24/11/2014

By Stuart Chamberlain, Employment Law Expert, Croner

Last week Ed Miliband attacked Sports Direct over their use of zero hours contracts. The use (and misuse) of zero hours contracts has been one of the most contentious topics in employment law in the past 12 months. Stuart Chamberlain, Employment Law Expert at Croner looks at what zero hours contracts are and the latest legal developments surrounding them.

Definition of a zero hours contract
There is currently no legal definition of a zero hours contract in UK law. It is broadly understood to be a contract in which the employer does not guarantee the individual any work.

When the Small Business, Enterprise and Employment Bill is implemented in 2015 (see below), the following definition of a zero hours contract will apply:

• “A contract of employment or a worker’s contract under which the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making the work or services available to the worker; and
• Where there is no certainty that any such work or services will be made available to the worker.”

First consultation and proposed legislation
Last summer the Government conducted an informal information gathering exercise on zero hours contracts in response to concerns about abuse of this type of contract by a small number of employers. It then launched a public consultation (Zero Hours Employment Contracts) from 19 December 2013 to 13 March 2014, seeking views on:

• the merit of banning exclusivity clauses in zero hours contracts
• whether a code of practice should be introduced covering the fair use of these contracts generally
• how useful people found existing information, advice and guidance.

The Government considered the results of this consultation and provisions relating to zero hours contracts were incorporated into the Small Business, Enterprise and Employment Bill (“the Bill”).

The Small Business, Enterprise and Employment Bill
The Small Business, Enterprise and Employment Bill, which deals with a number of other employment law issues, including measures relating to whistleblowing, employment tribunals and the National Minimum Wage, is expected to come into force in early 2015. In addition to defining a zero hours contract (see above), the Bill introduces a new provision into the Employment Rights Act 1996, which renders the use of exclusivity clauses in these contracts unenforceable.

An exclusivity clause in a zero hours contract is when the employer prevents the individual from working for someone else, even though it does not guarantee any hours of work. Currently, employers are not prohibited from seeking exclusivity from an individual as this is a contractual matter between the employer and individual.
However, stakeholders have raised concerns about this banning measure, arguing that employers could potentially sidestep the exclusivity ban, by, for example, offering contracts that guarantee just one hour of work. The Department for Business, Innovation and Skills has therefore published another consultation – Banning Exclusivity Clauses: Tackling Avoidance.

Further consultation
This second consultation seeks views on the best mechanism to tackle avoidance of the exclusivity ban in contracts that do not guarantee any hours and possible routes of redress for the individual. Any additional mechanism would be implemented via regulations made under the powers set out in the Bill. The consultation closed on 3 November 2014.

What next?
The Government believes that the provisions relating to zero hours contracts in the Bill will improve flexibility and fairness in the labour market and ensure greater opportunities for workers using these contracts to boost their income. It also hopes that business representatives and unions will work to develop industry-led, industry-owned, sector-specific codes of practice on the fair use of such contracts. The results of the second consultation are awaited with interest.