Zero hours contracts – New law to stop abuse: a bark with no bite?
- July 20, 2015
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The following article was provided by Roger Quickfall (barrister) of Parklane Plowden Chambers, Leeds.
There can be few areas of employment law that have received as much public attention in recent years as so-called ‘zero hours contracts’. The term is used to describe those contracts under which the worker is not entitled to receive a minimum amount of work. In November 2013 the CIPD estimated there were just over a million people in the UK employed under such contracts.
In recent years there has been increasing public concern with respect to such contracts and their abuse by employers. The concern in government surrounded exclusivity clauses in zero hours contracts by which workers were prevented from working for other employers. The obvious concern was that a worker on a zero hours contract was not entitled to any work from their employer and yet might also be prevented by an exclusivity clause from working for anyone else.
The government consultation in December 2013 on exclusivity clauses in zero hours contracts received over 30,000 responses. The government’s response to the consultation in June 2014 considered that up to 125,000 workers were tied to such exclusivity clauses. On 26 May 2015 exclusivity clauses in some zero hours contracts became unenforceable.
What is the change?
Prior to 26 May 2015 there were no legislative provisions regarding any zero hours contracts. As mentioned above, the term ‘zero hours contract’ was merely a label for those contracts under which the worker was not entitled to a minimum amount of work.
On 26 May 2015 sections 27A and 27B Employment Rights Act 1996 (ERA) came into force having been inserted into the ERA by the Small Business, Enterprise and Employment Act 2015.
- 27A(1) ERA 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.
S.27A(2) provides that:
For this purpose, an employer makes work or services available to a worker if the employer requests or requires the worker to do the work or perform the services.
Sections 27A(1) and (2) ERA therefore define a ‘zero hours contract’ as a contract under which a worker undertakes to work for the employer when asked to do so and under which there is no entitlement to be asked to do so. Any other so-called ‘zero hours contract’ such as one under which a worker is entitled to refuse work if offered does not appear to be covered by the statutory definition.
The change in the law is that, in respect of a zero hours contract as defined by the ERA, an exclusivity clause is unenforceable.
Section 27A(3) ERA provides:
Any provision of a zero hours contract which—
(a) prohibits the worker from doing work or performing services under another contract or under any other arrangement, or
(b) prohibits the worker from doing so without the employer’s consent,
is unenforceable against the worker.
Section 27A(3) therefore prevents employers from stopping individuals on specified types of zero hours contracts from working elsewhere or from doing so without permission. The reason is obvious. If an individual has no entitlement to be offered work and therefore no entitlement to earn money, they cannot be stopped from working and earning money elsewhere.
What is the practical effect of the new prohibition?
The practical effect of the new law appears to be very limited. There is no corresponding protection from detriment. An employer frustrated that a worker is working elsewhere may simply decide to offer no more work to that individual and, currently, there is nothing the individual can do about it. An employer not wanting to be caught by the prohibition on exclusivity clauses may simply contract to offer a minimum of say 1 hour of work a year to the individual. Such a contract will not be a zero hours contract as defined as there will be a contractual obligation to provide a minimum amount of work. Alternatively an employer may prevent the contract from being caught by the statutory definition by inserting a clause providing that the worker is not obliged to accept the work offered. In practice, if work is offered but not accepted the employer is unlikely to offer any more work.
In response to some of the concerns about the lack of impact of the new legislative change, it appears the government intends to introduce the Zero Hours Workers (Exclusivity Terms) Regulations 2015 which propose to extend the ban on exclusivity clauses beyond zero hours contracts as defined and to create a new protection from detriment for zero hours workers who take jobs elsewhere. Workers will be permitted to make a complaint to an employment tribunal which, if upheld, will entitle them to an award of compensation. The government has also said it will encourage business representatives and unions to develop codes of practice on the fair use of zero hours contracts.
S.27B ERA, already in force, is an enabling power allowing for future regulations preventing the abuse of exclusivity clauses. It applies to zero hours workers, a term defined more widely than simply those engaged on zero hours contracts as it covers those working under non-contractual zero hours arrangements.
It seems, therefore, that the changes that came into force on 26 May 2015 are just the first of a number planned for the future to mitigate the adverse effects of zero hours contracts on workers. Whether they will have the desired effect remains to be seen. Watch this space for details of further developments as they unfold.
8 June 2015
Mr Quickfall can be contacted:
- email: email@example.com
- call: 0113 228 5000