Zero-hours contracts: an unknown quantity?

14 May

Last week it was revealed that, under the new universal credit system, jobseekers could lose their benefits if they turn down jobs offering zero-hours contracts. This news comes in the wake of a report on "contracts that do not guarantee a minimum number of hours", published by the Office of National Statistics

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Zero Hours Contracts
Last week it was revealed that, under the new universal credit system, jobseekers could lose their benefits if they turn down jobs offering zero-hours contracts. This news comes in the wake of a report on  "contracts that do not guarantee a minimum number of hours", published by the Office of National Statistics ("ONS") (http://www.ons.gov.uk/ons/dcp171776_361578.pdf), and a recent government consultation on the topic, which closed in March with over 30,000 responses. (https://www.gov.uk/government/news/zero-hours-contracts-consultation-closes-with-over-30000-responses)

Zero-hours contracts (or "NGHCs" as the ONS more broadly defines them) have been the subject of much debate, with trade unions generally regarding them as exploitative of workers while business groups see them as offering employers the necessary flexibility to react to changes in demand.

Either way, they seem to be on the rise. The ONS survey published on 30 April estimates that between January and February 2014 there were 1.4 million employee contracts which did not guarantee a minimum number of hours (based on a survey of businesses). Even the more modest figures from the most recent Labour Force Survey (583,000 individuals who consider themselves to be on "zero-hours contracts") show a marked increase from the estimated 200,000 individuals working on such contracts in 2012.

Of course, zero-hours contracts aren't inherently either good or bad. It's not the type of contract, but what you do with it. However, as such contracts become more prevalent, there is a concern that zero-hours arrangements are leading to abusive practices and an erosion of workers' rights. Hence, the call for regulation from some corners.

As yet there is no standardised definition of a “zero-hours contract”, legal or otherwise. In the government's zero-hours consultation, it is defined in general terms as "an employment contract in which the employer does not guarantee the individual any work, and the individual is not obliged to accept any work offered." The practical reality is, of course, that many workers are obliged to accept the work, either because of exclusivity clauses in their contracts, or for fear of not being offered work in future.

This seems to be the message employees are sending out to ACAS. The Guardian reported on Monday that the service has been receiving 70 calls a week on the subject (http://www.theguardian.com/uk-news/2014/may/12/zero-hours-contracts-mistrust-insecurity-acas), the biggest concern being "effective exclusivity" (i.e. employees feeling afraid to turn down hours or look for work elsewhere, even where there isn't an express exclusivity clause in the contract).

What are the current legal implications of zero-hours contracts? Much depends on whether there is, in fact, mutuality of obligations as between worker and employer. If not, many employment law rights will not even arise. Of course, simply stating in the contract that there is no mutuality of obligation will not necessarily be determinative of an individual's worker or employee status in law. A Tribunal will take many other factors into account when deciding the true nature of the agreement between the parties. See Autoclenz Ltd v Belcher [2011] UKSC 41, and more recently on zero-hours contracts specifically, Pulse Healthcare Ltd v Carewatch Care Services Ltd (EAT 0123/12).

Even if an individual only qualifies as a worker, they will still be entitled to holiday pay and the national minimum wage, and will also enjoy certain protections under the Equality Act 2010 and the Part-time Workers Regulations. Employers should also take care to ensure the contracts don't give rise to indirect discrimination. According to the recent Labour Force Survey, a higher proportion of those on "zero-hours contracts" (compared to those who were not on such contracts) are women, part-time workers or are in the younger (16-24) or older (65+) age brackets.

As for how the law will take shape in future, more will be revealed when the government publishes its consultation response. Vince Cable says it's due "shortly".

Adrian Peck

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