When boiled down, zero hours contracts represent arguably the most flexible form of employment contract available. Neither employer nor employee (often) has any obligation in terms of minimum hours towards the other: on the employee to work any shifts offered and on the employer to offer any shifts. From a purely contractual law point of view, this situation reflects the principle of “freedom of contract”, yet the traditional approach to “freedom of contract” has gradually eroded over the decades.
As of 26 May, the Small Business, Enterprise and Employment Act 2015 has come into force and with it the last government's main attempt to redress one of the most problematic elements of most zero hours contracts – exclusivity of employment. This piece of amending legislation represents an attempt by the government to follow the judicial precedent described above by redressing the balance within zero hours employment contracts by nullifying the effects of exclusivity of employment clauses.
Exclusivity of employment.
The existence of exclusivity clauses in employment contracts is neither a novel nor controversial concept in and of itself. Where an employer, who has contracted to provide an employee a fixed number of hours seeks to restrict that employee’s ability to work elsewhere, this is often a reasonable and understandable position. The fixed hours’ employee needs to be able to work their set hours. Similarly, an employer may wish to prevent an employee working for a rival for reasons linked to confidentiality or to protect the privacy of internal procedures or systems of work. For the employee, the impact of this restriction is offset by the benefit of those fixed hours, a guaranteed income and the safety net that it provides in terms of personal financial planning and security.
By contrast, the impact of exclusivity clauses on zero hours’ workers is far more pronounced. Given that zero hours workers lack the security of fixed hours, exclusivity clauses prevent them from working elsewhere, even if a third party employer has work available. Whilst a zero hours employer may defend their exclusivity clauses on grounds of preventing zero hours workers engaging with rivals or compromising confidential information, the outgoing government has acknowledged this potentially justified employer fear is secondary to the need for zero hours workers to accept work elsewhere to top up their income and, in turn, reduce the burden on the welfare state.
The Small Business, Enterprise and Employment Act 2015 therefore introduces section 27A of the Employment Rights Act 1996, rendering exclusivity clauses in zero hours contracts unenforceable.
What impact will this have, if any?
Without doubt, the new 2015 Act does represent a crucial first attempt towards redressing the inherent imbalance of zero hours contracts. The notion that zero hours workers should have to reject work elsewhere when they are otherwise available is both perverse and unfair – especially during a time of government austerity and when the economy has reported an increase in the number of job vacancies now available overall. The government’s decision to restrict the “freedom of contract” in this regard should therefore be applauded. But does it go far enough?
Whilst rights in law can be legislated for with relative ease, it is often far more difficult to convert these into tangible and enforceable rights which provide a practical benefit for the parties seeking to utilise them. There is a fear amongst the employment sector that this legislative deficit has arisen in respect of the 2015 Act, with various potential loopholes highlighted which could allow zero hours employers to enforce exclusivity clauses through the back door:
- “One hour” contracts – the new prohibition prevents only exclusivity of employment in zero hours’ contracts. There is nothing preventing an employer contracting workers for, e.g., a minimum one hour a week, thus re-enabling the enforceability of any exclusivity clause. Given that the minimum wage is currently only £6.50 per hour for those aged 21 and above, the guarantee of a minimum one hour per week is hardly significant in providing individuals the financial security of fixed working hours.
- Requirement to work clauses – as an alternative to the above, employers could simply revise their zero hours contracts to create a contractual obligation requiring workers to accept work when offered. Unfortunately, this is a practice adopted by some employers with zero hours contracts already and has the effect of removing arguably the most pro-worker aspect of the traditional zero hours contract – the freedom for the worker to reject available work. When using such a contractual restriction, whilst there would be no contractual prohibition on a zero hours worker taking available work elsewhere with a second employer, in the event of a conflict between shifts, the worker would always have to defer to the original employer and accept those hours. The worker could thus have to turn down work offering better pay or more hours in favour of his original employer whose own offer of work is overall less attractive.
Contract labelling
The other point that is important to consider in the context of zero hours contracts generally is that, often, the written contract in place between and employer and worker does not accurately reflect the true nature of the working relationship. As such, what parties may label as a “zero hours contract”, may in fact be a pure employment relationship if regular hours and work patterns develop. Employment tribunals may look beyond contractual wording where there is a discrepancy between the contract terms and working practices in reality. Attempts by employer’s to bypass the new exclusivity clauses may strengthen a worker’s claim that they have the legal status of employees – thus removing most of the advantages employers look for when hiring on a zero hours basis.
Zero hours contracts, when used properly and appropriately can be a sensible means of organising a workforce, offering people a higher degree of flexibility, something which many workers – such as students and parents- often value. However, it is clear that simply removing the enforceability of exclusivity clauses in zero hours contracts falls short of preventing their continued abuse that some employers appear eager to continue. It remains to be seen whether the new government will legislate further to close off these already quite patent loopholes and provide more coherent guidance on how these contracts can be used to the benefit of both employers and employees.
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