Against a backdrop of rising youth unemployment, higher tuition fees and a shortage of vocational training opportunities, there is a strong push by the Government to encourage businesses throughout England and Wales to engage apprentices.

Introduction

Apprenticeships are becoming an increasingly attractive alternative to higher education and data released by the National Apprenticeship Service (NAS) at the start of 2013 shows that there were almost 1.13 million apprenticeship applications last year for around 106,000 vacancies.

Apprenticeships provide both adults and young people not in education, employment or training (NEETs) with an opportunity to ‘earn and learn’. Apprentices earn a wage and work alongside experienced staff to gain on-the-job training and off-the-job learning. Anyone living in England, over 16 years old and not in fulltime education can undertake an apprenticeship.

The so-called ‘modern apprenticeship’, which was introduced in 1994 and is a type of common law contract of apprenticeship, involves a tripartite arrangement between an employer, an apprentice and a third party training provider. Modern apprenticeships were rebranded apprenticeships in 2004.

The Apprenticeships, Skills, Children and Learning Act 2009 (the ASCLA 2009) came into force on 6 April 2011. It was the first complete overhaul of the law on apprenticeships for nearly 200 years and created a new statutory framework to govern the creation of modern apprenticeships. It was introduced following a consultation by the then Department for Innovation, Universities and Skills in 2008, in order to maximise the number of apprenticeships available by addressing, in particular, the ambiguity in the legal status of apprentices.

On 14 March 2013, the Government published a consultation on the future of apprenticeships in England in response to Doug Richard’s independent review of apprenticeships. It sets out the Government’s proposals for achieving its long term vision for apprenticeships and is due to close on 22 May 2013.

In this briefing we look primarily at apprenticeship agreements in England under the ASCLA 2009, the rights they confer and the risks and benefits associated with them.

Background

Apprenticeships are workbased training programmes which are undertaken in association with the NAS, are based around the needs of employers and lead to nationally recognised qualifications. Apprentices work alongside experienced staff to gain job-specific skills while earning a wage and studying towards a qualification. Since 2011 apprentices can be engaged under a traditional contract of apprenticeship or an apprenticeship agreement under the ASCLA 2009. Either arrangement can be structured as a tripartite modern apprenticeship between an employer, an apprentice and a third party training provider. While apprentices have ‘employee’ status under both contracts of apprenticeship and apprenticeship agreements, apprentices employed under traditional common law contracts of apprenticeship benefit from certain enhanced protections on termination. For example, they cannot be dismissed by reason of redundancy save where there is a complete closure of the employer’s business. This is because case law has determined that the primary purpose of a contract of apprenticeship is to provide training for the apprentice rather than working for the employer, which is secondary.

An apprenticeship agreement under the ASCLA 2009 is an agreement between an employer and an apprentice under which the apprentice undertakes work for the employer. It is specifically to be treated as a contract of service, and not a contract of apprenticeship. The requirement for an apprenticeship agreement for apprenticeships under the ASCLA 2009 came into force on 6 April 2012.

The ASCLA 2009 differentiates between English and Welsh apprenticeship agreements, and while the focus of this briefing is on English apprenticeships, the provisions are broadly similar.

Apprenticeship agreement conditions

An apprenticeship agreement under the ASCLA 2009 must meet the following conditions:

  • the apprentice must undertake to work for the employer;
  • the agreement must be in a prescribed form (see below);
  • the agreement must state that it is governed by the law of England and Wales; and
  • the agreement must state that it is entered into in connection with a qualifying apprenticeship framework.

The Apprenticeships (Form of Apprenticeship Agreement) Regulations 2012, which came into force on 6 April 2012, prescribe the form that must be used to enter into an apprenticeship agreement under the ASCLA 2009. Pursuant to these Regulations, the agreement must:

  • be in writing (for example, a written statement of particulars of employment, a written contract of employment or a letter of engagement);
  • contain the same basic terms of employment required to be given to employees under section 1 of the Employment Rights Act 1996 (although there is no requirement to use particular wording); and
  • include a statement of the skill, trade or occupation for which the apprentice is being trained under the relevant qualifying apprenticeship framework.

Employers would, however, be well advised to include much more detail in apprenticeship agreements given that they regulate the terms and conditions of the apprentice’s employment, stipulating the rights and obligations of the employer and employee and providing protection for the employer. For example, employers may consider including additional contractual provisions for a probationary period, performance review, and termination such as the ability to terminate the relationship if the apprentice does not attain specified/ minimum standards. Where the training fees are not funded (or are only partially funded), an employer may also wish to include a mechanism to claw back any training fees not met by Government funding and which have been incurred in the event that the apprentice does not complete the apprenticeship.

Completion conditions

In order to complete an English apprenticeship under the ASCLA 2009, an apprentice must meet the standard completion conditions or the alternative completion conditions.

The standard conditions require the apprentice to have entered into an apprenticeship agreement which relates to a recognised apprenticeship framework. There are over 240 apprenticeship frameworks across the UK covering various sectors, including Skills for Health (the sector for occupations in health care), People 1st (the sector for occupations in hospitality, leisure, travel and tourism) and e-Skills UK (the sector for occupations in business and Information Technology). The apprentice must also have completed a course of training for the qualification identified by the framework and met all the other requirements specified in the apprenticeship framework for the award of an apprenticeship certificate.

The alternative conditions provide that an apprenticeship will be completed:

  • if a person has been party to a succession of apprenticeship agreements relating to the same framework while working towards the competencies qualification specified, or has taken two or more courses of training leading to the competencies qualification; or
  • in circumstances where a person has not entered into an apprenticeship agreement but has been working under alternative working arrangements as specified by the Apprenticeships (Alternative English Completion Conditions) Regulations 2012. Under these Regulations, the alternative completion conditions will be met if a person has:
    • worked in a specified occupation (ie within Creative and Digital Media, Design, Live Events and Promotion, Technical Theatre and Maritime Occupations frameworks) as a self-employed person or otherwise than for reward; or
    • entered into an apprenticeship agreement in connection with a recognised apprenticeship framework, been dismissed by reason of redundancy but completed the course within six months from the date of the dismissal, during which time they have worked otherwise than for reward; or
    • completed a training course under the Sporting Excellence framework in respect of a specified sport with a view to participating in the Olympic, Winter Olympic, Paralympic or Commonwealth Games.

What rights do apprentices have?

Apprentices under ASCLA 2009 apprenticeship agreements have employee status, and most of the statutory rights available to employees are also available to apprentices. For example, apprentices are entitled to take 5.6 weeks’ paid holiday per year and have the same rights as employees under the Working Time Regulations (including average working hours per week and regular rest breaks).

A national minimum wage (NMW) for apprentices was introduced on 1 October 2010. The NMW applies to all apprentices aged under 19, and those aged 19 or over during the first year of their apprenticeship. The rate (effective from 1 October 2012) is currently £2.65 per hour. Apprentices over the age of 19 who have completed one year of their apprenticeship are entitled to receive the NMW applicable to their age. These rates apply to time working, plus time spent training that is part of the apprenticeship.

Apprenticeship agreements are covered by the Equality Act 2010. The protections from discrimination and harassment on the grounds of the nine protected characteristics covered by that Act, including sex, race, disability, religion or belief, gender, sexual orientation and age, therefore apply to apprentices. Apprentices also have the right not to be unfairly dismissed.

Apprenticeship agreements are usually for a fixed term lasting between one and four years (since 1 August 2012, apprenticeships must be for a minimum period of twelve months for apprentices aged 16 to 18 years). The qualifying period to bring an unfair dismissal claim was increased to two years from 6 April 2012. If an apprentice’s employment is not continued after the stipulated end date or event, they will be treated as dismissed. Apprentices who have achieved the qualifying period of service for unfair dismissal are therefore entitled, on request, to a written statement setting out the reasons for their dismissal, and the ACAS Code will apply. Employers must have a reasonable and genuine belief that any such dismissal is fair and should follow a proper procedure, eg disciplinary or redundancy as appropriate.

The Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 specifically exclude those employed under a contract of apprenticeship, as permitted by the EU Directive on fixed term work. It was not clear, however, whether or not those working under apprenticeship agreements under the ASCLA 2009 were covered by this exclusion. This was rectified with effect from 9 January 2013 and it is now clear that they are excluded.

What are the benefits of apprenticeships?

Apprenticeships can be an effective means of dealing with both current and future workforce issues. They allow businesses to ‘grow their own’ workforce by recruiting new talent and creating career paths into their organisations. Apprenticeships also help to ensure that employers have the right (up-to-date) skills and qualifications to progress their organisations, including filling any skills gaps and becoming more competitive. They are often more cost effective than hiring skilled staff as both the training and recruitment costs are lower.

There are a number of governmental schemes aimed at improving the attractiveness of apprenticeships to employers which offer support in implementing and funding the training costs (although not typically the wage costs) of apprenticeships. The level of funding available depends on the age of the apprentice and sometimes the location of the employer but by way of example the NAS will provide funds to cover up to 100% of the cost of training an apprentice aged 16 to 18 years. The AGE 16 to 24 employer incentive is also available to provide wage grants to assist employers in recruiting young apprentices.

And what are the risks?

Apprenticeships involve greater responsibilities for employers than ordinary contracts of employment. In particular, they are vocational in nature in that they provide training for the apprentice and work for the employer. It is therefore important that an employer supports an apprentice in his or her dual status of employee and learner by, for example, allowing him or her time off for college and examinations. It might be appropriate to include an express term within the apprenticeship agreement, or develop employer policies, to allow time off for training.

If employers do not provide fair access to their apprenticeship schemes in terms of gender, age, ethnicity and diversity, there is a risk that deterred applicants may accuse them of discrimination. Employers should therefore avoid applying discriminatory criteria such as age limits or a requirement for GCSEs which may constitute indirect discrimination unless such criteria can be justified objectively.

In addition to compliance with the NMW legislation, employers should check whether any sector-specific minimum wage rates apply and whether it would be appropriate to pay above the minimum wage, for example by paying a ‘London Weighting Allowance’ to compensate apprentices for the extra costs of living and studying in or around the capital.

Further, as apprenticeship agreements have the same status as contracts of service, apprentices engaged under apprenticeship agreements can be dismissed in the same way as ordinary employees. However, it is important to note that employers only have a limited right of dismissal in relation to apprentices engaged under traditional common law contracts of apprenticeship and in the event of wrongful termination of a contract of apprenticeship, different principles apply to the assessment of damages which will include loss of wages, loss of training and loss of status. Damages for breach of a common law contract of apprenticeship are therefore potentially much greater than damages for breach of an apprenticeship agreement which is deemed to be a contract of service.

Inadvertently creating a common law contract of apprenticeship (with the greater risks and costs associated with termination) when the parties intended to create an apprenticeship agreement under the ASCLA 2009 is a trap for the unwary but one which can easily be avoided by planning properly and taking appropriate advice.