Emotions around zero hours contracts have run high over the last year.

For businesses, zero hours contracts are a valuable tool in the current market. While their flexibility also suits some individuals, it leaves others open to exploitation.

To understand the issues associated with zero hours contracts, the Business Secretary, Vince Cable, launched a formal consultation on 19 December 2013. The consultation focused on:

  • exclusivity clauses; and 
  • the lack of transparency on the terms, conditions and consequences of zero hours contracts.

The consultation closed on 13 March 2014 with a record 36,000 responses.

GOVERNMENT PLANS

On 25 June 2014, the Government announced its response to the consultation process: to ban the use of exclusivity clauses in zero hours contracts; to take steps to address their lack of transparency, and to consult further on how to prevent rogue employers evading the exclusivity ban.

The changes will be introduced through the Small Business, Enterprise and Employment Bill 2014-15, which includes a new legal definition of a zero hours contract (being broadly an agreement to work if required but with no certainty of work).

Will these proposals achieve the Government’s “crackdown on zero hours contract abusers”? Unlikely. The proposals address limited issues - express exclusivity clauses and transparency - and do not tackle the wider concerns associated with zero hours contracts. However, they are a good first step.

EXCLUSIVITY

Exclusivity clauses tie a worker to one employer without guaranteeing hours. 83% of the consultation responses said that exclusivity clauses should be banned as they undermined workers’ choice and flexibility. However, according to the Office of National Statistics, only 125,000 out of an estimated 1.4 million zero hours workers have express exclusivity clauses in their contracts. So, while laudable, the ban will benefit only a limited number of workers.

According to ACAS, exclusivity clauses are not the real concern for zero hours workers. The more pressing issue for them is “effective exclusivity” where workers feel they cannot turn down work or look for other work for fear that their hours will be “zeroed down” or withdrawn altogether. This anxiety appears to stem from an imbalance of power between the zero hours worker and his employer created by an absence of guaranteed hours and uncertainty over the worker’s status (employee, self-employed or worker) and rights. Banning express exclusivity clauses will do little to remedy this.

The Bill allows for further regulations to be issued to ensure zero hours workers are not restricted from working for other employers. These may include provisions for financial penalties, employment rights and the requirement for employers to pay compensation. These regulations are likely to be influenced by the future consultation on how to prevent “rogue employers” circumventing the exclusivity ban.  

If the regulations include a broad protection for zero hours workers against detriment or dismissal for exercising their rights to work for others, this should help tackle effective exclusivity. However, as matters stand, the Bill is no real deterrent.

TRANSPARENCY

One of the major concerns with zero hours contracts is the lack of understanding from both workers and employers around their rights and obligations. Many workers don’t realise that they could potentially be offered no work or “zero hours”.

The Government will work with business representatives and unions to develop a code of practice on the fair use of zero hours contracts and to improve the information available to all parties using these contracts.

Increased clarity around zero hours contracts, associated rights and how workers calculate their entitlements – including pay, hours, holiday, other statutory leave and redundancy payments - is to be welcomed (as would a clear statement of the risks for workers).

However, the ability of non-binding guidance or a code of practice to prevent the abuse of zero hours contracts is questionable. Nor will such guidance, unless accompanied by a significant publicity campaign, necessarily be accessible to workers when most needed ie at the start of the relationship when negotiating terms.

So, does the Government’s response go far enough? The proposals certainly fall short of many union and campaign groups’ calls for a total ban on these contracts, or Labour’s proposals for zero hours workers to have the right to request minimum hours after 6 months and an automatic right to fixed hours after 12 months.  However, the Government’s response does keep the issue of monitoring misuse of zero hours contracts firmly on the political agenda.

In the current market, the ability to rely on a bank of workers who can be called on to work as required will remain popular. Regulation akin to the protection offered to fixed term workers (including the right to be offered permanent work and protection from detriment/unfair dismissal) is needed if there is a genuine desire to tackle the abuse of vulnerable zero hours workers.

This article was published in New Law Journal in July 2014.