Blog: From zero to hero? A closer look at zero hours contracts

Do you remember the days when zero hours contracts were the best thing since sliced bread?  Those contracts for casual working, under which the employer does not guarantee to provide the worker with any work and pays the worker only for work actually carried out?

A good thing

For employers, they offered the wonderful comfort of flexibility: the worker is expected to be available for work when or if called on by the employer. You could flex your workforce to suit the business needs and not have to worry about redundancy payments at the end. You could have a bank of ‘willing’ workers available at the end of phone line  to come in at short notice, who knew your business and therefore represented much better value for money than agency workers.  For workers, too, there were some advantages – if flexibility was what they craved most. They could pick and chose when they wanted to work and combine it with other commitments or interests. There was no legal definition of the ‘zero hours’ concept – but who cared?  Ah, happy days.

Then a bad thing

Then zero hours contracts went bad.  2013 seemed to be the high point, when you couldn’t move for another ‘zero hours exploitation’ story. The key thrust of the media pieces then was that large numbers of workers were being exploited through the use of these contracts. They were not being offered much work, but because of ‘exclusivity’ clauses in their contracts they couldn’t work for anyone else either. If they did, they were penalised and the offers of work from their ‘zero hours’ employer dried up. Worse, there were allegations of a lack of transparency around employment contract terms and that this category of worker was seen as a lower tier of employment status.

Government action

In the dying dates of the Coalition Government, BIS introduced the first ever legislation on zero hours contracts, which banned all exclusivity clauses in them with effect from 25 May 2015.

However, the wise folks at BIS soon noticed that there were some fairly gaping loopholes in their plans and undertook further consultation.  Their 2015 legislation had defined a zero hours contract as a contract “where there is no certainty that any such work or services will be made available to the worker”.  However, as so often happens, they had not been prepared for the clever employment lawyers who found it was fairly easy to get round that new definition by simply offering at least some guaranteed work (this could be as little as one hour per month) to partly remove the “no certainty” element from the contract.

Hey presto!  Once a zero hours contract guarantees one hour of work per month, it’s no longer a zero hours contract and so it can have a fully functioning, lawful exclusivity clause!  BIS went out to consultation over how to tackle this loophole and quite a few options were bandied around, including a suggestion that the definition of zero hours contracts should be extended even where minimum working hours are guaranteed or where a worker earns less than a specified hourly rate.  However, neither of those options saw the light of day.

Latest worker protection

But what we do now have are some new regulations (which came into force on 11 January 2016) which give zero hours workers the right to bring an unfair dismissal claim (with no need to have the usual 2 years’ service) if they are sacked for failing to comply with an exclusivity clause, or a ‘detriment’ claim in the event that an employer subjects the worker to any detriment for again failing to comply with an exclusivity clause.

So where does this leave us? 

The definition of ‘zero hours’ is wide enough to encompass many types of employment arrangements – from the seasonal fruit picker to the IT consultant.  There is no means testing here. It will almost certainly cover the ‘consultant’ arrangements that spring up everywhere when, hand on heart, you know that the person is not truly self-employed in any meaningful sense.

For those of you who use the services of skilled professionals and want to ensure that you can use an enforceable exclusivity clause (and by this we mean both the ‘you can’t also work for the competition’ and also the ‘you can’t also work for anyone else’ ones) then zero hours contracts won’t be for you. There will need to be at least a minimum guaranteed hours in the contract.  At least, for now. The Government has reserved the right to ‘expand’ the definition of a zero hours contract, but we imagine they will only do so after further consultation to see how the new anti-avoidance measures are going.

So, it would be a good idea now to dust off and review your casual worker/consultant type arrangements. Are they still fit for purpose? And is the individual’s employment status clear? Are they employees with the full set of statutory employment law rights, or workers who are still entitled to the National Minimum Wage, paid annual leave, rest breaks and protection from discrimination? Or are they actually self-employed?

Not sure? If you need help, we can audit your current arrangements and provide you with clear advice as to employee status and associated employment law rights.

Anne-Marie Boyle
Menzies Law

email Anne-Marie