ZERO HOURS CONTRACTS – WHAT’S NEXT?

Zero hours contracts continue to capture the attention of politicians and the general public alike, particularly in the run up to the general election. While the phrase seems to have become a by-word for any type of flexible working arrangement, there is now specific legislation which will govern their use. Here we look at the impact for employers and recruiters.

BACKGROUND

Summer 2013: The Government conducted an informal review to gather information about the use of zero hours contracts. The review highlighted one particular concern about the extent to which zero hours workers could be prevented, under a clause in the contract (an exclusivity clause), from carrying out other work during periods that their zero hours employer is unable to find work for them. December 2013 Following the findings of the informal review, the Government launched a formal consultation on zero hours contracts to consider:

• Whether to introduce legislation to ban the use of exclusivity clauses in zero hours contracts;

• How to improve transparency about the use of zero hours contracts, for example by introducing Government guidance for employers and workers and the production of a Government lead Code of Practice.

June 2014: The government announced that provisions to ban exclusivity clauses would be included in the Small Business, Enterprise and Employment Bill which was then introduced to Parliament.

August 2014: Having determined that a ban on exclusivity clauses was to be introduced, the Government launched a consultation to take views on whether employers would be likely to try to avoid the ban by, for example guaranteeing as little as one hour of work, and to consider proposals to tackle anti-avoidance.

WHERE ARE WE NOW?

March 2015: Responding to the August 2014 consultation (above) the Government has now released details of draft regulations which aim to prevent employers from getting around the ban on exclusivity clauses and to protect workers from suffering any detriment if they do not accept work from their employer.

THE LEGISLATION

 The Small Business, Enterprise and Employment Act 2015 (the Act) which only recently passed into law on 26 March 2015 defines a zero hours contract as:

a contract of employment or other worker’s contract under which

(a) 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

(b) there is no certainty that any such work or services will be made available to the worker Essentially this is a contract under which the employer does not guarantee to provide any work to an employee or worker. The reference to ‘workers’ includes individuals who do not have an employment contract, but have a contract under which they provide their services personally. The word ‘worker’ in this article is used to refer to both employees and workers.

 Exclusivity clauses banned

The Act goes on to make any provision in this type of contract, which prevents the worker from working elsewhere (or requires them to obtain consent to work elsewhere) unenforceable. Although the Act has been passed into law, these provisions relating to zero hours contracts are not yet in force. This will require a commencement order which will now be down to the next Government to introduce. In the meantime, the Government has also proposed further regulations which will extend the ban on exclusivity clauses to a wider range of contracts and will also provide protection for workers to prevent their employer subjecting them to a detriment if they turn down work which is offered to them.

Under the draft Zero Hours (Exclusivity Terms) Regulations 2015 exclusivity clauses will also be unenforceable in a ‘prescribed contract’ which is a contract of employment or worker’s contract which entitles the worker to be paid no more than a set minimum amount per week. The formula proposed for calculating the set minimum will be based on the adult national minimum wage (NMW) in force from time to time (currently £6.50) multiplied by a set number of hours (which is yet to be determined).

However, in order to avoid higher earners who choose to work fewer hours from being brought into scope, these provisions will not apply in respect of contracts where the employee or worker is paid at least £20 per hour.

Detriment

Under the draft regulations workers engaged on zero hours contracts or a prescribed contract will have the right to take action against their employer if they are subjected to a detriment because they turn down work offered by their employer. The Government explains that this provision has been included because, despite the exclusivity clause ban, employers could choose not to offer work to workers who have undertaken work for other employers. Detriment is not defined in the draft regulations as this will be left to employment tribunals to determine.

IMPACT FOR RECRUITERS

Despite the fact that most of the negative publicity about the abuse of zero hours contracts relates to staff directly engaged by employers on such contracts, these amendments will impact recruiters who supply agency workers. Employers who have typically restricted staff from working elsewhere or required employees to seek consent to do so (for example to ensure that employees are not working for a competitor) will be caught by these changes if their staff work on contracts which are below the weekly income threshold or hourly rate threshold (above).

Agency workers

Recruiters are already subject to the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the Conduct Regulations). This prohibits them from subjecting or threatening to subject candidates to any detriment for a range of reasons, including where an agency worker takes up or proposes to take up work elsewhere. Additionally since recruiters will generally have a range of clients to supply workers to, unlike employers of other zero hours workers, recruiters will generally have more options to find their workers work elsewhere with other clients.

These restrictions in the Conduct Regulations don’t apply where agency workers are engaged on contracts of employment or contracts of apprenticeship, so recruiters may need to review these contracts, particularly where the temporary worker may need consent to work to do work elsewhere.

NEXT STEPS

It is clear that some steps will be taken to provide zero hours workers with some additional protections. As to when this happens and whether more extensive measures than those outlined above will be put in place will very much depend on the outcome of the general election.

Posted: Fri 15 May 2015
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