SFA apprenticeship contract creates risks for employers

The new apprenticeship programme was designed to put employers in the driving seat, but the contract the SFA will make them sign places them in a risky situation, says Smita Jamdar.

As the jedi master Yoda once observed, “always two there are, no more and no less: a master and an apprentice”.

If only life were that simple.

The new apprenticeship arrangements have spawned a series of contracts: SFA/provider, provider/employer, employer/apprentice (contract of employment), employer/provider/apprentice (commitment statement), provider/subcontractor, and provider/apprenticeship assessment organisation.

The latest to be revealed, a little over two months before the apprenticeship programme starts, is the contract between the SFA and the employer.

It’s therefore a good moment to reflect on where employers now find themselves. The programme is the conclusion of several years of policy initiative designed to put employers in the driving seat on skills.

How far removed we’ve become from master Yoda’s simple vision

This has resulted in government taking money from them through a levy, returning it to them with complicated strings attached, and then threatening to claw it back if they happen to get tangled up in the rules.

As someone on Twitter archly but accurately noted, employers may be in the driving seat but if they get it wrong, they are going to pay for the car twice.

The new contract contains a range of provisions in which such suspension or clawback of funds might occur. Some, such as fraud, financial irregularity or insolvency, are obvious and unarguable. Others are likely to be more challenging for employers.

For example, funds may be withheld or suspended if an employee or agent has acted dishonestly or negligently or has taken action that the SFA reasonably concludes brings its name or reputation into disrepute. These are broad provisions, and create potentially onerous obligations for employers to access what they may see as their own money.

Similarly, breach of the apprenticeship funding guidance constitutes grounds to recover, from the employer, funding paid to a training provider in breach of those rules.

The funding rules are complex and thus the potential for breaching them, especially within the contractual matrix set out above, is not insignificant.

The SFA contract seeks to reassure employers that it will act “reasonably and proportionately” in seeking to recover the sums, but there is scope for disagreement as to when those thresholds are crossed.

A number of the complaints we have made to the SFA on behalf of colleges, for example, have been based on what we considered to be unreasonable or disproportionate conduct on the part of the SFA.

Employers may be in the driving seat but if they get it wrong, they are going to pay for the car twice

Some of the provisions of the contract may be difficult for employers to navigate confidently without legal advice. For example, the state aid provision refers to complicated de minimis provisions, supposedly clarified in the funding rules. The funding rules however simply refer to the state aid regulations.

State aid lawyers are amongst the cleverest and most detail-focused in the profession for a good reason: it’s a dauntingly complex area, and therefore not one that many employers will have much experience of.

Similarly, the contract brings employers within the scope of the SFA’s freedom of information obligations, meaning employers could see their confidential information made publicly accessible.

The contract also contains provisions from the “bloomin’ cheek” school of contract drafting. That employers, who are after all being forced to offer apprenticeships or lose their levy contributions, should be forced to guarantee that they have all necessary resources and expertise to deliver them is at best irksome and at worst onerous, as is the broad warranty that the employer has complied with “all relevant legislation and all applicable codes of practice” and will notify the SFA of any departures.

Material breaches are grounds for termination of the agreement and the end of funding.

The SFA/employer contract creates risks not just for employers, though, but for all of those other contracting parties, whose own rights to payment or employment could be jeopardised if an employer gets it wrong. How far removed we have become from master Yoda’s simple vision of only the two: master and apprentice.


Smita Jamdar is partner and head of education at SGH Martineau LLP

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    • Smita Jamdar

      Hi Iain, under FOI all information held by the SFA is potentially disclosable unless one of the exemptions apply. The contract makes it clear that it is for the SFA to decide if an exemption applies. Therefore what employers regard as confidential and/or commercially sensitive information could be disclosed in response to an FOI request. The contract imposes wide obligations to provide the SFA with information, all of which is therefore potentially disclosable, including financial information or know-how.