Zero Hours Contracts (ZHCs) are a hotly contested issue but they can provide employers and employees with a flexible employment option. However, they are also open to abuse, which makes it a controversial subject.
New legislation came into force on Monday 11 January which provides key protection for employees on ZHCs subject to exclusivity clauses preventing them from working for another employer whilst under a ZHC.
The new regulations will apply to existing zero hours contracts and any contracts entered into in the future, so employers need to review what processes are in place to ensure compliance.
Will the Regulations Work?
The Government first attempted to address the issue of exclusivity clauses in ZHCs in May last year, through the introduction of the Small Business, Enterprise and Employment Act 2015. This Act renders any provision of a ZHC which prohibits the worker from doing work or performing services under another contract, or prohibits the worker from doing so without the employer’s consent, unenforceable against the worker. However, the measures were widely criticised for failing to include a right for workers who were dismissed or treated unfavourably as a result of breaching such a clause to seek any remedy. Without any enforcement mechanism, the measures were effectively toothless.
The new Regulations have sought to remedy this and have “bite”! The guidelines now provide that any dismissal of a zero hour contract employee is automatically unfair if the principal reason for the dismissal is that the employee breached an exclusivity clause; no qualifying period of service is required to bring an unfair dismissal claim under the Regulations. It is also unlawful to submit a zero hour worker (not just an employee) to detriments if they work for another employer in breach of an exclusivity clause.
Impact for businesses
These changes will affect a significant number of businesses. It is estimated by the Department for Business Innovation and Skills (BIS) that around 17,000 employers have contracts containing exclusivity clauses.
The presence of an exclusivity clause in a ZHC will not render the existing contract void, but the clause will be unenforceable.
Employers may incur some organisational costs in allowing for sufficient cover or re-allocation of work to allow for the unavailability of workers who take on another job. Although BIS suggest that the proportion of workers who will actually do so is unlikely to be high.
There is some uncertainty over the implications of the Regulations on other common provisions in ZHCs, such as those which require workers to be available for work if required. The practical effect of this may well be that a worker is prevented from taking on other employment. However, the language in the legislation refers to “prohibiting” workers from doing work under any other arrangement, and it seems unlikely that a Tribunal could stretch to interpret this as amounting to a prohibition.
One to watch
Whilst a useful tool for employers, ZHCs remain very much subject to scrutiny. Employers should take care to educate their management as to the implications of the Regulations in order to avoid claims. They may also wish to consider redrafting contracts to avoid confusion or unrest amongst employees.
The organisational implications of the measures remain to be seen, and may well vary according to sector. Employers should take steps to assess the likely effects on their business and begin to prepare themselves for this.
Kate Meadowcroft is an employment partner at DWF law firm.