Parents are making unfounded complaints about their children's schools in the hope of making money in out-of-court settlements, head teachers claim.
The National Association of Head Teachers said no-win-no-fee lawyers encouraged a wave of false allegations against schools and their staff.
Many parents knew a claim for less than £12,000 would often be settled out-of-court by education authorities.
The NAHT called for justice, saying reputations were being wrongly damaged.
"Parents know that if they put in a claim for anything up to £12,000 and it will never go to court"
A report being presented to the NAHT annual conference in Bournemouth this weekend suggests that "most teachers and heads have faced false allegations at some point in their careers".
"The official view that these events are extremely rare is not borne out by the available evidence," the union said.
NAHT general secretary Mick Brookes said firms offering no-win-no-fee arrangements exacerbated the problem.
"Parents, at times, don't hesitate to go there," said Mr Brookes.
"It gives the green light to people to do this."
Fear of reprisals
Dame Mary MacDonald, a head teacher who has herself been the subject of a malicious allegation, said parents often made complaints hoping for an out-of-court settlement.
She said she had heard of cases where insurance companies advised local education authorities to settle claims that might go over £12,000.
"Parents know this, they know that if they put in a claim for anything up to £12,000 and it will never go to court."
One head, who did not want to be named for fear of reprisals against her staff, said a complaint about a PE teacher at her school was settled out-of-court, without her knowledge.
The complaint was made by the mother of a 13-year-old girl who needed hospital treatment after she hurt her ankle while jumping off a trampoline.
Tougher deterrents
When the head followed up the allegation, that the teacher had not acted with due care and attention, she found the education authority had agreed to settle out-of-court, without informing her.
"This has caused enormous problems for my staff - the girl now says to other pupils 'Don't do that, you might hurt yourself'," said the head.
"It knocks the confidence out of staff."
The NAHT is concerned that the names of accused teachers and head teachers is often released to the media, while the names of alleged victims is protected.
The union said, while the safety of children was its primary concern, too many teachers and heads were suffering the shame of unfounded allegations.
Small number
Mr Brookes said: "We have clear evidence that lives are being damaged and careers ruined by a failure by the law to adequately protect people who are innocent of accusations levelled against them."
Dame Mary, 56, said that, before she retired, she wanted to see malicious allegations punished.
"I make no apology for that because I've seen it destroy some excellent colleagues' reputations and their family lives.
"No teacher who has been falsely accused of physical or sexual abuse should ever have to sit and look at that pupil again.
"And parents should be taken to court."
The Department for Education and Skills said it was "keenly aware" of the devastating effects of false allegations.
But a spokesman said the number of allegations made each year was "very small" as a proportion of the number of children and staff in schools.
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