What is a zero-hours contract?
A zero-hours contract is a term used to describe types of casual agreements between an employer and their staff. Generally, under a zero hours contract employees are not guaranteed any work and are paid only as and when they work.
Individuals working under zero-hours contracts are entitled to the national minimum wage, paid annual leave, rest breaks and protection from discrimination. Depending on whether they are an employee or not, they may also be entitled to statutory employment rights such as the right not to be unfairly dismissed.
When are zero hours contracts used?
Zero hours contracts are frequently used when there is a requirement for a flexible workforce; for example, where workers are required at short notice or the level of work is uncertain. In schools, they might be used for supply teachers or where a “bank” of administration workers or midday supervisors is used.
Zero hours contracts are not likely to be appropriate when an individual carries out work for an organisation on a more regular basis.
Exclusivity clauses have been used in zero hours contracts to prevent or limit a worker’s ability to work elsewhere. These types of clauses were considered to be unfair as they prevented those engaged under zero-hours contracts from earning money from another employer despite there being no guarantee of any wages being paid to them.
In May 2015 legislation was introduced making exclusivity clauses contained in zero hours contracts unenforceable where they prevented a worker from:
- doing work or performing services under another contract or under any other arrangement; or
- doing work or performing services under another contract or under any other arrangement without the employer’s consent.
Protection from dismissal and detriment
The Regulations, which came into force on 11 January 2016, provide the following new rights for those working under zero-hours contracts who have failed to comply with an exclusivity clause in their contract:
- Where an employee is dismissed because they breached the exclusivity clause that dismissal will be automatically unfair. The employee will be able to make an Employment Tribunal claim against the employer regardless of their length of service. (An employee will usually need 2 years’ service with an employer before they are able to make a claim for unfair dismissal.)
- It is unlawful to subject a worker working under a zero hours contract to a detriment because they have breached the exclusivity clause.
There is no guidance in the Regulations as to what amounts to a detriment but it is likely that the following types of treatment could be considered to be detrimental, depending on the circumstances (this is not an exhaustive list):
- Reduction in pay
- Failure to offer future hours
- Denial of training
- Unrequested reassignment or relocation
- Disciplinary sanctions
- Bullying or harassment
- Failure to provide an appropriate reference
The Regulations make a distinction between employees and workers. Only those classed as employees are able to make a claim for unfair dismissal whereas workers, which has a wider definition, are able to make a claim for detriment.
Zero-hours contract advice
In light of these changes, we would suggest organisations consider the following:
- Review the use of zero hours contracts to ensure they are being used appropriately.
- When interpreting existing zero hours contracts remember that any exclusivity clauses will be unenforceable.
- When drafting new zero hours contracts, remove any exclusivity clauses.
- When dismissing an employee on a zero hours contract, carefully consider the reasons for dismissal. If it is because they failed to adhere to an exclusivity clause, the dismissal will be automatically unfair.
- When managing workers with zero hours contracts remember that they are protected from suffering any detriment because they failed to adhere to an exclusivity clause in their contract. This can be particularly relevant when deciding which employees or workers to offer hours to as this decision should not be based on whether they undertake work elsewhere.