Zero hours contracts: Avoiding the loopholes


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Although they have been part of the employment landscape for some time, zero hours contracts became particularly popular during the recent recession, on the basis that they afforded employers access to a pool of workers, but with a financial commitment that was limited to paying only for work actually carried out.

More recently, following the country’s apparent emergence from the recession, the practicality and fairness of such contracts (which have proven particularly popular within the retail sector) has been called into question.

Retail giants such as Amazon, McDonalds and, most recently, Sports Direct, have been heavily criticised by the press for their use of zero hours contracts. Sports Direct, in particular, has borne the brunt of the criticism in recent months, given that 90% of its 20,000-strong part-time workforce are employed on terms that provide that they have no guaranteed working hours but are also unable to seek work elsewhere without special permission. Therefore, in an attempt to regulate the (mis)use of zero hours contracts, and in response to a consultation held in late 2013, draft legislation was issued providing for the ban of exclusivity clauses in zero hours contracts.

However, prior to the new law even coming into force, the government recognised that employers could find “loopholes” within the legislation to avoid the effects of the ban. Therefore, in a second attempt to regulate the use of zero hours contracts, new draft regulations were issued which:

  • make it unlawful for employers to subject their zero hours workers to detriment if they perform services under other contracts; and
  • establish a minimum income level below which exclusivity clauses will be unenforceable in the same way as is the case with exclusivity clauses in zero hours contracts.

The government has also pledged to review and improve existing guidance available to both employers and employees in relation to zero hours workers.

Although the law is not due to come into force until later this year, changes are already taking place in anticipation of the forthcoming reforms. In October last year, Sports Direct agreed, as part of an out of court settlement with a former zero hours employee, to rewrite its zero hours contracts to make it clear that its workers are not guaranteed work and to produce clear policies on sick pay and paid holiday for zero hours workers. In addition, Amazon, which was criticised in the past for its use of zero hours contracts, now offers its part-time workers guaranteed pay for 20 hours per week even if work is not available for them.

Given the prevalence of zero hours contracts, other employers will also need to consider whether any changes are required to their standard form contracts and/or their current working practices, when the new legislation comes into force later this year.

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