This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

Zero tolerance for loopholes
Helen Croft
12 November 2014

Zero tolerance for loopholes

Brands who use 'zero hours' contracts to engage employees on an ad hoc basis should keep a close eye on a Government consultation which closed on 3rd November 2014. This looks at potential loopholes that employers may use to avoid the proposed ban on exclusivity clauses - which stop a worker from seeking income elsewhere even when their employer has no work to offer - and also aims to develop sector-specific codes of practice on the fair use of zero hours contracts.

Zero hour contracts are often used in industries which fluctuate in demand, for example retail and hospitality. They are arrangements which set out the terms of the relationship between an 'employer' and a casual worker, and are intended for use when a business wants to engage a worker on an ad hoc basis, with no guarantee of work, but with an expectation that the worker will be available for work if and when offered. Only compensation for work performed (at the national minimum wage or above) is given. Criticism of the zero hour regime has primarily focussed on the fact that for the estimated 1.4m people in the UK working under such arrangements, the needs of business are often prioritised over the rights of the worker. Putting aside the fact that the worker does not accrue the right to redundancy payments or unfair dismissal rights, it is the use of exclusivity clauses that has caused the greatest outrage – the ability to restrain a worker from seeking employment and income elsewhere at times when their employer has not offered work or has no work to offer. And it is this principle that the government is looking to prohibit.

However, despite its good intentions, the Government has already acknowledged that employers may try and use potential loopholes to avoid the proposed exclusivity ban, such as offering contracts which guarantee very low hours of work or, as some have suggested, offering fewer opportunities or no work to those who choose to also work for another employer. The consultation will seek views on how best to address and close such loopholes. It will also look at penalties for employers who abuse the arrangements and remedies for workers who suffer as a result. Also of interest is the government's announcement that sector-specific codes of practice should be developed to help implement the fair use of zero hour contracts. This will be particularly interesting for many of our clients and those who wish to participate in the consultation can do so through the following link here.

If you use zero hour contracts in your business, you can assume that exclusivity clauses will be prohibited at some point in the near future. For those entering into arrangements with workers going forward, it would be sensible not to have such a prohibition in the worker's contract – allow the worker to seek and perform alternative employment at times when your business is not in a position to offer work. A well written contract will always allow the employer to terminate the arrangement if the worker is unable to accept a certain number of assignments over a defined period of time. The key to the future of the zero hour contract regime will be flexibility for industry with protection for workers. And the more businesses which are able to demonstrate support for their workers, the better served they will be when the minimal of anticipated changes are likely introduced.

For more information, please contact Helen Croft.