Companies could be banned from imposing exclusivity on zero hours contracts which offer no guarantee of work and stop employees from working for another company, under new proposals announced by Business Secretary Vince Cable. These measures come as part of efforts to boost fairness for workers.
In a consultation launched yesterday (19 December 2013), the government will also outline proposals on ways to tackle the lack of transparency in the way zero hours contracts are currently being used and improve guidance for both employers and employees around their use.
Business Secretary Vince Cable said: “A growing number of employers and individuals today are using zero hours contracts. While for many people they offer a welcome flexibility to accommodate childcare or top up monthly earnings, for others it is clear that there has been evidence of abuse around this type of employment which can offer limited employment rights and job security. We believe they have a place in today’s labour market and are not proposing to ban them outright, but we also want to make sure that people are getting a fair deal.
“Our research this summer gave us a much needed insight into both the positive and negative aspects of zero hours contracts. Our consultation will now focus on tackling the key concerns that were raised, such as exclusivity clauses and how to provide workers with more protection. We don’t think that people should be tied exclusively to one employer if it unfairly stops them from boosting their income when they are not getting enough work to earn a living. We also want to give employees and employers more guidance and advice on these types of employment contracts.
“Employers need flexible workforces and people should have the choice in how they work. But this shouldn’t be at the expense of fairness and transparency.”
The 12 week public consultation will seek views on a range of proposals including:
- proposals to potentially ban the use of exclusivity clauses in contracts that offer no guarantee of work
- new advice and guidance to improve transparency around the use of zero hours contracts for employers and employees
The launch of the consultation follows a fact-finding exercise that was carried out over the summer by the Department for Business, Innovation and Skills (BIS) to explore how these contracts are currently being used.
The consultation will run until 13 March 2014.
Commenting on the announcement, TUC General Secretary Frances O’Grady said: “The growth of zero-hours contracts is one of the reasons why so many hard-working people are fearful for their jobs and struggling to make ends meet, in spite of the recovery.
“But while the government has identified some of the problems faced by those with zero job security, it’s desperately short on solutions to curb the use of these contracts.
“Through the consultation, the TUC and unions will propose tougher action in order to tackle abuse of zero-hours contracts, which can leave people not knowing how much they’ll be earning from one week to the next.”
Neil Carberry, CBI Director of Employment and Skills, said: “The Government has recognised the important role that zero hours contracts play in the UK labour market. These contracts have helped to save jobs through tough economic times and enabled businesses to respond rapidly to new opportunities over recent months.
“Zero hours contracts offer a choice to those who want flexibility in the hours they work – such as students, parents and carers – and provide a stepping-stone into the jobs market for those most vulnerable to long-term unemployment.”
Simon Rice-Birchall, partner at global law firm Eversheds, casts a legal eye over the challenges: “The major problem faced by the Government is the absence of any legal definition of a zero hour contract. This matters because any attempt at regulating their use without a clear definition will inevitably be a blunt instrument and may have unintended and undesirable consequences, for example, putting up barriers to other forms of flexible work. This is one reason why the Government is signalling a cautious approach to avoid throwing the baby out with the bathwater.”
“However, with the political heat rising over the potential abuse of zero hour contracts, employers should expect some change to come. In particular, it seems likely that the Government will seek to stop employers from unnecessarily banning zero hour workers working for another employer: so-called ‘exclusivity’ clauses. In practice, few employers demand such exclusivity and many will consider this a reasonable step in the circumstances.”
Nicola Kerr, Head of Employment at SJ Berwin, supports zero hours: “The growth in zero-hours contracts in our view reflects the increased desire for flexibility in the job market. These contracts create a valuable opportunity for employers to ensure that their workforce meets the needs of the business, while at the same time providing workers with an employment opportunity that may not otherwise exist.
“It is reassuring that Vince Cable does not support an outright ban. However, it is also hard to see how piecemeal legislation following the Consultation will assist. In fact, it would undermine the government’s stated intention to reduce red tape for employers.”
Stuart Neilson, an Employment Law Partner at law firm Pinsent Masons agrees: “It is good to see that the Government have recognised that so called “zero hours” contracts are a valid option for both employers and employees and that any legislative control of this area will be “light touch”. Clearly there are some situations where abuses of these arrangements are occurring but that could be said of any type of contract that employers/employees use. An outright ban on the use of zero hours contracts would have been a disproportionate and unwelcome response from both business and individuals.”
Chris Bryce, PCG’s Chief Executive says that Vince cable has gone from zero to hero and is on the right track: “The contentious issue of zero hours contracts has been addressed by Business Secretary Vince Cable today, a move which has been welcomed by PCG, the membership organisation for independent professionals.
“Clearly, businesses need access to flexible resource and zero hours contracts deliver that. However, restrictive handcuffs used by some employers smacks of exploitation. Flexibility has to work both ways an exclusivity clause is fundamentally against the spirit of flexible working. Mr Cable’s words provide reassurance that any measures designed to stamp out exploitation of vulnerable workers will not negatively affect genuine independent professionals in business on their own account.
“The way we work in this country is fundamentally changing. In the flexible labour market that we have now, this route is not only available to the upper echelons of the market as it has been historically but also to young people, working mothers, and anyone who might choose this way of working as a viable alternative to permanent employment.
“With the growth of new industries such as digital technology, becoming an independent professional is no longer the preserve of the vastly experienced, highly skilled sectors of the workforce. We would urge the Government to ensure those choosing to work in this way are not confused with vulnerable workers.”
Nikki Duncan, partner, Michelmores has the last word: “As promised, the Government has today published a 41 page consultation paper on zero hours contracts, inviting comment in particular on possible ways to minimise “abuse and exploitation”.
“There is nothing surprising in Vince Cable’s public statement that the use of ZHCs in unlikely to be banned outright. As the consultation paper records, around a quarter of a million workers are estimated to be working under such contracts in the UK today, and many provide welcome flexibility to employees as well as employers.
“As a result it would be political suicide to ban them outright, and certainly that has never been suggested by either the Government or the Opposition.
“Indeed the current paper indicates that the law will not necessarily change at all: preserving the status quo is an option. That said, it explores two areas where there is evidence of abuse, under the headings “Exclusivity” and “Transparency”.
“The consultation on “Exclusivity” clauses in ZHC explores various options ranging from banning them altogether in contracts that offer no guarantee of work, to the Government issuing guidance on the fair use of exclusivity clauses, through to reliance on existing common law redress (ie no change!)
“Under the “Transparency” proposals, concern is expressed that individuals are not always clear on the terms and conditions, and consequences of ZHC, & that employers do not always fulfil or understand their responsibilities. The paper also flags the fact that some individuals have experienced uncertainty over access to personal finance markets, and eligibility for benefits payments when their hours of work change frequently.
“The proposals to remedy the “transparency” concern seem to centre on information and guidance, including a possible employer-led Code of Practice that covers the fair use of ZHCs, with or without model clauses for ZHCs.
“Therefore, as expected, it seems unlikely there will be more than light-touch legislation, or possibly simply Government guidance. Consultation continues until March, and doubtless there will be parallel focus groups discussions about the political implications of any changes in the run up to the next General Election.”