Zero-hour contracts consultation

With unemployment falling, the Labour opposition is having to be more creative in its criticism of the government’s record on unemployment. Consequently, their main argument is now that although there are more jobs, too many of these are part time, or, even worse, zero-hours. So what are zero-hours contracts? Why are they used by colleges and why are they so controversial?

What are zero-hours contracts?

For such a hot topic in employment law, it’s interesting that zero-hours contracts (or “casual workers agreements” as they’re sometimes called) don’t actually have a legal definition. The term is generally used to describe contracts in which the worker has no set hours and is only paid for the hours worked. There is also usually no obligation on the employer to provide work to the employee. So an individual could be employed on a zero-hours contract and not be offered any work for significant amount of time.

Given that there is no legal definition of zero-hours contracts, there is considerable variation between these contracts from employer to employer. For example, under some contracts, an individual will be obliged to accept any work that is offered, whereas in others they may be entitled to turn work down. Also, in some zero-hours contracts, the individual is prevented from carrying out any other work (so-called “exclusivity clauses”) whereas in other contracts this exclusivity wouldn’t apply.

Why are zero-hours contracts used?

Many colleges rely on the flexibility of zero-hours contracts. Education demands fluctuate and labour is often needed on short notice, so a convenient bank of individuals ready to call upon on when required can be invaluable. As the college is only obliged to pay these individuals when they are actually needed and carrying out work, the costs of maintaining this bank of casual workers is very low. When demand falls again and the individuals are no longer required, the employer can simply stop offering them work.

This all sounds great for the colleges but what about the workers themselves? Well some individuals do appreciate the flexibility of such contracts; very often they will be entitled to turn down any work that is offered by a college. But many individuals are working under these contracts because they are unable to find roles where work is guaranteed.

Why are zero-hours contracts controversial?

The main criticism of zero-hours contracts is that they unfairly restrict individuals who are employed under such contracts. In practice, it’s usually the college who will primarily benefit from the flexibility of such contracts. The terms of these contracts do vary, and so they don’t all restrict employees to the same extent. But the issues that are of particular concern to the government are the exclusivity obligations and lack of transparency that often applies to these contracts.

It is sometimes difficult for a college to justify preventing an individual to work for someone else during periods when they are not offering any work to the individual. The Department for Business, Innovation and Skills (BIS) therefore launched a consultation on zero-hours contracts on 19 December 2013, which will close on 13 March 2014.

The Government’s consultation

The Government is not suggesting that zero-hours contracts should be banned. It recognises that, if used properly, these contracts can be of great benefit to both employers and individuals. It has therefore stated that the aim of the consultation is to “maximise the opportunities of zero-hours contracts while minimising abuse and setting out core standards that protect individuals”.

A key question for the consultation is whether the exclusivity clauses in zero-hours contracts are reasonable. Some may argue that due to the nature of the work being carried out, it is sometimes reasonable for exclusivity to apply. But if the individuals really are of such importance to a college, it’s difficult to see why they shouldn’t be employed on a more secure basis. So in practice there doesn’t appear to be a strong justification for exclusivity clauses.

As well as the possible banning of exclusivity clauses, the consultation invites views on some possible options in relation to zero-hours contracts, including:

• An employer led code of practice on fair use and whether the government should endorse this;
• Improving the content and accessibility of guidance on employment rights and benefits for zero hours workers; and
• Producing model clauses and a “key facts” section.

Zero-hours contracts can be used responsibly and effectively for the benefit of both employers and workers. But, without proper regulation, there is also the potential for them to be used to the unfair detriment of workers. So it will be interesting to see whether this consultation is effective in creating a fair balance between the employer and worker in the use of zero-hours contracts.

Matt Kelly is a partner at Thomas Eggar, the law firm