08 September 2016

There has been considerable media activity around the issue of zero hours contracts, not least given their prominence in some businesses and the apparent desire by some business owners to eliminate their use. The Office of National Statistics reported that around 2.5% of the UK working population has a zero hours contract. That amounts to the entire population of Glasgow and Aberdeen combined. Research has also shown that zero hours workers tend also to be young, part time, women or in part time education. What are these contracts and what rights exist?

A definition

A zero hours contract is a contract whereby the employer is under no obligation to offer the worker any work. There is no guarantee that work will be offered and the worker has no guaranteed hours or pay. This creates inherent flexibility for both employer and worker. The employer has the ability to manage fluctuating demands in workload by calling upon such workers if needed and the workers have the ability to work elsewhere and gain experience etc. That flexibility can create problems for workers given the inherent uncertainty that exists and some employers have reportedly been misusing the contracts to exploit workers.

What’s the problem?

One of the perceived issues was that some employers were imposing exclusivity upon workers ie preventing workers from working for a competitor (despite the absence of any guaranteed work). This meant that such workers had no guarantee of any income. The Government took action and introduced a number of protections.

The protections

In summary a zero hours contract worker is protected in the following ways:

• With effect from 26 May 2015 a provision within a zero hours contract which prohibits the worker from working for another employer (an “exclusivity clause”) is unenforceable.
  
  
• With effect from 11 January 2016 it became automatically unfair to dismiss an employee because of a breach of the unenforceable exclusivity clause. It also became unlawful to cause a worker to suffer a detriment because of reliance on the exclusivity clause.

Thus care should be taken if you engage zero hours contract workers to make sure that any exclusivity clause is not enforced or relied upon. Compensation can be awarded where the above rights are infringed. It is important to ensure that the terms and conditions upon which all individuals are engaged have been considered. The employment team at BTO can help.

Other rights

It is also important to remember that in addition to these specific rights, individuals who enter into a zero hours contract do have other protections.

It is likely that an individual who enters into a zero hours contract will be a “worker” in law – i.e. an individual who has contracted personally to provide services who is not genuinely self-employed. Workers have the right to receive the national minimum (or living) wage, the right not to be unlawfully discriminated against, the right to paid holidays, rest breaks and other rights. The issue as to paid holidays can be difficult given the absence of any guaranteed hours but there are ways in which holidays for such workers can be calculated (and paid).

“Employees” have the same rights as workers in addition to certain others, including the right not to be unfairly dismissed (assuming the individual is qualified to claim unfair dismissal), the right to a redundancy payment (subject to the qualification requirements) and other rights too (such as in relation to maternity etc).

Reports suggesting that zero hours workers have no rights are therefore inaccurate but it is important to look at the relationship carefully to understand firstly whether it is a zero hours contract at all and secondly whether the individual is genuinely self-employed, a worker or an employee.

Employee or worker

There is no textbook or flow chart that will give a definite answer as to whether the particular contract is a contract of employment or a worker’s contract as the issue depends upon a Tribunal’s assessment of the full factual matrix. A Tribunal would also look at the reality of the situation; the fact the contract says it is not an employment contract will not prevent the relationship being one of employment if that is the reality. A Tribunal would consider:

• Does the employer require to provide work?
• If offered, does the person require to do the work?
• Is there detailed control and supervision of the individual?
• Is the person integrated in the workplace like other employees?
• Is there a fixed hourly/daily rate (as opposed to a payment “per job”)
• Is there protection against financial risk if the job goes wrong?
• Does the individual use the employer’s tools and equipment and wear the company uniform?

No one issue is decisive but a Tribunal will form a view from the full picture in each case. It may be that the individual is an employee during periods when work is actually carried out. The issue in these cases will be whether the periods when no work is done is covered by an employment contract or whether the gaps in service break continuity of service. There have also been cases where over time a relationship has become an employment relationship. It is also possible for the individual to be an employee during periods when work is carried out. The issue in those cases is whether the gaps in service break the continuity needed to claim unfair dismissal and a redundancy payment or not. There are circumstances in which gaps in service don’t necessarily break continuous service (such as where there is a temporary cessation of work or there is a custom and practice in place such that the parties regard the relationship as continuing).

Practical issues

The first issue for employers is to consider what type of contractual arrangement is needed. Zero hours contracts tend to be used to deal with fluctuating demand and are generally inappropriate for core staff. Employers should consider introducing a Policy that sets out the employer’s position in relation to when such workers would be appropriate, how they will be recruited, how the arrangement will be documented and how the arrangement will work in practice (including in relation to holidays, termination etc). Transparency is key together with dialogue with staff and their representatives to create a fully engaged and committed workforce.

Contact: David Hoey, Partner dho@bto.co.uk  T: 0141 221 8012