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Zero Hours Contracts – The Devil Incarnate or an Aid to Flexibility?

Zero Hours Contracts – The Devil Incarnate or an Aid to Flexibility?

Employment law solicitor Natalie Ruane explains the intricacies of the zero hours contract.

The issue of whether zero hours contracts are good or bad has been a recurring topic in the press over the last 12 months but what exactly is a zero hours contract and how does it work?
In actual fact, there is no legal definition of a zero hours contract and one of the problems with the term is that it has been used by the media, and by employers, to cover a wide variety of contractual relationships.

Traditionally, zero hours contracts were used to cover very casual working relationships, when there was not meant to be an ongoing relationship between the parties and the individual was just working on an ad hoc basis.

As a result, what really marks a zero hours contact out from other types of contract is a lack of commitment on either side. In most cases, the business is not obliged to provide the individual with any work and, in a traditional zero hours arrangement, the individual isn’t obliged to accept anything that is offered.

This lack of commitment and certainty (over hours and pay) is what has led to such bad press for zero hours contracts. However, there are a number of industries in which the flexibility offered by such contracts is really useful. In cases where there is a lack of certainty over how much work will be required or where there are large fluctuations in demand, zero hours contracts can provide enormous benefits. For some employees, being able to accept or reject work whenever is convenient for them can be an attractive proposition.

However, the fact that zero hours contracts are used in a number of circumstances leads to some complex legal issues. The most important being whether the individual working under the zero hours contract actually has employment status and therefore any employment rights.

If there is no obligation to provide work and no obligation to perform that work, the person working under the zero hours contract may not be able to satisfy the test of 'mutuality of obligation' which is needed between an employer and an employee. Only employees enjoy statutory protections such as statutory minimum notice rights, unfair dismissal protection and/or the right to a statutory redundancy payment. 

That doesn’t mean that the individual has no rights. The individual is still likely to be a 'worker' which carries with it the right to paid holiday and to be paid the National Minimum Wage. Such individuals may also be protected by anti-discrimination legislation since those who work under a contract personally to execute work are included within the broader definition of 'employment' for the purpose of discrimination claims. 

Even if mutuality of obligation does exist, and the person working under the zero hours contract is deemed to be an employee when he or she is working under the contract, the individual may not have as much protection as that of a permanent employee because zero hours contracts are often operated in such a way that there are breaks in the individuals continuous service. This means that the individual never accumulates the 2 years continuous service which is needed to claim unfair dismissal or to qualify for redundancy pay.

Sometimes it is accepted that the individual is an employee and is accruing service and benefits.  It is just that the zero hours contracts are used to have flexibility over hours and pay. In these circumstances the employer sometimes seeks to prevent the employee from working for anyone else.  This is understandable in highly competitive industries; the employer still has contacts and confidential information to protect. In addition to which, as this type of contract is most common when it isn’t easy to identify exactly how many staff will be needed at any one time, the employer wants certainty that the employees will be available to perform work as and when required. However, it is this use of ‘exclusivity clauses’ within zero hours contracts which has come in for the most criticism.

If the Small Business, Enterprise and Employment Bill makes it through parliament in its current format then it will be unlawful to restrict staff working under zero hours contracts in this way. It will not, however, be unlawful to continue to use zero hours contracts. Employers will still be able to have flexibility over hours, it will just be more difficult to prevent the individual from working elsewhere while signed up to that type of agreement. 

Zero hours contracts will continue to be used. However, employers need to make sure that they are using these type of contracts for the right reasons and that they are aware of the risks that arise (accrual of employment rights). Individual’s need to understand that they are not necessarily going to be employees and/or that there is no guarantee over hours and therefore pay.

In advance of the impending changes, employers using zero hours contracts should check what restrictions have been imposed and should consider whether those restrictions are necessary or workable going forward.

Individuals who are offered a zero hours contract should consider whether the lack of certainty over pay is something they can manage.

Anyone in need of more information about how these types of contracts work should contact Natalie Ruane at Burnetts Solicitors on 01228 552 222.

About the author

Natalie Ruane profile photo

Natalie Ruane

Natalie is a Partner and leads the Employment Law & HR team and specialises in education.

Published: Monday 29th September 2014
Categorised: Employment

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