Tag Archive: Zero hours

New employment legislation on the horizon

Clare Gregory, a Partner in our Sheffield office, comments: On 27 May 2015 the Queen unveiled the Government’s legislative programme for the new Parliament, the first exclusively Conservative programme for nearly 20 years. This included a number of employment-law reforms, particularly in the fields of industrial action and immigration, none of which come as a surprise having been heavily trailed before and since the election.

The Trade Unions Bill will create more barriers for trade unions wishing to call a strike. First, more than 50% of a union’s eligible members must vote in order for the ballot to be valid. Second, if the strike affects “essential public services” at least 40% of those entitled to vote must be in favour of the strike. The Bill will also lift the ban on the use of agency staff to provide cover when strike action takes place. There is to be a new time limit on the ballot for industrial action and a promise to tackle intimidation of non-striking workers, although it is unclear how this would be done. The Government said the point of the bill was to “ensure that disruption to essential public services has a democratic mandate”. The Bill would also force trade union members to opt in if they want to pay a political levy.

An attempt to fulfil a Conservative manifesto promise to reduce regulation on small businesses, the Enterprise Bill would cap redundancy pay to public sector workers. The new Business Secretary Sajid Javid has said that the Bill also intends to “cut red tape for business by at least £10 billion over the next five years.” It is not clear precisely what red tape will be targeted, but the CBI is calling for further deregulation in the field of employment. Savid Javid has said, however, that he will not be going back to the controversial Beecroft proposals for no fault dismissals.

The Immigration Bill will create a new enforcement agency to tackle the worst cases of exploitation as well as creating an offence of illegal working and enabling wages to be seized as the proceeds of crime. Ministers promise to consult on the introduction of a new visa levy on businesses that recruit overseas labour to fund extra apprenticeships for British and EU workers.

More profound changes may ultimately result from the EU Referendum Bill which will set in law an in-out vote as to whether the UK should remain in the EU before the end of 2017. David Cameron has indicated that he is not necessarily looking for a EU exit, but continued EU membership is dependent on the UK negotiating more acceptable terms including reforms to support business growth and job creation and restrict EU migrants claiming benefits in the UK. An EU exit would provide the Government with more flexibility to make changes to employment laws such as TUPE and the Agency Worker Regulations.

Notably, the Queen’s Speech stopped short of a legislative plan to scrap the Human Rights Act, but it did confirm government plans to present proposals for reform. Human rights as set out in the European Convention have impacted the employment relationship; particularly the right to a private and family life; to freedom of thought, conscience and religion; to freedom of expression; to freedom of assembly and association; and the right not to be discriminated against. At this stage it is unclear how repeal of the Human Rights Act might impact on employment rights.

The day before the Queen’s speech, other employment law changes came into effect with little fanfare: Exclusivity clauses in zero hours contracts became unlawful as from 26 May.  This change, which was a key feature of the employment law reforms contained in the Small Business, Enterprise and Employment Act 2015, came into force 2 months after the Act was passed.

Under the new law, any clause in a zero hours contract which prohibits a worker from “doing work or performing services” under another contract, or prohibits him or her from doing so “without the employer’s consent”, will now be unenforceable by the employer. The new law has, however, been described as toothless by some commentators as a worker cannot currently claim detriment as a result of an employer trying to enforce such a clause. However, there is further scope under the Act for the Government to add this protection for zero hours workers.  Draft rules, which were attached to the coalition government’s response to its public consultation on the exclusivity ban earlier this year, have not yet been brought into force. These included a new right not to suffer any detriment should the workers take a job under other contracts and an extension of the scope of the exclusivity ban to workers on very low weekly pay/working hours. Until these anti-avoidance measures are in place, the ban will not create any meaningful protection for zero hours workers. However, it is likely to be only be a matter of time before this protection is introduced. Employers who operate zero hours contracts may wish to remove any offending clauses from their contracts in anticipation of this.

The government, in its response to the consultation on the new law, pledged to review and improve existing guidance available to employers and workers regarding zero hours contracts. Such guidance would help to correct the confusion which often surrounds the rights of zero hours workers, particularly in relation to working time and holiday pay.

The following employment-related provisions also came into force on 26 May:

  • Increase in the penalty which can be imposed on an employer who pays less than the National Minimum Wage; the maximum penalty is now £20,000 per worker, rather per employer; and
  • Provision giving power for the Secretary of State to make regulations to prevent discrimination by NHS employers against job applicants on the grounds that they appear to be NHS whistleblowers.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/new-employment-legislation-on-the-horizon/

Zero hours contracts: new consultation launched

Alan Chalmers, a Partner in our Manchester office, comments: Regulation of the labour market is always a political issue, and in the protracted run-up to the 2015 General Election the regulation of zero hours contracts seems set to be a particular focus for all the main political parties. In June, the Government announced that it would be taking action to ban the use of exclusivity clauses in zero hours contracts. The proposed ban forms part of the Small Business, Enterprise and Employment Bill and it is intended to protect zero hours contract workers against the situation where they may be contracted to work for one employer, receive no or very little work in any given period but be prohibited from seeking other employment to supplement or provide an income. It is thought that the ban on exclusivity will benefit around 125,000 zero hours contract workers who are estimated to be tied into such exclusivity clauses. The proposed ban comes following a period of widespread concern over the prevalence and misuse of zero hours contracts. Several types of further regulation have been mooted but are not included in the draft Bill, including requiring more transparency from employers about the nature of zero hours roles, a non-binding Code of Practice on the use of zero hours contracts, protection from detriment similar to the protection for fixed term employees and part time workers, entitlement to be notified of a permanent role and prohibitions on the circumstances in which an employer can reduce hours. There is particular concern that some employers may be using reductions in hours as a form of disciplinary sanction, or in order to reduce redundancy costs.

The difficulty with any potential restrictions on zero hours contracts, including the exclusivity ban, is how to ensure enforceability without unduly restricting the labour market.  Any attempt to restrict abuse runs the risk of being either too easily circumvented or so restrictive that it interferes with legitimate use.

 As drafted, the proposed ban on exclusivity will apply to any contract under which there is no certainty that any work will be made available to the worker. This could easily be circumvented by employers offering one hour fixed contracts with additional flexible hours, or by simply failing to provide further work to a zero hours worker who undertakes work for another employer. The Government has now issued a consultation paper seeking views on how to tackle the potential for such avoidance. The consultation paper suggests that this might include imposing financial penalties on employers if employees are treated detrimentally as a result of taking another job.

The abuse of zero hours contracts is a real problem. However, what the draft legislation and consultation paper highlight is that it is very difficult to do anything meaningful about ‘bad’ zero hours contracts without undermining the valuable flexibility provided by ‘good’ zero hours contracts. Zero hours contracts have a valuable role in the labour market, offering significant benefits for both employers and employees when used properly. Employers benefit from a bank of trained staff to respond to fluctuations in demand, and many employees find zero hours contracts useful in helping them to balance work with other commitments such as family or study. There are undoubtedly circumstances in which use of exclusivity clauses where there is no corresponding duty on the employer to provide work causes significant unfairness and hardship to employees. Conversely, however, some employers have good reasons for exclusivity clauses. Workers on zero hours contracts may be highly skilled or trained for a job which has specialist requirements and employers need to ensure that they will be available when needed.

Further regulation of zero hours contracts seems likely given the high political profile which they currently enjoy. Ahead of whatever approach this or any subsequent government decides to take, there are sensible voluntary steps which employers could take to ensure responsible use of zero hours contracts, such as ensuring there are sufficient safeguards in place to prevent managers capriciously changing hours and being clear as to the terms and effect of what a zero hours contract means for the employee before he or she signs up to an arrangement. Employers who take steps to pre-emptively adopt some of these measures may find themselves in a position of being best placed to attract and retain skilled workers who are happy with the flexibility of a zero hours arrangement.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/zero-hours-contracts-new-consultation-launched/

Zero hours contracts: Are they really such bad news?

Adam Hartley, a Partner, in our London office comments:

Zero hours contracts have hardly been out of the news in recent weeks.  The overwhelming majority of the media coverage has been negative, suggesting that zero hours contracts are exploitative of workers and should be outlawed.  The pressure gauge has risen to such an extent that, in September, the Business Secretary, Vince Cable, announced that there would be a consultation process to tackle any abuse discovered.  In addition to this, the Labour Party has also announced it will be conducting its own review.

But why all this sudden interest? Zero hours contracts are not a new phenomenon… and, on the face of it, they provide employers with the type of flexibility which the Government has been so keen to introduce over past months through a wide range of other employment reforms.  In short, they allow employers to maintain a flexible workforce, capable of meeting short-term staffing needs, potentially without taking on many of the obligations which arise under contracts of employment.  Arguably, therefore, these types of contracts actually benefit employers more than any other legal proposal in the Government’s programme of reform.

However, it appears the issue has come into sharp focus after research published by the CIPD in August indicated that there are around 1 million people in the United Kingdom working under zero hours contracts, far more than had previously been thought to be the case.  This has led to heightened scrutiny of what these contracts are and what impact they have on workers.

In a nutshell, zero hours contracts do not guarantee workers a minimum number of hours of work;  there is no obligation for the employer to provide any work and, as a consequence,  any remuneration.  Importantly, although they can be structured as traditional employment contracts they can, and often are, structured in such a way that the individual does not have ’employee’ status.  Individuals who do not have ’employee’ status have very limited employment rights.

It is therefore easy to deduce that the characteristics of a zero hours contract are favourable to employers, and they are commonly used in the retail, hospitality and leisure sectors where employers may struggle to predict how many staff they will need in work at any given time.  However, zero hours contracts have also become increasingly popular in sectors outside of these sectors including sectors such as health, education and IT.

Zero hours contracts are not without merit for workers, however. They have the potential to benefit workers who welcome the flexibility that zero hours contracts offer, perhaps because of family commitments, or because they are studying or are otherwise retired, or who only require occasional earnings.

However, in light of the recent negative publicity, employers who use, or wish to start using, zero hours contracts, would be well advised to carry out a careful balancing act between the needs of the business and those of its workers.  If zero hours contracts are taken forward, a number of practical points should be taken into account when preparing the contracts and discussing the terms with individuals who will be engaged under them:

  • The employer should ensure that it has explained the flexible nature of the work to the individual so they are aware of the financial uncertainty involved;
  • The employer should consider how working hours should be organised in practice i.e. whether weekly or monthly rosters should be prepared.  Consideration should be given as to whether employers can prepare monthly rosters in order to give individuals as much notice as possible so they can accept alternative work if it is available or make necessary childcare arrangements;
  • Thought should be given as to how employers will determine who is given the work if there is only enough available for some of the individuals employed under zero hours contracts.  To ensure fairness, this should ideally be determined based on which individuals have been provided with work recently – the employer should try and divide the work evenly and fairly;
  • The employer should decide whether a cancellation fee should be payable if the working hours available are cancelled at short notice;
  • The employer should also consider how sick pay and holidays will accrue and how holiday and sick pay will be calculated.  Potential difficulties arise under the Working Time Regulations as it is impossible to know at the outset of a zero hours contract how much holiday and pay an individual will be entitled to.  
  • The employer should consider whether the terms of the contract could result in employment status for the individual, potentially causing other employment liabilities to arise.

It will be interesting to see what proposals the Government makes in its consultation paper.  Despite the bad press, it seems unlikely that the Government will actually go as far as advocating zero tolerance of zero hours contracts. However, it may make suggestions for regulation which will have the potential to impact significantly on the flexibility employers have with their workforces going forward.

adam.hartley@dlapiper.com
+44 20 7796 6326

Permanent link to this article: http://www.dlapiperbeaware.co.uk/zero-hours-contracts-are-they-really-such-bad-news/