Zero Hours Contracts are Still Legal

How will you make effective use of such staff to meet your service needs and balance your needs as an employer as well as the needs of individuals on such contracts?     Changes have been introduced from 26th May 2015 and further changes are proposed to halt abuse by the minority of employers.  Many employees will be affected by these changes.

For some organisations, zero hours contracts are an appropriate.way of providing a flexible workforce.  Unfortunately, some managers abuse the use of such contracts by banning employees from making up their earnings by working for other employers or ‘punish’ them by not providing much or any work if an individual chooses to work for other employers..  Rogue managers will now find that more difficult but all managers need to revisit their contracts and aims as explained below.

In theory, zero hours contracts are like a tap of resources that can be turned on and off at very short notice and so supplement the regular workforce.  However, the wording of the arrangements and failure to understand how legal principles affect such contracts often leads to surprises for managers

The leisure industry, as an example, has used zero hours for many years to cope with seasonal busy periods across the year and also unplanned absences.   Estimates of the extent to which zero hours contracts are used across all sectors vary from 3% to 11% of employers or the workforce [1].

There are pitfalls to avoid in such contracts as well as understanding the impact of the recent changes .

Changes from May 2015

From 26th May, zero hours contracts may no longer prohibit a worker from taking on other work to increase his/her earnings.  Hence, clauses requiring exclusive availability of an employee or worker are not enforceable against the employee/worker in a zero hours arrangement.  The regulations are vague and more regulations are due on anti avoidance measures of the ban on exclusivity clauses.  Managers should review their contracts and employment practices to identify any breaches of the legislation and take action to brief their managers and affected employees on the new approach – this is explored later.

Further Changes Proposed to Deter Circumventing the Ban

The previous Government consulted on proposals to stop managers seeking to side step the ban on exclusivity clauses.  The responses to the Government’s consultation [2] indicate that the majority believe that exclusivity clauses should be banned and other measures taken to deter employers from circumventing the ban.  Further legislation has been drafted [3] which is likely to introduce the principles below:

• The prohibition of exclusivity clauses in zero hours types of contracts i.e. where an individual is not guaranteed a certain level of weekly income and/or hours.  That ban would not apply to zero hours contracts that:
  • pay at least £20 per hour for each hour worked or
  • if the weekly income is above a certain level – which will be determined by a set number of hours (to be announced) and multiplied by the adult rate of the national minimum wage, at the prevailing time;
• The right of a zero hours arrangement employee/worker (earning below £20 per hour)  to complain to an Employment Tribunal if he is subjected to any detriment for working for another employer or other working arrangement. (It is not clear whether this would require payment of a fee to make such a claim but one hopes that would not be so or only a minor sum);
• The Tribunal may award compensation to the employee for the breach;
• To deter rogue employers, Tribunals may be given powers to impose a financial penalty on an employer who breaches the legislation in a way that is considered to have aggravating features.

Why Do You Need to Review Your Aims and Contractual Clauses?

Zero hours contracts lull managers into a false sense of security that a zero hours employee does not gain continuous service etc.  Any arrangement or custom that exists between an employer and employee will lead to continuous service even if the employee does not work during a ‘fallow’ period if the understanding was that the employee would return to work after that period.   Furthermore, any week in which an employee works an hour or part of an hour will be counted towards continuous service provided there is not a break of one week or more which is not treated as continuous service.  Certain breaks are still treated as continuous service e.g. maternity leave.

Unwittingly, managers often create contractual conditions in which continous service accrues, for example –

• A term time worker who is engaged on a zero hours contract and works varlable hours in term time and does not work during holiday periods but returns to work after the holiday periods.  That arrangement will be categorised as a part time or term time contract irrespective of a label of zero hours.

• Some managers try to reduce the paper work involved by leaving zero hours employees on the lowest possibile fraction of an hour that their payroll/personnel system will permit and thus avoid having to set up an employee afresh each time the individual worked.  That administrative practice requires close monitoring of what is happening in practice to ensure that the arrangement has not turned from zero hours into a part time contract.

Zero hours arrangements take many shapes but the real risk is that where there is an understanding or custom or arrangement that the individual will carry on working after a certain period, then the law is likely to consider that the individual has acquired continuous service and consequently various employment rights.

The key is not the label that an employer gives to a contract but its essence and the legal principles that will determine the true rights of the individual.  The lesson for managers is to be clear about when a truly flexible, casual work arrangement is appropriate and then ensure that both the express terms of the agreement and the practices adopted are consistent with a zero hours relationship.  The importance of monitoring how frequently individuals on zero hours are working and for how long is stressed.

Questions to Ask Your Managers

a)  Will you pay expenses and/or a minimum flat payment to an individual who is asked to report to work but then cancelled at short notice i.e. upon arrival or shortly after starting?

b)  How do you monitor whether employees are working every week in practice even if their hours vary each week?  Some zero hours employees are keen to work regularly but want the freedom to say ‘no’ to having to work – even if in practice that never seems to occur.

c)  Are there some zero hours roles in which the individual will have access to confidential information that you do not want passed on to a competitor etc?  If so, consider whether clauses should be inserted that make it clear that such information is confidential and not for placing in the public domain.  Enforcement of such a clause is possibile but usually the damage is done already.  A preferable solution may be to restrict such information to ‘higher’ paid employees who can then be made subject to an exclusivity clause as well as confidentiality clauses.

Sources

[1]  Zero-hours contracts: myth and reality, CIPD, 2013 plus the Workplace Employment Relations Survey, the latter estimated that the proportion of workplaces with some employees on zero-hours contracts increased from 4% in 2004 to 8% in 2011.

[2]  Zero Hours Employment Contract  ’Government Response to the Banning Exclusivity Clauses: Tackling Avoidance   March 2015   Department for Business, Innovation and Skill

[3]  The Draft Zero Hours Workers (Exclusivity Terms) Regulations 2015

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