Following the outcome of the General Election on 7 May 2015, we now have a clearer idea of how far the use of zero hours contracts is likely to be regulated in the UK.

What are they?

Under a zero hours contract, the employer does not guarantee to provide the worker with any work and pays the worker only for work actually carried out. An employer expects a worker to be available for work when or if called on. A zero hours contract can also describe an arrangement where the worker is free to accept or refuse work when it is offered, which implies more bargaining power on the employee's side.

The first legal definition has appeared in the Small Business, Enterprise and Employment Act 2015.  The purpose of it appearing in the Act is to deal with a proposed ban on exclusivity clauses - see below. The Act defines a zero hours contract as a contract of employment or other worker's contract under which a worker undertakes to perform work conditionally on the employer making such work available, but in which there is no certainty of such work being made available.

What's the issue?

The concern with zero hours contracts is that they have been on a steady increase, with reports of a 20 per cent increase last year alone. The Labour Party talked about the nature of zero hours contracts undermining hard work, living standards and family life. It claimed employees just do not know how much they are getting from one week to the next, or one day to the next.

Employment tribunal approach

Not only have zero hours contracts been in the press, they have also made it into the courtroom. InSouthern v. Britannia Hotels Ltd [ET/1800507/14] an Employment Tribunal had to consider whether the treatment afforded to a young female worker, who was of a fragile mental state and worked on a zero hours contract, amounted to unlawful harassment. 

The facts of the case were that Miss Southern worked on a zero hours contract as a waitress for Britannia Hotels. Her line manager was Mr Alex Nkorol. She alleged that over a period of eight months Mr Nkorol subjected her to continuing harassment. He would ask her questions about her sex life, he touched her and kissed her and made inappropriate comments about her personal life. Miss Southern complained about the treatment to another line manager, but said she did not want any action taken as she was worried this would affect the shifts offered to her. On a later occasion Miss Southern lodged a formal complaint against Mr Nkorol. A cursory investigation took place and Mr Nkorol was asked to desist from any inappropriate behaviour. Prior to the outcome of her complaint Miss Southern lodged a claim at the employment tribunal. This spurred Britannia Hotels to reinvestigate the matter. There were again flaws in the investigation and Britannia concluded that no harassment had taken place. 

At the tribunal, it was found that Miss Southern was a credible witness. This was contrary to Mr Nkorol, who dodged questions that he did not want to answer untruthfully on oath, and was equivocal about whether the harassment had taken place. This was in contrast to his vehement denials of any such conduct during the internal investigations. Miss Southern's complaint of sex discrimination by way of harassment succeeded. Taking into account Miss Southern's youth and vulnerability, and the dismissive approach taken by Britannia Hotels, the tribunal awarded her compensation of £19,500. It took into account Miss Southern's fears that her shifts might be reduced if she complained of the harassment.  The decision is not binding since it is only a first instance decision, but it is likely that other Tribunals will follow suit and take into account the vulnerability of employees on zero hours contracts.

Consultation and legislation

As mentioned above, the Small Business, Enterprise and Employment Act 2015, being a product of the outgoing coalition Government, addresses a prohibition on employers restricting zero hours workers from working for other businesses. Prior to the Act receiving Royal Assent on 26 March 2015, the Government carried out a consultation - Banning Exclusivity Clauses: Tackling Avoidance. The consultation focused on how to prevent employers avoiding the ban and possible penalties and remedies. The results of the consultation were published on 11 March 2015. These showed that measures were required to prevent employers avoiding the ban by either offering a very low number of guaranteed hours or offering no work or fewer opportunities to individuals who undertake work elsewhere. The results also showed support for extending the exclusivity ban to include low income contracts. This would mean that exclusivity clauses would also be unenforceable in contracts under which a worker works less than a set number of hours each week or earns less than a set amount each week.

As a result of the consultation, the Government issued the draft Zero Hours Workers (Exclusivity Terms) Regulations 2015 for consideration by Parliament. The Regulations state that any provision of an employee's or worker's contract which:

  • prohibits the worker from doing work or performing services under another contract or under any other arrangement; or
  • prohibits the worker from doing so without the employer’s consent,

is unenforceable against the worker. However, there is a proposal that workers with an hourly rate of pay of £20 or more will fall outside of the Regulations.

A worker on a zero hours contract may complain to an employment tribunal if his employer subjects him to a detriment because he did work or performed services under another contract.

The Conservative approach

Once Parliament reopens on 27 May 2015, the Conservatives will have to decide on the approach it wishes to take. The Conservatives have previously advocated the use of zero hours contracts, saying they provide people with a flexible way of working and the freedom to arrange jobs around other commitments. However, they are likely to take on board that some regulation is necessary to limit their use since they are viewed as unpopular. Obviously, though, not by Boris Johnson, who has happily compared his new cabinet post to a zero hours contract. And not by Sports Direct, a supporter of zero hours contracts, which saw its share price rise by 4 per cent after a Conservative victory. 

Originally published on Thomson Reuters © 2014. Written by Verity Buckingham in Dentons' Milton Keynes office.