Zero Hours Contracts – Do you know what you’re signing up to?

With the festive period upon us, businesses in the hospitality sector are busier than ever which means staff are also in high demand. Those staff can be engaged under a number of different contracts, with one of the most popular being a zero hours contract. Zero hours contracts are often the subject of controversy and with that in mind we thought it would be helpful to recap some of the issues that can often arise where zero hours contracts are concerned.

What is a zero hours contract?

A zero hours contract is a contract for casual working, under which an employer engages a worker on a genuinely ad-hoc basis and does not guarantee to provide that worker with any work. The worker is only paid for work actually carried out. However, the worker is expected to be available for work when or if called on by the employer.

The aim of a zero hours contract is to provide an employer with a high degree of flexibility whilst incurring as few legal obligations to the worker as possible.

What is the status of individuals engaged under a zero hours contract?

An individual working under a zero-hours contract will be either an employee or a worker.

Employees and workers are both are entitled to national minimum wage, paid holiday, rest breaks and protection from discrimination. Employees are also entitled to various statutory employment rights such as (among others) the right to sick pay, maternity pay, a minimum notice period and the right not to be unfairly dismissed.

Zero hours contracts are drafted to try and ensure that the individual does not obtain employment status, but will be a worker. However, the wording of a zero hours contract does not always reflect the true relationship between the parties. The Employment Tribunal will always consider the nature of the engagement and what actually happens in practice. Hence, the drafting of a zero hours contract will not prevent a finding that a casual worker is in fact an employee. This means that where employees regularly offer work (which is then accepted) to those under such contracts they are at risk of a challenge to employment status.

Can an employer prevent an individual from working elsewhere whilst under a zero hours contract?

Exclusivity clauses in zero hours contracts i.e. a provision that seeks to prevent, or purport to prevent, the individual from working under any other contract or arrangement, became unenforceable on 26 May 2015.

Following this, further Regulations (The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015) were made on 14 December 2015. These will come into force on 11 January 2016. They give (a) zero hours employees the right not to be unfairly dismissed for failing to comply with an exclusivity clause (this right is not subject to a qualifying period of employment); and (b) zero hours employees and workers the right to not be subjected to a detriment for failing to comply with an exclusivity clause. If an employer breaches these rights they could face an Employment Tribunal claim for a declaration and/or compensation.

What does this means for employers?

Whilst zero hours contracts might be appropriate in certain situations, including new business start-ups, seasonal work, to cover unexpected sickness absence or for special events, employers should think carefully about the associated risks before offering them. Such contracts should not be used as a permanent arrangement where it is not justifiable. If recruiting for a zero-hours contract, an employer should make clear that the job is “zero hours” and therefore hours are not guaranteed.

It is important that employers are alive to the risks associated with the use of zero hours contracts. For example, in order to try and avoid challenges to status i.e. a worker arguing that he is an employee if he is provided with regular hours or discrimination claims where work is not allocated on a fair and transparent basis, employers should review their internal guidance/training on the use of workers engaged under zero hours contracts. This should include how work is allocated and that records are kept as to hours worked.

For more information or for any employment law enquiries the employment team can be contacted at [email protected] or 020 7408 8888.