BRACHER RAWLINS | Should your business be using zero-hours contracts?

Cinema chain Everyman is the latest of several companies to announce that it is moving staff off zero-hours contracts. It has promised to offer guaranteed monthly hours to hundreds of staff by the end of next year.

Everyman’s chief executive Crispin Lilly said after the announcement: “Our staff have never had problems with zero hours but it has become a bad word and there are employees out there who would not come to us if we’re associated with it.”

Much of the adverse publicity for zero-hours contracts has been directed at retailer Sports Direct. They too have recently backed down on the use of these contracts, promising to move 18,000 staff onto guaranteed hours.

So should all employers consider stopping the use of zero-hours contracts?

The starting point is to explain what a zero-hours contract is. In brief, it is a contract between a company and an individual where:

The company is not obliged to provide any minimum working hours, and
The individual is not obliged to accept any work offered.

Zero hours contracts are useful for businesses that only require staff on a seasonal basis or to cover one-off events or staff shortages. They are widely used in the hospitality and care industries.

Most people on zero-hours contracts are ‘casual workers’ and are legally classed as ‘workers’ rather than ‘employees’, which means that they have fewer employment rights. It is not always clear whether someone is a ‘worker’ or an ‘employee’ but the key elements that need to be satisfied to establish employee status are:

A contract of employment between the employer and employee, whether express or implied
A duty on the part of the individual to carry out their work personally
‘Mutuality of obligations’ between the parties
The employer has control over the work the employee does.

Even if an individual on a zero hours contract is considered a ‘worker’ rather than an ‘employee’, that does not meant that they have no rights. They do. These include:

The entitlement to statutory minimum levels of annual leave
Rights to rest breaks and the ‘48 hour working week’
The right to be paid while travelling if this is a requirement of their job
The right not to be prevented from working for another company.

This latter right is important. It was introduced in May 2015 under the Exclusivity Terms in Zero Hours Regulations 2015 to avoid the situation where workers were not being offered work by an employer but were being prevented from working for someone else. Under these Regulations:

If the individual is considered an ‘employee’, it is automatically unfair to dismiss him because he has breached a contractual clause stopping him from working for another employer. There is no qualifying period to bring an unfair dismissal claim for this reason. Where a claim is made to a tribunal, the individual will need to show that he was an ‘employee’ (rather than a ‘worker’) and that there was an exclusivity clause in the contract

In any event, it is unlawful for a worker to suffer a detriment because they work for another company. So even if the individual is a ‘worker’, they would have a claim against a company that terminates their zero hours contract because they choose to work for another company.

Last month it was reported that the number of UK workers on zero-hours contracts has risen 20% in a year to more than 900,000. Analysis by the TUC has revealed that the average employee earns 50% more per hour than people on zero-hours contracts.

Frances O’Grady, general secretary of the TUC, has said that zero-hours contracts have become an easy way for businesses to employ staff on the cheap. “There is no getting away from the fact that zero-hours workers earn less money and have fewer rights than people with permanent jobs,” she said.

Unions have called for the UK to follow New Zealand’s lead and ban zero-hours contracts. Employers there must now guarantee a minimum number of hours a week and workers are allowed to refuse extra hours.

There is little doubt that the flexibility zero-hours contracts offer are useful for businesses. They are not without their problems though and employers using them are advised to take these steps:

Consider if zero-hours contracts are appropriate for your business. Would permanent or temporary staff be a better fit, or alternatively, the use of agency workers? As the Everyman quote above shows, there is a danger of failing to attract the right staff by using zero hours contracts

Be aware that the employment status of a ‘worker’ on a zero-hours contract could be considered to be that of an ‘employee’, depending on how the individual is treated by the business and particularly so if they are incorporated into the business and treated as an employee. This will give them additional employment rights.

Keep up to date with the law on zero-hours contracts. This is a hot political issue and is one that is likely to be regulated further in future.

If you have any questions about zero-hours contracts , please contact Lee Gabbie at lee.gabbie@bracherrawlins.co.uk or Lisa Rice atLisa.rice@bracherrawlins.co.uk