Zero Hours Contract Act 2014
Protection Introduced for Zero Hour Contract Workers
The Exclusivity Terms in Zero Hour Contracts (Redress) Regulations 2015, Zero Hours Contract Act 2014, came into force today and provide that:-
- any dismissal of a zero hour contract employee is automatically unfair, if the principal reason is that they breached a contractual clause prohibiting them from working for another employer
- no qualifying period is required to bring such an unfair dismissal claim; and,
- it is also unlawful to submit a zero hour worker (note: worker not employee) to detriments if they work for another employer in breach of a clause prohibiting them from doing so.
Employee Handbook Compliance Package
Date Published: 20 November 2015
Zero Hours Contract Act 2014
The Department of Business, Innovation and Skills (BIS) has published guidance on how Zero Hour Contracts should be used. The guidance is aimed at employers and includes information on employment rights, appropriate use, best practice and exclusivity clauses. Further, the Government has recently published draft regulations designed to provide redress for zero hours workers who are dismissed or subjected to a detriment for not complying with an exclusivity clause.
Guidance for Employers
BIS offers the following guidance for employers:
Zero Hour Contracts are only appropriate in certain situations, for example, when the employee is engaged in seasonal work, a start-up business or, a one-off special event. These contracts would not be appropriate for an individual who is contracted for permanent work, with regular hours, over a continuous amount of time.
When recruiting for a Zero Hour Contract, employers should clearly advertise the job as such and the individual should be informed that hours are not guaranteed.
When offering a Zero Hour Contract, employers should consider including specific information such as, whether the individual is an employee or worker, what employment rights they are entitled to, the process by which work will be offered and, how the individual’s contract will be terminated.
Cancelling work at late notice is not acceptable unless truly unavoidable and employers should give employees as much notice as possible when work is, or is not, offered.
As an additional point, the guidance reminds employers that the Small Business, Enterprise and Employment Act 2015 (SBEEA) prohibits the use of exclusivity clauses in any Zero Hour Contract. This means that an employer cannot stop an individual from looking for work, or accepting work from another employer.
Draft regulations to prevent avoidance of ban on exclusivity clauses
On 26 May 2015 the provision in the SBEEA banning exclusivity clauses in Zero Hour Contracts came into force. The Government has consulted on the potential ways in which employers might seek to avoid the ban. It concluded that further measures were required, including financial penalties for employers who try to avoid the ban, and a right for Zero Hour workers not to be subjected to a detriment as a result of working for another employer.
The Government has now published the draft Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015. The regulations provide:
- A right for Zero Hours workers not to be unfairly dismissed if the reason, or principal reason, is that they have failed to comply with an exclusivity clause. There is no qualifying period of employment needed to bring such an unfair dismissal claim.
- A right for Zero Hours workers not to be subjected to any detriment because they have failed to comply with an exclusivity clause.
- Where an employer breaches these rights, the worker may issue a claim in the Employment Tribunal and seek a declaration and/or compensation.
Although Zero Hour Contracts are most commonly associated with the public and voluntary sector, they are used by 17% of private firms. All employers, regardless of their size or sector, must pay attention to the BIS guidance and how the regulations will work in practice to avoid unintended consequences. For example, following the ban of exclusivity clauses, employers should review their employment contracts and ensure they are adequately protected in relation to confidentiality and competition issues, without falling foul of the regulations.Date Published: 20 March 2015
Anti Avoidance of Zero Hours Contracts
The Government has published its draft regulations confirming the measures it intends to introduce to prevent avoidance of the ban on exclusivity clauses in Zero Hours Contracts.
The Government has responded to concerns that employers may seek to avoid the ban on exclusivity clauses by contracting workers for a low number of hours per week. Therefore the ban on exclusivity clauses will apply on an hours and income based threshold. The threshold has not currently been published but will be calculated on the basis of the number of hours worked multiplied by the national minimum wage. Anyone who does not meet that threshold will be protected by the exclusivity ban, irrespective of whether their engagement is on a Zero Hours Contract, or not.
It is proposed that the maximum hourly rate to which the threshold will apply will be £20 per hour.
The Government has retained the view that business representatives and unions should develop sector-specific codes of practice to help ensure the fair use of Zero Hours Contracts but there is no indication in the regulations of when or how this will be developed.
What happens next depends on the outcome of the election. While the coalition parties support the draft regulations outlined above, Labour is committed to going further: for example, giving Zero Hours Contract workers the right to a fixed hours contract where they work ‘regular’ hours.
Consultation Over Exclusivity Clauses in Zero-hours Contracts Launched
The government have launched a consultation aimed at identifying and closing any loopholes regarding exclusivity clauses in zero-hours contracts.
The Small Business, Enterprise and Employment Bill, is due to be debated in the House of Commons in October 2014. If passed, the Bill will prevent employers relying on a contractual clause that prohibits a zero hours worker from working for someone else. However, the Government is concerned that it will be easy for employers to circumvent the ban and its new consultation seeks views on how that can be avoided.
The consultation asks for views on:
- what the likelihood of employers avoiding a ban on exclusivity clauses might be and how that might be achieved;
- whether the government should do more to deal with potential avoidance, how might that be best achieved, and whether to do this alongside the ban or wait for evidence of whether such avoidance is taking place;
- how potential avoidance could be dealt with;
- whether there should be consequences for an employer if they circumvent a ban on exclusivity clauses and, if so, what those consequences should be; and
- whether there are any potentially negative or unintended consequences as a result of the wording of the legislation.
In announcing the consultation business secretary Vince Cable said: “We are tightening the screws on rogue employers who try to abuse workers on zero-hours contracts. We are looking closely at any potential loopholes that could arise from a ban, to ensure that these are closed off and no one can get round the new law. We are also ensuring there is access to justice for workers treated unfairly.”
He went on to say evidence showed most zero-hours contracts had been used responsibly by many businesses for many years, “but unfortunately we know some abuse does take place”.
With regards further guidance, rather than one overarching code of practice, the consultation envisages industry-led/owned sector-specific codes of practice on the use of Zero-hours Contracts. It will therefore be left to unions and employers to agree the precise contents of such codes but the consultation suggests that the issues to cover could include:
- when it is appropriate/not appropriate to use a ZHC
- whether and how to promote clarity, e.g. job adverts and contracts stating the type of contract up front
- the rights and responsibilities of the individual and the employer and how to calculate accrued benefits such as annual leave where appropriate
- best practice in allocating work, and
- recommended practice around notice of hours of work or cancellation of work
Consultation via the government’s website is open until 3 November.
I shall be submitting a response in due course; if you would like to feed your views in to that response please get in touch by email to email@example.com.Date Published: 25 June 2014
The Small Business, Enterprise and Employment Bill 2014 was published today (25 June 2014).
Clause 139 of the Bill provides a definition of a zero-hour contract, and renders any clause which tries to stop the worker working for somebody else void.
Definition of a Zero Hours Contract
The term “Zero Hours Contract” means a contract of employment or other worker’s contract under which:
- the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and
- there is no certainty that any such work or services will be made available to the worker.
Under the new Act any clause within a Zero Hours Contract, will be unenforceable, which:
- prohibits the worker from doing work or performing services under another contract or under any other arrangement, or
- prohibits the worker from doing so without the employer’s consent
A bill to prohibit the use of zero hours employment contracts has been debated in Parliament.
If enacted it will be unlawful to issue a zero hours contract and any existing contract shall become void.
The bill defines a zero hours contract as a contract or arrangement for the provision of labour which fails to specify guaranteed working hours and has one or more of the following features:
- it requires the worker to be available for work when there is no guarantee the worker will be needed;
- it requires the worker to work exclusively for one employer;
- a contract setting out the worker’s regular working hours has not been offered after the worker has been employed for 12 consecutive weeks.
Right to Fixed and Regular Employment
The employer of a worker whose contract becomes void will be required to offer the worker a contract of employment including fixed and regular working hours.
The Act will be known as the Zero Hours Contracts Act 2014 and will come into force once it received Royal Assent.
The Bill is scheduled for a second debate on 28th February 2014.Published 11 October 2014
Business Secretary, Vince Cable, has announced his decision to launch a consultation on zero hours contracts later this year, to “explore how to tackle any abuses, particularly around exclusivity”.
This follows increased media interest in the use of zero hours contracts. An employment tribunal claim has been brought against Sports Direct by an individual on a zero hours contract denied paid annual leave, sick pay and bonuses. She is reported to be claiming indirect sex discrimination, less favourable treatment due to part-time status, and breach of working time rules.
Use of Zero Hours Contracts
Zero hours contracts are being used increasingly by companies seeking workforce flexibility in order to adapt to fluctuations in demand, without taking on the obligations associated with contracts of employment.
According to the Office for National Statistics, the number of zero-hours contracts has risen from 134,000 in 2006 to more than 200,000 in 2012; their use being most common among workers aged 16-24. One explanation for the rise in their use is the recession: zero-hours contracts provide a pool of flexible labour, assisting employers to satisfy short-term staffing needs whilst reducing wage costs; they also allow employers to reduce the initial costs of recruiting and training staff. Another explanation may be the introduction of the Agency Worker Regulations in 2011.
Critics say that zero-hours contracts present serious drawbacks for individuals given the associated lack of employment rights, insecurity and the potential disruption to family life – in particular, the ability to arrange child care – due to short-notice calls to attend work
But it is recognised that for some individuals, particularly those seeking to supplement a more permanent source of income, zero-hours contracts have value. These individuals prefer to work only occasionally; having the flexibility to turn down work if they wish and benefiting from a choice of working patterns, thereby facilitating a better balance between work and other commitments.
What Are The Likely Results Of The Consultation On Zero Hours Contracts
The Trades Union Congress initially called for the contracts to be outlawed, but has more recently confirmed that they do not intend to call for an outright ban. The Resolution Foundation similarly concludes that it may be too early to ban them, but considers that they should be reformed and more closely regulated. For example, all job adverts for such posts should make the conditions entirely clear.
Whilst an outright ban seems unlikely, increased regulation and possible safeguards are likely to be considered including, for example, in relation to the eligibility of people on zero-hours contracts to receive benefits. One option could be higher tax credits to compensate for periods when they are not working.