, and in a way which minimises the risk of legal challenge. In this particular claim, brought by two teachers made redundant due to the closure of the school where they worked, the focus was whether or not a redundancy dismissal without any right of appeal was unfair. Whilst appeals can be a factor when considering the fairness of a redundancy process, they are only one part of the puzzle, and it is important to consider the procedure followed as a whole

Below we set out a summary of what a fair redundancy procedure ought to look like (including whether an appeal is needed), and some helpful tips for academies on how to manage the difficult situation where they feel there is no alternative but to make staff redundant.

What actually constitutes a redundancy situation?

In order to fairly dismiss an employee, an employer must have a fair reason to dismiss, follow a fair procedure and the decision to dismiss, when considering all the circumstances, must be reasonable. Redundancy is one of five potentially fair reasons an employer can give to dismiss an employee. Employers must be careful though, as they are required to prove there is a genuine redundancy situation in order to rely upon this reason in the event that they are defending an Employment Tribunal claim. In the education sector a genuine redundancy situation can arise where a school or academy has closed altogether, one of a MAT’s sites has closed or relocated, or where the requirement for work of a particular kind has ceased or diminished – either because there is no longer the need for a particular role or the numbers needed to carry out that role have reduced.

If an employer relies upon redundancy as the fair reason for dismissal and there is not a genuine redundancy situation in the first place, it is almost inevitable that an Employment Tribunal claim of unfair dismissal against it would succeed.

How can you dismiss for redundancy fairly?

Provided there is a genuine redundancy situation, there are a number of key steps employers must take to ensure they dismiss fairly. These include; warn and consult employees or their representatives about the proposed redundancy; adopt a fair basis to select employees for redundancy; and consider whether there is alternative employment that can be offered in order to avoid having to make redundancies. In addition, and in light of the aforementioned Gwynedd County Council case, employers should also consider whether it should offer any redundant employees a right of appeal against their dismissal.

Warn/Consult

Academies should speak to affected employees/appropriate representatives at an early stage, prior to a formal decision being made by the Corporation, to inform them about possible redundancies and give employees/representatives the opportunity to suggest ways in which redundancies could be avoided or the numbers reduced.

If an academy is proposing to make large-scale redundancies, so 20 or more employees within a 90-day period, it will have to undertake collective consultation with the recognised trade union(s) or, if no union is recognised, elected employee representatives.

More commonly the numbers will be below 20. In these circumstances there will be no obligation to collectively consult (assuming there is no contractual agreement to the contrary) – though of course the academy could choose to do this if it suits it to do so. There will, however, be the need to consult individually. This can be commenced by holding a meeting for all those employees affected or by making an announcement. Those employees should then be seen on a one-to-one basis to discuss how the redundancy process will affect them personally and to give each of them the chance to make comments before the final decision is taken.

Fairly select

Fair selection depends on the nature of the redundancies being made. If someone is in a unique role or there is an entire team of employees undertaking a certain role that is no longer required, selection is less of an issue as that unique individual or all of the team will be selected. However, where teams or departments are being reduced in size or employees’ skills are interchangeable, which can be especially relevant for teaching staff, academies must take care to ensure they fairly select employees for dismissal.

The first step is usually to identify a pool of employees at risk of redundancy. For example, if there are to be any changes to a curriculum or the courses on offer to pupils it would be necessary to identify all those who work in delivering those subjects, and it is likely that they would be placed in the pool of employees ‘at risk’ of redundancy. Employees who are not involved in those subject areas, however, are unlikely to be placed in the ‘at risk’ pool of employees as their job is distinguishable and is still required to the same extent.

An academy must then have a fair and reasonable way to select which of the ‘at risk’ employees are retained and which are made redundant. The criteria will very much depend upon the type of work which is being reduced. If there are, say, a mixture of academic and non-academic roles being made redundant the criteria may be different from role to role. However, in order to be reasonable, the redundancy selection criteria should be objective and capable of independent verification. This means that the criteria should, as far as possible, be measurable, rather than just being based on personal opinion.

Potentially fair selection criteria may include; measurable performance such as pupil progress, exam results, relevant qualifications for the job, recent appraisal scores, disciplinary records, length of service and attendance records, although in relation to the last two it is worth proceeding with caution as potential arguments could arise over age or sex discrimination (on length of service) or disability discrimination, if disability related absences are taken into account.

Selection on purely subjective grounds is likely to be unfair. This is to ensure that an employee is not selected by a manager due to personal animosity and also helps avoid unfair or discriminatory reasons, such as the employee being pregnant, old, disabled or a whistle-blower for example creeping in. Examples of criteria that are too vague, imprecise or subjective include whether an employee is liked by their colleagues and whether they are perceived as a hard worker, for example.

Alternatives to redundancy

Once an employee had been provisionally selected for redundancy, the employer must consider if there are any other jobs that the employee could do to avoid being made redundant. Of course, the employer does not have to create a new job for the employee or put the employee in a vacant position they are clearly unsuited to - but the employee should be offered reasonable alternatives that are available. Where the redundancies are being made by a multi academy trust, this can include alternatives available in any of the schools in that MAT. Trials in roles can be undertaken by employees to see if a role is suitable. If a suitable role is unreasonably refused by an employee, they can lose their right to a redundancy payment.

In the context of alternative employment, it is important for academies to remember the special protection for employees at risk of redundancy who are on maternity leave, adoption leave or shared parental leave. If a redundancy situation arises during an employee's maternity, adoption or shared parental leave and it is not practicable by reason of redundancy for the employer to continue to employ them under their existing contract, the employee is entitled to be offered a suitable alternative vacancy (where one is available) to start immediately after their existing contract ends.

Appeals

If redundancy cannot be avoided and an employee is dismissed, does an academy have to offer the right of appeal and, if it doesn’t have to, should it? As mentioned, this is the issue which was examined recently in the Gwynedd County Council case. There the two teachers were not given any right of appeal against the decision to make them redundant (having failed to secure newly created roles at a new school site) – this was in breach of the applicable Welsh education regulations.

The claimants succeeded in their claim for unfair dismissal, and the Employment Tribunal’s decision was then upheld by the Employment Appeal Tribunal. The employer appealed to the Court of Appeal on a number of grounds, one of which was the Employment Tribunal’s finding that there must be “truly exceptional circumstances” to refuse an employee the right of appeal against a decision to dismiss.

The Court of Appeal dismissed the appeal, upholding the original decision that the dismissals were unfair. It found that the Employment Tribunal had concluded on the facts that the lack of any review or appeal was both substantively and procedurally unfair, in circumstances where the employee had a clear statutory right to an appeal. The Employment Tribunal had applied a test of overall unfairness, and had concluded that the employer’s approach was not within the band of reasonable responses.

Although the dismissals were unfair, the Court of Appeal did confirm that the absence of a right of appeal in a redundancy dismissal will not in itself automatically lead to a finding of unfair dismissal. It is the overall fairness of the procedure that the employer has adopted, including the extent of the consultation with affected employees that will determine whether the dismissal is unfair.

In terms of English law surrounding dismissals, there is no legal obligation to offer an appeal against redundancy dismissals, and the ACAS Code of Practice does not apply to redundancies. There is also unlikely to be any contractual right of appeal – though if there is, clearly an appeal should be allowed. So the failure to give the right of appeal against a decision to dismiss by way of redundancy will not in itself render the dismissal unfair.

That being said, it remains good practice to offer a right of appeal, and this is certainly the safest option. This is especially the case for academies who may operate over more than one site, as the appeal is a second chance to ensure that redeployment to another trust school has, at the least, been considered. It also can have the advantage of allowing the academy to correct any procedural flaws that have happened earlier in the process and deal with any points that may have been overlooked previously.

For more information please contact:

Laura McHugh

Senior Associate

lauramchugh@eversheds-sutherland.com

07770 492 076

Ben Wood

Partner

benwood@eversheds-sutherland.com

07876 780 298

 

Sharing your school of thought - Pensions issues for academy outsourcings

Many academy trusts have decided to outsource cleaning, catering and other services to external private contractors in order to save costs.

This article provides information on the key issues and risks that trusts should consider from a pensions law perspective.

What happens on outsourcing?

As a result of an outsourcing, non-teaching employees who are currently carrying out the services in-house will likely become employees of the contractor, in line with the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). Whether TUPE applies in practice depends on a number of factors and we would recommend that advice is sought on whether TUPE would apply in any given scenario.

The outsourcing contract

The terms of the outsourcing will usually be set out in an outsourcing agreement (also known as a “services contract”), entered into between a trust and the contractor.

What should be included in the outsourcing contract from a pensions perspective?

New Fair Deal

Before the Trust sends out its invitation to tender, the Trust must ensure that it considers the application of HM Treasury’s New Fair Deal policy 2013 (“New Fair Deal”).

New Fair Deal (broadly) provides that:

• staff who are members of the LGPS and who are compulsorily transferred to a contractor, and who remain continuously employed on the delivery of the outsourced service or function, will remain eligible to be members of the LGPS while they continue to be employed on the transferred service or function;

• this protection does not apply in relation to other staff of the contractor, including any staff recruited to deliver the outsourced service or function who were not compulsorily transferred from the trust;

• it is the responsibility of the Trust to ensure that the terms of the outsourcing contract require the contractor to provide protected staff with continued access to the LGPS in their new employment; and

• trusts must also ensure that staff protected by New Fair Deal are provided with continued access to the LGPS on any subsequent compulsory transfer while they continue to be employed on the contracted-out service or function, including any transfer to a sub-contractor.

Although New Fair Deal does not have the force of law, the Department for Education – and public sector unions – usually expect trusts to comply with it as a matter of practice. It is also important to note that the policy is not overriding, and that failure to include appropriate provisions in the outsourcing contract will result in staff having no protection. The outsourcing contract should therefore include provisions in respect of New Fair Deal if the Trust wishes to follow it. This will include provisions such as requiring the contractor to obtain admitted body status in the relevant LGPS pension fund.

To obtain admitted body status the administering authority of the LGPS pension fund will require the contractor to enter into an admission agreement, which in these cases will be a tripartite agreement between the contractor, the Trust and the relevant LGPS administering authority.

The Trust should also consider whether it wishes to require the contractor to obtain a bond from a third-party provider. Such bonds can assist in protecting the Trust in the event that the contractor does not pay what it is required to pay to the Fund during the admission agreement being in place or in the event of the contractors insolvency. Contractors often try and require trusts to reimburse them for the costs of obtaining a bond.

LGPS pensions risk sharing

The default position under the LGPS Regulations is that the admission body (contractor) is required to pay all employer contributions and other payments that the Fund requires them to make. This includes ongoing employer contributions, strain payments in the event of redundancy or business efficiency early retirement or ill health retirement and also any exit debt payable at the end of the contract/admission agreement. Such payments may be material and therefore participation in the LGPS comes with risk for admission body contractors.

Given this, contractors will often seek protection under the terms of the contract (and admission agreement) against the funding risks (and associated costs) of such participation. We have seen contractors do this by including provisions in contracts or liaising with the relevant Fund to include provisions in the admission agreement that:

• provide that if the Fund increases the employer contribution rate then the Trust is liable for such increases;

• if the Fund require a strain payment to be made in the event of redundancy or business efficiency early retirement or ill health retirement, that the Trust is responsible for such costs; and

• if an exit debt is payable then the Trust is responsible for making the exit payment to the Fund (or for reimbursing the contractor for such payment).

Trusts should be mindful of such requests from contractors and take advice on the position.

We are also seeing a trend in contractors providing responses to tenders that either do not mention LGPS risk sharing provisions or provide certain information in respect of these but not to the full extent that the contractor is really wanting to put the risk on the Trust.

Given this we strongly recommend that LGPS risk sharing is considered at an early stage and that trusts should make it clear that they require detailed information about the contractor’s LGPS pensions risk sharing proposals as part of the tender response. The Trust can then consider the responses and level of risk sharing they are willing to agree to and then award the contract accordingly. Admission agreements and contractual provisions should be legally reviewed to check that they contain the provisions that the Trust is wanting to include and reflects the commercial agreed risk sharing arrangements.

Update – Government consultations on New Fair Deal

We are waiting for Government’s comments on the results of a consultation on the application of New Fair Deal in the LGPS. If the provisions as discussed in the consultation are enacted this will give New Fair Deal principles the force of law in the LGPS meaning that the principles of New Fair Deal will apply automatically.

How can we help?

Eversheds Sutherland has considerable experience in acting for trusts that are considering outsourcing services. We can assist academy trusts by:

• advising on the requirements of New Fair Deal and obligations under this

• drafting pensions content in the invitation to tender

• reviewing responses to tenders including in respect of pensions risk sharing

• preparing pensions provisions in contracts

• reviewing and advising on admission agreements and obligations under those agreements

For more information please contact:

Cat Ellis

Principal Associate

catellis@eversheds-sutherland.com

07557 895 777