In recent years, zero hours contracts have come under increasing criticism. Although such contracts are undoubtedly a valuable tool for businesses who experience fluctuating demand or who face an uncertain trading period, a particular concern was the growing use by employers of exclusivity clauses, a clause in the contract seeking to prevent employees and workers for working for another employer yet in the same contract giving no guarantee of work.
At one stage, there was concern that the Government might seek to prohibit the use of a zero hour contract. However, following a period of consultation in 2014, the contracts remain a permitted form of working arrangement but the Government indicated its intention to address the criticism by banning exclusivity clauses (which they did in 2015). The Government has now taken further steps to protect employees and workers in the form of The Exclusivity Terms in Zero Hour Contracts (Redress) Regulations 2015, which took effect on 11 January 2016.
What is a zero hours contract?
A zero hours contract does exactly what it says on the tin. In the context of employment, it is a contract that provides the employee with no commitment or guarantee of any work. In practice, an employee might be offered 30 hours one week, and none the next week.
Figures from the Office of National Statistics revealed that at the end of December 2015, 1.4 million people are employed or engaged on a zero hour contract and that figure is rising. These contracts are very prevalent in hospitality, retail and manufacturing sectors and high-profile organisations such as McDonalds, Amazon and Sports Direct employ a large proportion of their staff under these contracts.
The main problem that ultimately arose with these contracts was that employers were seeking to have their cake and eat it. Whilst they were giving no commitment to a minimum number of hours, there was an increasing number of employers who were starting to introduce exclusivity clauses prohibiting employees from working for anybody else. In addition, where employees did undertake work for another employer, increasing evidence was emerging of employees suffering as a result, in the form of dismissal or intentionally being overlooked when hours were being distributed.
This led the Government to ban the use of exclusivity clauses in zero hour contracts and introduce the new legislation in 2016.
So what does the new legislation do?
The new legislation goes much further than the Government’s previous measure. In essence, the material provisions of the new legislation are as follows:
- Any dismissal of a zero hours employee will be automatically unfair if the principal reason is that the employee breached a contractual provision prohibiting him or her from working for another employer. In other words, if the employer has an exclusivity clause in the contract, and then dismisses an employee for breaching that clause, that dismissal will be automatically unfair. Thus, if the employee brings a claim for unfair dismissal, he will automatically succeed and will be entitled to financial compensation.
- There is no qualifying service in respect of the unfair dismissal claim in 1 above. That is unlike the general position in employment law where you would normally need two years’ service to be able to bring a claim for unfair dismissal.
- It is also unlawful to submit a zero hours worker to a detriment if they work for another organisation in breach of any exclusivity clause.
How might this impact on you?
If you currently use zero hour contracts or indeed if you envisage using them at some point in the future, this legislation will impact on you. Equally, you may have informal arrangements regarding working hours which might not be consolidated in an actual written contract but still constitute an implied zero hours contract.
We would recommend you review any zero hours contracts to ensure firstly that any exclusivity clauses that might be contained within those contracts are removed. Also, consider whether those contracts still reflect the reality of the original arrangement. Is the employee working such regular hours now that they are arguably no longer a zero hours employee?
In circumstances where you do wish to terminate the employment of an employee under a zero hours contract, you equally need to be very conscious that the employee does now have the basis to contend that the reason for the dismissal is because they have undertaken work for an alternative employer whilst employed by you. In those circumstances, where the reason for dismissal is unrelated to their zero hour status, you should consider documenting the reasons for dismissal and communicating these to the individual at the time of the dismissal.
We would also recommend for the sake of completeness that you consider taking legal advice in respect of any dismissals because aside from the provisions that have now been introduced in relation to zero hours employees, there are also other legal protections available under employment law that could be triggered. Forget zero hours – we much prefer zero claims.