Week 3

Zero Hour Contracts – what does the future hold?

The issue of Zero Hour Contracts (ZHCs) has been very much in the public eye over the past 12  months and there is plenty more to look out for in 2015.

The key feature of ZHCs is that they do not guarantee any work to the individual worker. From a  socio-economic point of view, this means that the worker does not have any guarantee or certainty  over the level of their income. From an employment law point of view, the issue is that the absence of obligation between  employer and worker means that there are a number of statutory rights to which the individuals are  not entitled.

ZHCs seem to polarise opinion in the employment sphere. Some trade unions refer to them as a tool  used by employers to exploit the workforce and minimise workers’ rights. Others make the point that  these are contracts that have been around for years and give both employers and workers  flexibility, in particular  in industries where demand fluctuates from month to month and day to  day. They are a necessary and appropriate part of our economy it is said.

What was the Government response to the public debate on ZHCs?

The Government responded by  launching a consultation at the end of 2013 into two key areas of concern: (i) exclusivity clauses,  i.e. the issue that a worker may be tied to a relationship that provides no work; and (ii) lack of  transparency, i.e. some businesses and individuals may not be clear on the terms of a ZHC or the  implications of entering into one.

36,000 views from businesses, individuals, charities and unions were gathered under the  consultation and following this, the Government took steps to introduce specific legislation in  relation to ZHCs under the Small Business, Enterprise and Employment Bill 2014-2015 (the Bill) which was intended to be passed into legislation in late  2014/early 2015 and then come into force in late 2015.

What does the Bill seek to do?

In summary, the Bill seeks to:

  • Make exclusivity clauses in ZHCs unenforceable
  • Introduce a definition of ZHCs as a contract in which: (a) the carrying out of work is dependent  on the employer offering work; and (b) there is no certainty that any work will be offered to the  worker
  • Give the Government powers to make further regulations to protect workers on ZHCs. Such  regulations may include: (a) provisions to address steps taken by employers to sidestep the ban on  exclusivity clauses; and (b) the power to impose financial penalties on employers for breach or  avoidance of the ban or requiring employers to pay compensation to workers on ZHCs through Employment Tribunals

What has been the response to the proposed Bill and proposed legislation?

The response has largely been contained within participation in a second consultation process  launched by the Government following publication of the Bill. It has centred around:

  • Criticisms of: (a) the narrow definition of ZHCs (which would, for example, enable an employer  offering 1 hour’s guaranteed work per week to circumvent the exclusivity ban provisions); and (b)  the fact that making exclusivity clauses unenforceable does not give the worker protection against  detrimental treatment where they seek out other work against the wishes of the business
  • Suggestions on how to deal with these loopholes, such as putting in place a minimum number of  weekly  hours worked under which a contract would be deemed to be a ZHC, introducing penalties for  employers who circumvent the exclusivity ban, and redress to Employment Tribunals for individuals who suffer  detrimental  treatment

This second consultation closed on 3 November 2014 and the Government response to it is something  to look out for in the coming weeks.

Will the Bill be made into legislation?

A Bill is not law, it is intended law. So will the Bill make  it into being a law? This is  impossible to predict with any certainty but, given the timing of the General Election next year and the short period for the Bill to be passed into legislation, there is a good chance  that the Bill will not be passed either at all or in its entirety.

So where does that leave us when looking forward to 2015?

The best place to look for answers is likely to be the policy statements made by the main political  parties. David Cameron referred to the Government’s actions in respect of ZHCs in his speech at the  Tory Party Conference. The importance given to the issue indicates that if the  Bill does not get passed in time, the same  or similar provisions would be enacted in the next Parliament, if the Conservatives are in  Government.

Labour’s statements on ZHCs indicate a commitment to go much further in taking action. Their  proposals have included:

  • ZHC workers not being required to be available outside contracted hours
  • a right to compensation if shifts are cancelled on short notice
  • a right to request a contract with a minimum amount of work after six months an automatic right to a fixed-hour contract after 12 months with an employer

The implementation of these proposals would involve a major upheaval in this area and would be  unpopular with employers.

What else is on the horizon in relation to ZHCs?

Code of Practice The Government has committed to work with business representatives and trade unions in order to  introduce guidance for employers and employees on the use of ZHCs. The guidance would be in the  form of a Code of Practice and the aim was to have released this by the end of the year. Such a  code is expected to cover: (i) when ZHCs should be used and how to identify them to job applicants  and workers; (ii) rights and responsibilities of the worker and employer, for example how to accrue  benefits such as annual leave; and (iii) allocating and giving notice of work or cancelling work.

Employment status consultation

The issues surrounding ZHCs are being addressed very specifically by the Government in the Bill and  under its various consultations. However, the broader question of the employment status of the  workforce (including those on ZHCs) is also on the radar for 2015.

In October 2014, the Business Secretary, Vince Cable, launched a wide-ranging employment review  that seeks to “help clarify and potentially strengthen the employment status of up to a million  British workers.” What seems to be intended is a review of employment status (including employees,  workers and self employed), with a view to assessing whether the rights allocated to each are appropriate and whether greater transparency  and clarity can be introduced in this area.

This review undoubtedly has its origins in the ZHC debate in terms of it addressing public  perception about the abuse of ZHCs. Certainly, employment status is a very complex area and  although greater transparency and clarity would be welcome for both businesses and the workforce,  it is difficult to see how this could be easily achieved.

Sports Direct case

Relevant to this Government review is a potential High Court challenge against Sports Direct by a  group of Sports Direct workers who are on ZHCs. It is expected that they will argue that they have  a contractual right to receive a bonus under a scheme in place for permanent full time employees because, regardless of the “zero-hours” label â€‹given to the contracts, the workers are, in reality, all permanent employees, given the amount of regular work that they carry out.

Although this case is about a specific contractual situation and bonus scheme, it is still likely  to be one to watch in terms of guidance on employment status and key pointers on circumstances that  may lead to workers on ZHCs being deemed to be employees. It will also provide a useful insight  into the Court’s views on ZHCs.

EC Commission consultation

In its new consultation on the review of the Working Time Directive (closing on 15 March 2015), the  EC Commission is asking whether ZHCs should be regulated. So yet another consultation to keep an  eye on!

Regardless of whether the Bill is passed before the General Election or which party or parties form  the next Government, the issue of ZHCs seems destined to remain a hot topic for 2015 and an area  that employers will need to keep an eye on.