Zero-hours contracts: proposed legislation unveiled

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Background

In 2013 the issue of zero-hours contracts became highly contentious. Research showed that more than 1 million workers could be on such contracts, under which work is not guaranteed. This triggered a series of lurid headlines, with real concerns being expressed about the exploitation of workers.

The principal case against zero-hours contracts is that employers of low-paid labour abuse them as a way of reducing costs to a minimum and possibly avoiding holiday and sick pay obligations. Stories began to circulate in the press about employees arriving at work only to be told to wait around – or, worse still, being sent home as there would be no work that day.

Consensus quickly developed in political circles that something must be done. Trade unions and some Labour politicians pressed for a ban on zero-hours contracts. Others focused on specific perceived abuses of these contracts - in particular, the use of exclusivity clauses, which prohibit workers from finding alternative sources of employment income when work is not required under their zero-hours contracts. It is generally thought that approximately 1 million workers are on zero-hours contracts, of which 9% (ie, around 125,000) have exclusivity clauses – admittedly, a ball-park figure.

Research

A government consultation was launched in December 2013 and concluded in March 2014 (for further details please see "Government launches consultation on zero-hours contracts"). In the meantime, more reliable statistics had been sought, with the Chartered Institute of Personnel and Development leading the way in canvassing its members and commissioning research. This research, published in November 2013, found that contrary to popular opinion, workers on zero-hours arrangements are equally satisfied with their jobs, happier with their work/life balance and less likely to think that they are treated unfairly by their organisation when compared with the average UK employee.

There were increasing revelations that zero-hours contracts were not the sole province of industries such as retail, hospitality and leisure, but also used by many professional firms, universities and the National Health Service, among others. Many skilled workers were found to be on zero-hours contracts in arrangements which were generally felt to be working well – this even included part-time judges.

Proposed legislation

Although many employers have pressed for a code of practice rather than legislation, the government has now announced that it intends to legislate to ban exclusivity provisions in zero-hours contracts. The relevant provision is Clause 139 of the newly published Small Business, Enterprise and Employment Bill.

Clause 139 is relatively short and has a broad definition of zero-hours contract work, covering all arrangements where there is "no certainty" that any work will be required of the worker (many situations can be envisaged in which the provision of work is highly probable, but not necessarily certain). In these circumstances, any provision of a zero-hours contract prohibiting the worker from working under another contract or "under any other arrangement", or prohibiting the worker from doing so without the employer's consent, will be void and unenforceable.

As drafted, the bill also gives the secretary of state wide powers to make further regulations to ensure that zero-hours workers are not prevented from working for another employer. These include extending protection to other types of contract (eg, contracts which guarantee a very limited number of hours). Such regulations could also impose financial penalties on employers or require them to pay compensation to workers, although the bill does not specify in what circumstances.

A lively debate has already kicked off about the position of professional footballers, who have no certainty that they will be picked to play in any particular match. Clause 139 could arguably cause difficulties in other professions – for example, it would enable a skilled designer working on a zero-hours contract for one employer to work for any competitor with impunity. The provision appears to render any non-compete provisions void in such circumstances. However, confidentiality provisions may still provide the initial employer with adequate protection, so it could be crucial to ensure that such restrictions are well drafted.

Despite these understandable concerns, this proposed ban on exclusivity is likely to be widely welcomed, particularly by low-paid workers – not least on the basis that it would help to prevent 'cowboy' employers from undercutting quality services.