Employment law implications of apprenticeship growth plans

Jayne Flint,  28 July 2015

Companies need to know regulatory issues of recruiting apprentices.

The number of employees going on training courses outside the workplace has fallen from 141,000 a year in 1995 to just 18,000 last year. Chancellor George Osborne said that too many large companies were leaving training to others and taking “a free ride on the system”.

To combat this, the government set a target in the recent budget of creating 3 million new apprenticeships in England by 2020 and has planned a levy on all large companies to help fund this. The government may contribute towards the training cost, depending on the apprentice’s age, and is proposing to increase its funding but has yet to commit to a particular sum. The lack of detail available on how the levy will work and an absence of commitment to central funding has attracted criticism from employers.

Given the lack of information, it is difficult to speculate on whether the levy will make any difference to apprenticeships. It will certainly affect those large employers required to make payments under the scheme.  However any employer considering taking on apprentices should make sure they are fully aware of the legal framework which underpins the arrangement.

Contracts
Apprenticeships are work-based training programmes that provide relatively cheap labour while enabling companies to train individuals to fill skilled roles. They date from the middle ages, before there was any concept of employment rights, and are governed by common law rules. This type of ‘apprentice contract’ can be created orally and does not need to be in writing.

The primary focus of an apprentice contract is training. Apprentices gain enhanced rights against dismissal prior to the end of that training which makes it almost impossible to dismiss them, for example on the grounds of misconduct, capability, or redundancy. The contract is for a fixed period and early termination entitles apprentices to claim breach of contract for the remaining period, as well as future loss of earnings based on the salary they would have earned had they completed the training. This makes traditional apprentice contracts an unattractive proposition for businesses.

Agreements
In 2009 the Labour government’s Apprenticeships, Skills, Children and Learning Act 2009 introduced ‘apprenticeship agreements’ to sit alongside the common law alternative with the aim of removing the rigid and inflexible nature of the old system, bringing apprenticeships in line with modern employment law principles and, ultimately, encouraging more take up.

Apprenticeships created under the statutory framework must comply with the Act. The apprentice must undertake to work for the employer and the agreement must:

• be in a prescribed form
• state that it is governed by the law of England and Wales
• state that it is entered into in connection with a qualifying apprenticeship framework

If an agreement does not meet those requirements it will default to a traditional apprentice contract.

Termination
Employers should be alert to a number of issues regarding apprenticeships, especially when beginning or ending an agreement. There is the risk of discrimination particularly related to age. Even though government funding is tied to age, employers should be careful about imposing an age limit on applications for apprentice schemes as this could be seen to be indirectly discriminatory.

Generally agreements will be terminated because the apprentice’s training (the reason for which the individual was engaged) has been fulfilled. Someone with an apprenticeship agreement is regarded as being employed under a contract of service in the same way as any other employee, so the apprentice can be lawfully dismissed in the same way as any other employee.

Apprentices not being offered a qualified role available after they have completed their training would very likely be an unfair dismissal. However, perhaps surprisingly, there is very little case law on the fairness of dismissals at the end of the apprenticeship period.

Jayne Flint is an employment solicitor with Shoosmiths