Employment law implications for academy conversions

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Education Article

06 July, 2020

Background

Despite the ongoing upheaval that has been caused by Covid-19 and in particular the upheaval that this has caused for schools there are some things which continue on as normal.

At Forbes Solicitors we are experienced in navigating the academy conversion or rebrokerage process and these have been continued despite the ongoing uncertainty and disruption caused by Covid-19.

However whilst these processes are continuing Covid-19 has inevitably impacted them and there are additional considerations that need to be factored in during any ongoing or future academy conversions or rebrokerages, in particular it presents issues around the transfer of staff under TUPE.

How to carry out the consultation

Under TUPE Regulations there is a requirement to inform and, in some cases, consult with transferring staff around the proposed transfer. Under normal circumstances this is normally done by arranging meetings with the recognised trade unions to discuss the proposed transfer and also arranging to meet with the transferring members of staff to discuss the proposed transfer.

The normal way of carrying out these meetings via face to face meetings is going to be more difficult in at least the short term whilst social distancing is in place and so consideration will need to be given on how the obligation to inform and consult takes place in the future.

Whilst this is the way consultations in academy conversions have traditionally followed, there is no legal requirement for the information and consultation to take place in this way. Therefore you can look at alternative options such as holding virtual meetings etc. If you do look at carrying out these meetings via virtual means you should ensure that measures are put in place to allow the transferring staff to discuss any issues with their respective unions and ensure that an adequate consultation takes place.

Enhanced due diligence

A key issue which can sometimes be overlooked in TUPE transfers is that it is not just the employee themselves who transfers over, it is also any accrued liabilities on behalf of that employee which transfers. As a result it has always been important during any academy conversion to ensure that appropriate due diligence takes place so as the new employer you are aware of any potential risks.

However issues caused by Covid-19 make this more of an issue. Covid-19 has caused many issues for schools in particular as it is an issue which schools have not had to deal with in living memory and depending on how the previous employer has dealt with these issues there are potential liabilities that may transfer under TUPE.

Therefore when looking at any academy conversion or rebrokerage some of the things employer should consider investigating as part of their due diligence is:

  • Have their been any dismissals which had resulted from Covid-19;
  • Were any employees subject to disciplinary action for failing to attend school due to Covid-19;
  • Do they have any staff who are still shielding;
  • Did they agree any formal flexible working requests;
  • Did they furlough any members of staff;
  • Were these staff properly furloughed; and
  • Were the staff in a category which allowed them to be furloughed.

In many ways the issues around furloughing members of staff are the most important that should be considered. Whilst TUPE does transfer any liabilities, generally most claims within an Employment Tribunal would need to be brought within 3 months. Therefore if the conversion takes place longer than 3 months after these incidents took place the risk is relatively small in most circumstances.

However issues that arise from furloughing staff may not become apparent until a number of years later. HMRC for instance have made clear they will seek to recover money paid improperly to employers who had furloughed employees when they didn't have the right to do so and this process could take years. The liability for this is likely to transfer to the new employer under TUPE so this should be considered.

Additionally if an employee is not aware they had been improperly furloughed until some time after they had returned to work from furlough, they may then have an argument to resign and claim constructive dismissal as a result of that breach of their contract.

How to mitigate the risks discovered during due diligence

As part of the academy conversion or rebrokerage process it is common that the parties enter into a Commercial Transfer Agreement (the CTA) to transfer over all the assets of the school to the new provider.

The CTA also commonly has a series of warranties and indemnities offered by the previous employer to the new employer to protect the new employer from some elements of liability that they may inherit as a result of TUPE. Therefore schools may wish to consider if there are additional protections they need within the CTA as a result of their due diligence. Ordinarily the outgoing employers are reluctant to offer significant additional warranties and indemnities so in the majority of cases this may not be possible but it is something which should be considered.

Additionally in some rebrokerage situations the outgoing employer may not exist following the transfer and so any warranties and indemnities within the CTA could not be enforced in any event and so in these circumstances, or when the warranties and indemnities offered are not sufficient, a risk assessment should be carried out before making a determination on whether to continue with the proposed transfer.

For more information contact James Barron in our Education department via email or phone on 0161 918 0017. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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