I want to engage new staff on zero-hours contracts, but I am aware that there has been a lot of bad press about these recently. Does this mean I should not use zero-hours contracts anymore?”


Amanda Espey from the Employment team at Tughans writes:


Despite the media spotlight on zero-hours contracts in recent months, it is still lawful for employers to engage workers under zero-hours working arrangements.


What are Zero-Hours Contracts?


Whilst there is no accepted legal definition of what a zero-hours contract is, generally speaking, such contracts will be contracts for casual working whereby the employer does not guarantee to provide work, and only pays for work actually done. Under some zero-hours working arrangements, the worker may be free to accept or refuse work when offered, but other arrangements may provide that the worker is expected to make him or herself available for work at any time.


Adverse Media Coverage


The recent media coverage of zero-hours contracts points to a number of concerns about their use, suggesting in particular that such contracts do not offer enough financial stability to individuals, and that they may be wrongly used as a heavy-handed management tool. Employers may therefore be uncomfortable about exposing themselves to such media controversy, as appears to be case in this instance.

Readers will be aware that the UK Government has launched a formal consultation on the use of zero-hours contracts in GB, which is due to run until 13 March 2014 (no such consultation has been launched in Northern Ireland). The GB consultation paper seeks evidence on the use of such contracts and views on possible options. Whilst the paper accepts that the flexibility offered by zero-hours contracts can be valuable for both employers and workers, it identifies two main concerns caused by zero-hours contracts, namely exclusivity clauses and the transparency surrounding the implications of being engaged on such a contract.

The problem with exclusivity clauses is that they prevent a worker undertaking work for anyone else, even if no work is offered under the zero-hours contract. Whilst such a clause might be justified in certain circumstances, for example to protect confidential information, there is a concern that such clauses are being used by employers even where there is no real justification for them. The Government’s consultation paper asks for views on how such misuse could be addressed, including the possibility of a ban on exclusivity clauses in contracts where there is no minimum guarantee of work, or further guidance or a Code of Practice on the use of exclusivity clauses.

In relation to concerns that zero-hours contracts are not sufficiently transparent, and that workers are not necessarily aware of their rights under such a contract or the fact that they are not guaranteed work under it, again there are various suggestions for how this could be dealt with, including the availability of information and guidance, an employer-led Code of Practice on the fair use of zero-hours contracts, and model clauses for zero-hours contracts that would help individuals understand their rights under them.

The Government has made it clear that any measures introduced will be about striking a balance between addressing the concerns identified by the consultation and not taking any “knee jerk decisions which offer little in the way of real solutions”, so it will be interesting to see how the Government intends to strike this balance once the consultation closes.


Using Zero-Hours Contracts


Despite the issues however, employers currently using or intending to use zero-hours contracts can take comfort from the fact that the Government does not seem keen to ban their use completely, and in Northern Ireland, whilst Ministers are conscious of the issues surrounding the use of zero-hours contracts, their use is not currently, and has not been, part of any formal consultation in this jurisdiction.

However, the legal and practical issues involved in zero-hours contracts can be challenging for employers, and the rights and protections enjoyed by zero-hours workers will depend on each particular individual’s employment status, i.e. whether they are classed as a worker or an employee.

Genuine zero-hours contracts will not usually create a “mutuality of obligation” – in other words, the employer will not be obliged to provide work to the individual and the individual will not be required to carry out the work offered. As a consequence, the individuals working under these arrangements will often be deemed to be workers rather than employees.

However, as with every case involving employment status, courts and tribunals will not only look at the specific wording of the written contract, but will also look at how the contract has been performed in practice. Accordingly, where there is an “expectation” that the employee will be given work (and that the employee will do the work offered), for example, arising out of a usual practice that has developed over time, an employment relationship may nevertheless exist. Employers should therefore continually assess the relationship they have with their zero-hours workers.

Regarding a worker’s rights and protections under a zero-hours contract, a zero-hours worker will benefit from various statutory rights, including protection from discrimination, the right to receive paid holiday, the right to receive the National Minimum Wage and (in certain situations) a right to receive Statutory Sick Pay.

Zero-hours employees however, will benefit from a much higher level of protection than workers (depending on their period of service). As well as all of the rights listed above, they will enjoy additional rights including the right not to be unfairly dismissed, an entitlement to statutory redundancy payments, and an entitlement to maternity and other family leave/pay. It is therefore essential for employers seeking to use zero-hours contracts to assess the status of their zero-hours workers from the outset of the working relationship.


Conclusion


The principal advantage of zero-hours contracts is the flexibility that they offer to employers, and such contracts are particularly useful in certain sectors such as catering, retail and leisure, where demand fluctuates significantly and workers are simply not required during certain periods. Such flexibility is often equally attractive for workers – a contract which provides that the individual is not obliged to take on the work he or she is offered will allow greater freedom to fit work around personal or family life.

So whilst employers should continue to be mindful of the media and the Government’s criticisms of zero-hours contracts, careful and responsible use of such contracts will minimise the disadvantages, and so long as a zero-hours worker’s ability to work elsewhere is not restricted, and the use of a zero-hours contract is genuinely appropriate, the use of a zero-hours contract will be perfectly lawful.