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Zero-hours contracts – tackling avoidance

19 March 2015

Over the past year, zero-hours contracts have never been far from the headlines and, in the run up to the general election, it seems this issue will continue to be a hot political topic.

Over the past year, zero-hours contracts have never been far from the headlines and, in the run up to the general election, it seems this issue will continue to be a hot political topic. The government has recently published its response to the latest round of consultation as it continues to press on with proposals to tackle potential abuses in the use of these types of contracts.

Background

Last summer, we reported on the government’s intention to legislate to ban exclusivity clauses in zero-hours contracts which prohibit workers from finding additional work to boost their hours. The proposal is that provisions to deal with this, contained in the Small Business, Enterprise and Employment Bill 2014-15 (“the Bill”), will be inserted into the Employment Rights Act 1996. These provisions will render unenforceable terms in zero-hours contracts which prohibit workers working for another employer, or from doing so without the employer’s consent.

This prompted widespread concerns that it would be fairly simple to side-step the ban - for example, by putting employees on a one-hour contract rather than a zero-hours one in order to retain exclusivity, or restricting work opportunities for individuals because they have taken up work elsewhere. Recognising this, the government launched a further consultation seeking views on how to tackle potential employer avoidance. The government has now published its response to the consultation.

What is the government now proposing?

As a result of the consultation, the government has issued the draft Zero Hours Workers (Exclusivity Terms) Regulations 2015 (the “draft Regulations”). In summary, these propose to:

  • extend the exclusivity ban to include low-income contracts. The draft Regulations would broaden the scope of the ban on exclusivity clauses to include low-income contracts (“prescribed contracts”) as well as zero-hours contracts. To be classed as a prescribed contract, income would be calculated by reference to a minimum number of hours per week multiplied by a minimum pay threshold linked to the national minimum wage.
  • exempt jobs paying £20 per hour or more. To avoid inadvertently including highly paid workers who choose only to work a few hours per week, jobs paying £20 per hour or more would be exempt from the exclusivity ban.
  • give workers a route to bring tribunal claims. Any worker under a zero-hours contract or prescribed contract whose employer subjects them to a detriment because they have worked under another contract would be entitled to bring a detriment claim in an employment tribunal. The tribunal could order compensation of such amount as it considers just and equitable.

The consultation response notes that tribunals would also be able to impose civil penalties on non-compliant employers under existing powers in the Employment Tribunals Act 1996 where workers’ rights had been breached and there were aggravating factors.

What is the likely impact?

Taken with the ban on exclusivity clauses, the proposals set out in the draft Regulations are likely to have some deterrent value for businesses that might consider taking measures to prevent individuals on zero-hours contracts and low-income contracts from working for other organisations. However, while many will welcome additional statutory protection, it is hard to envisage how many individuals working under these types of contracts will realistically be able to afford to bring claims to enforce the new rights, in light of the tribunal fees regime.

Another issue is that many workers may well be unaware of their rights. Raising awareness and providing practical guidance on the rights and obligations of those working under zero-hours contracts will be key to successfully tackling the zero-hours conundrum. The government acknowledges this and has repeated its intention to improve existing guidance. The wider review of employment status that is currently underway will hopefully bring further clarity to this complex area. While the government has stated that it will encourage the development of industry-led codes of practice, it apparently intends to leave this to other organisations to create.

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