Zero Hours Contracts – do they have a role to play in your business?

Since May 2015, employers have not been ‘allowed’ to include exclusivity clauses in zero hours contracts of employment. However at the time, there was no penalty against them if they did so or if they disciplined an employee or treated them less favourably for working elsewhere or asking for permission to work elsewhere.

Finally, some decisions have been have been taken and legislative changes made which will give workers additional protection and enable business owners to decide whether or not zero hours contracts are appropriate for use in their business; whether they provide the flexibility the business requires and whether they are the most appropriate form of contract to use.

The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 came into force on 11th January and provides employees with a number of rights and more importantly consequences for the employer if these rights are breached.

Unfair dismissal and the right not to be subjected to detriment treatment

Any dismissal of a zero hour contract employee is automatically unfair, if the main reason is that she/he breached a contractual clause prohibiting him/her from working for another employer. No qualifying period is required to bring such an unfair dismissal claim; and, it is also illegal to submit a zero hour worker (note: worker which means they do not have to be an employee!) to detriments if they work for another employer in breach of a clause prohibiting them from doing so.

Employment Tribunal

Employees and workers now have more rights at the employment tribunal with respect to claims related to their zero hours contract.

A worker may present a complaint to an employment tribunal where an employer has infringed their rights but, the worker only has three months from the incident (or last occurrence of a number of incidents) to raise the complaint. However, a tribunal may consider any such complaint which is out of time if, in all the circumstances of the case, it considers that it is just and equitable to do so

Redress

Where an employment tribunal finds that a complaint presented to it under the regulations is well founded, it may take one of the following steps as it considers just and equitable
• making a declaration as to the rights of the complainant and the employer in relation to the matters to which the complaint relates
• ordering the employer to pay compensation to the complainant. The employment tribunals have discretion over the amount of compensation awarded and again refers to a ‘just and equitable’ decision.

Implications for employers

Until there is some case law in this area, we really have no idea how this will impact employers: whether it provides enough of a disincentive to employers when considering the use of zero hours contracts and whether the compensation and fines handed out by the employment tribunals will make the use of zero hours contracts null and void.

There are many businesses where having your employees work for a competitor is not a problem, but there are definitely environments where not having an exclusivity clause will be an issue and employers will need to very carefully consider whether a part time contract will provide greater cover. At this stage we also don’t know whether a robust non compete clause prohiting workers working for a direct competitor will fall foul of this legislation.

Also the new Government guidance provides examples of what is considered “inappropriate use” of zero hour contracts and states that zero hours contracts should not be used as a permanent arrangement for an employee who works set hours each week, even if the hours worked are part time. At this stage it is unclear whether an exclusivity clause in a part time contract would be treated the same as in a zero hours contract should it be challenged in an employment tribunal.

As always, it is essential to get proper advice when drawing up contracts of employment. Zero hours contracts have been a huge benefit for many small and growing businesses, and fortunately their use has not been banned entirely, but their role now needs to be reassessed and their value carefully considered for each new employee taken on and a zero hours contract may no longer be the most appropriate basis of employment in the future.