The use of zero hour contracts in the industry has increased over recent years. The use and abuse of these types of working arrangements has come to the Government’s attention and as a result a consultation to consider their use was launched in December 2013 and ran until 13 March 2014.

On 25 June 2014, the Government published its response to the consultation. In line with the views of the overwhelming majority of respondents (which included businesses of all sizes, charities, unions and individuals), the Government has decided to ban exclusivity clauses in all contracts that do not guarantee hours of work (a position currently estimated to affect 125,000 contract workers in the UK). The Government is also committed to providing clearer and more readily available guidance on the use of such contracts.

The exclusivity ban is to be introduced via The Small Business, Enterprise and Employment Bill 2014-15 (“the Bill”) which will introduce new provisions into the Employment Rights Act 1996 to effectively render unenforceable any terms in zero hours contracts which seek to restrict employees from engaging in alternative employment either at all or without consent. It is not yet known when the Bill will come into force, however, it is unlikely to be before 6 November 2014 when the Public Bill Committee is due to report on it.

It is anticipated that some employers will seek to circumvent the new provisions by, for example, offering contracts that guarantee one hour of work. The Government is therefore consulting on how to limit such loopholes. 

The Government also expects businesses and unions to work together to develop sector-specific codes of practice (by the end of the year) with a view to promoting the fair and consistent use of zero hours contracts. The codes are expected to deal with, among other things, an employee’s right to notice in respect of allocation/cancellation of hours of work and benefits such as annual leave. 

Despite the immense support for the proposed changes, there is some residual concern that they do not go far enough to address wider issues surrounding the use of zero hours contracts. Equally, there is the risk of negative repercussions for some employees for whom zero hours contracts offer much needed flexibility. If employers feel that they are unable to protect legitimate business interests (where workers seek to take up additional roles with competitors, for example), they may, ultimately, stop offering zero hours contracts altogether. We have clients for whom the ban will be very problematic, so we are working on creative solutions to protect their interests.

The closing date for responses to the current consultation is 3 November 2014.