Reviewed for 2018
Apprenticeships are a fantastic way to build a highly skilled workforce. Many businesses rely on apprentices to provide them with the stable, fully tailored skill set that they need.
But sometimes, things don’t work out as planned. Money might be tight – a concern with which many firms are all too familiar in the current climate. You might therefore be considering making your apprentices redundant.
There is a worryingly large degree of misunderstanding surrounding the rights of apprentices. If you can no longer afford to keep your apprentice on, you need to be aware that you are likely to be in breach of contract if you try to make them redundant – and this can have hugely expensive results.
This depends on who you ask. Many business owners presume that, as apprentices are treated like any other employee in many aspects of their work, they should be able to make them redundant in the same way they would anyone else. Indeed, apprentices haven’t been immune from the swathe of redundancies that has hit the private sector since the start of the downturn.
But things might not be this simple. There is a significant and growing body of case law that suggests that apprentices are, in fact, protected from redundancy – and that terminating a contract with an apprentice early can therefore lead to costly consequences.
When you take on an apprentice, you take them on for a set period of time (although it is worth noting that an apprenticeship contract is specifically not considered to be a fixed-term contract for legal purposes). This might be, say, four or five years. The contract ends either on a specific date, or when the training is complete – for example when the apprentice has achieved a set goal like a qualification.
Having signed this contract, you are obliged to fulfil it. In the eyes of the courts, your firm’s inability to pay that apprentice is not a good enough reason to shirk your responsibilities under the contract. If you terminate a contract early because you can no longer afford to pay the apprentice, you run the very serious risk of being found to be in breach of contract.
If you are found to have broken the terms of your contract with the apprentice, the consequences are potentially very costly indeed.
At the very least, you run the risk of the apprentice being awarded lost earnings equivalent to those that they would have received had their apprenticeship been completed. Clearly, if the contract is terminated relatively early this can be hugely expensive.
But some more recent cases have suggested that the true costs of an award can be even higher than this. A case from 2006 ended up with the apprentice being awarded not just their lost earnings, but also an additional sum in compensation for ‘lost opportunities’ – that is, in recognition of the fact that the claimant would find it more difficult to find work than they would if they had been able to complete their apprenticeship.
In a similar case in 2017, a court ruled in favour of an apprentice who had had his apprenticeship cut short because of a downturn in the business. The trainee roof tiler had his contract terminated two years early. The court awarded him £25,000 in lieu of the amount that he would have been paid, although it made no detailed assessment of lost opportunities in this case.
There are a few exceptions. Perhaps the most notable is when the business in question is closing down altogether. In these cases it is unlikely that the apprentice would be successful in a claim against you.
The other main exception is when the employer’s right to terminate early is written into the contract. This is shaky legal ground, however, and you should make sure that you seek specialist independent advice before relying on this.
You may be able to mitigate problems by writing a clause like the one outlined above into your apprenticeship contract. Again, though, make sure you take legal advice before continuing.
Perhaps the most important thing you can do in order to avoid situations like these, however, is simply to make sure that you understand the costs associated with hiring an apprentice. Yes, there is financial help available from the LSC and the National Apprenticeship Service that can help cover the cost of the training. But you must remember that you will still need to pay the apprentice, as well as meeting all the sundry costs like equipment, tax, and so on. By fully considering these costs in advance, and factoring them into your financial forecasts, you can help to avoid problems further down the line.
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