Now the Children's Commissioner for England and Wales is calling for offending schools to be hit with fines of up to £4,000.
Dr Maggie Atkinson revealed that teachers had admitted sending pupils home without making an official record.
In one case, 15-year-olds were sent home at Christmas and told not to return until their GCSE exams in the summer.
In another, children were sent home for having the wrong haircut. In her report, she states that hundreds of schools are likely to have illegally excluded thousands of young people.
She called for schools found guilty of illegally excluding a pupil for a month to be stripped of the funds they received for that student for a year. This would equate to at least £4,000.
"Where illegal exclusions are identified and pursued, there is no meaningful sanction for schools," Atkinson said.
"It is clear that there is no disincentive on them to act in the same way in future."
The inquiry found several schools 'clearly discriminated' against some pupils with rules on hair length that only apply to boys and rules on hairstyles that are much more likely to be worn by particular ethnic groups.
In most cases, schools illegally exclude children because they are unaware of the law or believe the law to be wrong, the inquiry found. In other cases, schools may have illegally excluded a pupil to ensure they do not disrupt behaviour during an Ofsted inspection. I
In some schools, children with special needs have been sent home because their specialist teacher is unavailable.
Head teachers said fines would only penalise those pupils remaining at the school.
Brian Lightman, general secretary of the Association of School and College Leaders, said falsifying registers was 'already illegal and heads risked losing their jobs for it or even ending up in prison'.
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