Zero Hour Contracts - What Is All The Fuss About?

by Jacqueline McGuigan

ZHCs are on the rise, but a statutory framework is needed to make them part of a fair and flexible labour market

On 19 December 2013 the Department for Business Innovations and Skills launched a consultation on Zero

Hours Contracts (ZHCs). The reason was that, last summer, the government con- ducted an informal information gathering exercise on the use of zero hours employ- ment contracts, with the overarching aim of achieving a labour market that is flex- ible, effective and fair.

The government and trade unions tell us that the use of ZHCs among the private and public sector is on the increase, but it is not clear why. A survey of 5,000 mem- bers of Unite found that 22 per cent were on ZHCs earning an average of £500 per month, equating to an estimated 5.5 mil- lion people over the UK workforce.

So what exactly is a Zero Hours Con- tract? ZHCs are not defined in legislation but are generally understood to be an em- ployment contract between an employer and an individual where there is no obliga- tion for employers to offer work, or for the individual to accept it.

The government has identified concerns around the use of ZHCs in the areas of “exclusivity”, clauses preventing an indi- vidual from working for another employ- er, and “transparency”, in that individuals are not always clear on the terms, condi- tions and consequences of ZHCs and em- ployers do not always fulfil or understand their responsibilities.

The contracts are popular in hotels, restaurants, education and health. When used properly they offer flexibility to those who want to combine work with other commitments. When used improp- erly, they deny fair employment rights.

An individual’s rights will depend on his or her status as employee or worker. This distinction can prove vital, as the

difference between the two statuses will determine employment rights. ZHCs, for example, are not entitled to receive mini- mum notice periods, redundancy pay, protection from unfair dismissal, transfer of undertakings (TUPE) rights, or mater- nity/paternity/adoption leave and pay.

Barrister David Stephenson says he fears that “whilst some workers may welcome the flexibility of ZHCs, in the present cli- mate the vast majority have no choice but to accept what work is available”.

To address the concerns about ZHCs, the government sought views on a num- ber of options related to exclusivity and transparency. These include: banning the use of exclusivity clauses, issuing guid- ance and a Code of Practice on the fair use of exclusivity clauses, relying on exist- ing common law redress, improving the content and accessibility of information, advice and guidance about ZHCs, issuing a Code of Practice covering fair use of ZHCs, and producing model contract clauses.

Existing common law redress is both cumbersome and costly. Determin- ing the issue of employment status en- tails an Employment Tribunal (more on this on page 15) undertaking a factual enquiry which looks at a number of as- pects of the working relationship. The legal cost of this enquiry will be beyond the reach of many individuals who are working under ZHCs.

Barrister Claire Palmer says that it is a reality that many Zero Hours Contract employees “cannot enforce their rights due to cost”. However, she believes that exclusivity clauses are “likely to be struck down by a court as being an unnecessary restriction on trade”.

Introducing a statutory framework gov- erning the use of Zero Hours Contracts would thus go a long way to levelling the playing field and ensure that the UK labour market is flexible, effective and fair. l Jacqueline McGuigan is a solicitor at TMP Solicitors LLP

Case Study: Pulse Healthcare versus Carewatch Care Services & Others
This 2012 case involved a care package for a lady who suffered severe physi- cal disabilities and required around the clock care by no less than 15 persons working on shifts to look after her.

The carers signed a document entitled ‘Zero Hours Contract Agreement’. In the section headed ‘Hours of Employ- ment’ the words ‘Zero Hours’ were added. After an investigation, the Em- ployment Tribunal Judge said that the written contract of employment did not reflect the true position and that the

carers were employees. He said that, in reality, the carers worked fixed hours on a regular basis over a number of years. Once the rota was prepared, they were required to work and the employer was required to provide that work.

As “employees” they were subject to control and discipline, and were re- quired to provided a personal service. The finding of employee status was then appealed and Judge Richardson, hearing the appeal, found that the Employment Judge was entirely justified in saying that the expressed “Zero Hours Con- tract Agreement” did not reflect the true agreement between the parties.