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Articles Employment 23rd Jun 2015

Franchise Bulletin: June 2015 – Calling time on zero hour contracts

Many sectors, such as the retail and hospitality sectors, and many other seasonal industries rely heavily on zero hours contracts to deal with fluctuating demand within their workforce. The widespread use of zero hours contracts is highlighted by the Chartered Institute of Personnel and Development’s estimate that one million workers are engaged via zero hours contracts. It is also widely believed that their use has risen in recent years due the economic pressures on employers, more of whom are seeking to operate a more flexible workforce.

Despite the recent negative press that the use of zero hours contracts has attracted recently, it should not be forgotten that as well as being of benefit to employers, many individuals engaged on zero hours contracts, such as students, young people and individuals who have partially retired or who have retired but who wish to return to work via a flexible arrangement, benefit from the flexibility they afford. It is therefore unsurprising that the more extreme calls for a ban on the use of zero hours contracts is not one of the options being considered by the Government in its consultation on the topic launched on 19 December 2013. The consultation has instead focused on areas of concerns and is intended to explore areas of perceived abuse of zero hours arrangements by employers and whether there is any form of regulation required to protect workers engaged via these arrangements. The Government position is that they are “seeking ways to prevent any abuse and to maximise opportunities both for employers seeking to create jobs and for individuals to get work that suits them.”

The two major concerns identified, which are to be explored in the consultation, are transparency and the use by employers of exclusivity clauses.

Transparency

The information gathered by the Government prior to the consultation being launched identified that many workers were unaware that they were employed on a zero hours contract and, crucially, that there was a possibility that they could be offered no work. There was also information that suggested that employers may not be fulfilling or understanding their obligations towards individuals on zero hours contracts in terms of their employment rights or, in extreme cases, deliberately evading them. One likely area of confusion from both a worker and an employer’s perspective, given the legal complexity, is a zero hours worker’s entitlement to paid annual leave and how this is operated in practice.

The consultation has identified options to explore with a view to resolving the transparency concern:

  • Improving the content and accessibility of information and guidance on employment rights and benefits for zero hours workers such as creating new resources like online tools to calculate holiday, sick pay or redundancy entitlement;
  • Encouraging an employer-led code of practice on the fair use of zero hours contracts; and
  • Producing model clauses for zero hours contracts. The contract could include a “key facts” section to help individuals understand the terms of the contract.

Exclusivity clauses

This concern resulted from the information gathered by the Government suggesting that a small number of individuals engaged on zero hours contracts are prevented from working for another employer. Given the lack of guaranteed income a zero hours contract provides, individuals bound by such an exclusivity clause are placed in an uncertain position as their income will be reliant on them being offered work under the zero hours arrangement.

The Government’s position on this issue is that without a valid justification, such as where an individual is entrusted with confidential information which would make it problematic should that person choose to work for a competitor at the same time, exclusivity clauses undermine the choice and flexibility for the individuals concerned. Whilst it is open for individuals to challenge the enforceability of exclusivity clauses, on the basis that they constitute an unreasonable restraint of trade, this is an uncertain and potentially costly option. Given that zero hours contracts are often used for lower paid workers, clear regulation on the use of exclusivity clauses in zero hours contracts would be of benefit to workers.

The consultation is due to close on 13 March 2014. It will be interesting to see if the outcome of the consultation is that the Government seeks to introduce regulation or whether softer non-regulatory options, such as the provision of greater levels of information, advice and non-statutory guidance. Whilst the latter may address transparency concerns, without a form of regulation being introduced to address the use of exclusivity clauses in zero hours contracts, their use by employers is unlikely to change.


The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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