In the past month or so there has been an escalating controversy over zero hours contracts. It has been claimed that they are a way for employers to avoid employment rights and that they create a ‘second class’ workforce with no guaranteed hours or pay. Is that right, or are they simply a way for employers to build flexibility into their workforce?
First, what actually are zero hours contracts? It isn’t a legal term, but it usually means a situation where a worker doesn’t have any guaranteed minimum working hours. So for example it has been common for many years now for employers to have a ‘bank’ of flexible casual workers they can call on if they have any extra hours available.
These kinds of arrangements can suit both parties, and obviously in that case there is no problem whatsoever. For example, those who have caring responsibilities who cannot commit to regular hours may still be able to do odd hours here and there, in which case it is a ‘win win’ situation. It is important that the contract is properly drafted to ensure that the arrangement is clear for both parties.
However, the lack of guaranteed hours does leave zero hours workers without certain protections. For example, because of the ad hoc nature of their work they may not have continuity of service. They will also not usually be entitled to any sick pay because there is no obligation on the employer to offer them work – if they do get offered work and they are ill, the employer will call someone else instead. Although they should receive holiday pay, it is often complicated because the amount accrued and the pay for it will vary with the amount of work they are doing.
Although zero hours arrangements are nothing new, recent revelations have shown just how widespread they are – it appears that the use of such contracts has increased dramatically during the recession, as some companies have sought to make their workforce as flexible as possible in order to keep costs down. Many people have strongly criticised employers like Sports Direct who have revealed that 90% of its staff work on a zero hours basis, but it is also common for zero hours to be used in other fields, including the public sector and particularly the NHS. The CIPD have estimated that up to a million workers are on zero hours type arrangements, and the true figure may well be even higher.
Leaving the ethical issues to one side and focusing on the legal perspective, can organisations put their workforce onto these sorts of arrangements as a way of minimising their employment law burdens?
To a certain extent, yes they can. However, there are a number of grounds on which it could be challenged. Firstly, in my experience it is fairly common for someone to be on a zero hours contract but to actually be working regular hours. If that is the case, then the employee may be able to show that their zero hours contract doesn’t reflect the real arrangement between the parties, and that the terms of the contract have been changed by custom and practice. That could give them the right to claim for notice pay or wages if their hours are changed, and if they have sufficient service it could also give them the ability to claim unfair dismissal and/or redundancy (although as the qualifying period is now 2 years, that would be relatively unusual).
I have previously written about the case of Pulse Healthcare v Carewatch Care Services & others, which is a very useful example of a Tribunal finding that although employees were told that they were on a ‘zero hours’ arrangement, in practice they had regular hours with continuity of service. This was particularly the case in the care sector, where seamless cover was needed, but the same principle could be applied to other sectors.
There are of course methods employers could use to try to deal with this risk, by ensuring that they have a large enough pool of workers to pick from so that no one ever has regular hours or guaranteed work. That may work in the current job market, but is unlikely to be a successful long-term strategy, especially in roles where particular skills are needed. I suspect that a Tribunal would find it difficult to believe that an employer can only guarantee hours for 10% of its workforce.
The other area for challenge is one that has apparently already begun. A test case is being brought by a Sports Direct zero hours worker who is claiming less favourable treatment on the grounds of being a part-time worker. It will be interesting to see how the case progresses, although if the reports are correct, the claim is on quite limited grounds.
Finally, there has been talk of the Government taking steps to outlaw zero hours contracts – Vince Cable has talked about this possibility. It is very difficult to see how this would work in practice. As stated above, casual arrangements are nothing new and in many cases they suit both parties, so any Government action would need to ensure that these could still continue – but of course it is not always easy to spot the difference.
The majority of employers I deal with use zero hours contracts as an additional resource to give flexibility on top of their existing permanent workforce – and there is no suggestion that there is anything improper about that. However, where organisations have put arrangements in place that don’t reflect reality, or are purely designed to restrict or prevent employees accruing rights, there is an increasing risk of challenge, and those employers should take advice.
If you would like advice on a zero hours arrangement or any other aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).
Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.