HM Insights

Employment Law Update - Zero Hours Contracts

Zero Hours contracts, while not new, are now firmly under the political and media spotlight. Employers, such as Sports Direct, JD Wetherspoons and McDonalds, are being 'named and shamed' in the press for their use of this practice. These contracts are traditionally used in the retail sector where staff demands often fluctuate.             

Zero hours contracts give no guarantee of a minimum number of hours which are to be worked. As such, depending on the wording, the individual working under the contract may be under no obligation to accept any work offered. However, some contracts may stipulate that the employee is obliged to accept any work he/she is offered, but not guarantee the employee any minimum hours.

However, merely because the employees are on zero hours contracts, it does not necessarily mean that they lack any employment rights. They may build up the qualifying service for unfair dismissal claims where they work on a regular basis on consistent hours and may be able to argue that a contractual right to these hours has come to exist through custom and practice. Furthermore, it is not possible to contract out of the statutory right to paid annual leave for workers and companies wishing to avoid claims have to take steps to ensure that the zero hours staff are taking the minimum leave (currently 28 days per year for full time employees).

Despite these potential protections, zero hours contracts can be misused and can be unfair to the staff concerned. There is also the likely effect that staff who are unnecessarily placed on these sorts of precarious terms may be unlikely to be committed to their employer, which may make them less productive- a downside for businesses.

Following the mounting pressure for a change in the law in relation to zero hours contracts, Vince Cable has announced that the contracts will not be banned as they offer "welcome flexibility" to some workers. However, he did admit that there had been evidence of abuse of their use. He has therefore launched a consultation which is currently underway and is due to close on 13 March 2014. Under this process, the Government is considering, among other things, views on banning companies from using "exclusivity contracts"- contracts which offer no guarantee of a job but prevent staff from working elsewhere. Another key concern on which the Government is consulting is the transparency of zero hours contracts and how clear individuals are as to the implications of entering such agreements. A formal response is expected once the consultation closes, detailing any action the Government plans to take.