Kenny Scott

We are in the midst of a traditionally very busy period for Scotland’s hospitality and tourism sectors. It has also seen the issue of zero hour contracts (ZHC) once again in the spotlight, with the recent widely publicised news of a ZHC worker in the hospitality sector in Inverness having successfully settled a claim brought following the cancellation of shifts at short notice.

The use of ZHC’s by employers has attracted criticism for over a decade, with calls for their use to even be banned.  However, for many sectors and from both the perspective of the worker and individual business, the ZHC has its merits.  Research by the Chartered Institute of Personnel and Development (CIPD) suggests that ZHC’s often provide a better work life balance and job satisfaction compared to more traditional employment arrangements.

It may be useful to clarify precisely what a ZHC is, the rights and obligations it offers and possible future developments.

The Zero Hour Contract

Zero Hour Contract is not a legal term. ZHC’s are contracts for work under which there is not an obligation by the business to provide a minimum (or any) amount of work to the worker and he or she is not obliged to accept any work offered. Consequently, a ZHC usually offers both parties flexibility and can ensure lower hiring and employment costs for the business. Research by the Office for National Statistics (ONS) in 2017 also suggests that ZHC’s may be more prevalent in the younger segment of the workforce (33 per cent aged 16-24), among females (57 per cent) and part-time workers. 

Rights under ZHCs

Despite the political furore around ZHCs, a key development in recent years has been the 2016 ban on exclusivity clauses or the individual requiring consent (from the business) to take up other work. As a result of this ban (under the Small Business, Enterprise and Employment Act 2015), any such term that restricts the individual from accepting work elsewhere will be void and unenforceable. The limited restrictions on ZHC’s probably reflect that workers under ZHC’s already have a number of potential rights. These include: to be paid the National Minimum Wage or National Living Wage, 5.6 weeks holiday pro rata depending on their hours worked, rest breaks, protection from discrimination, protection from unlawful deduction of wages and pension auto-enrolment.

Advice for employers

Based on the above, employers may wish to consider the following advice:

• Set out clearly the employment status of those engaged on ZHCs and, where appropriate, limit this to that of a ‘worker’ rather than an ‘employee’. It’s important to remember that what the contract states is only part of the picture and the day-to-day arrangements would (if challenged) be scrutinised by an Employment Tribunal to assess if an individual is in fact a worker or has employee status. The latter brings with it the right to claim unfair dismissal and certain family friendly entitlements.
• Consider whether ZHCs are actually suitable for the business, or whether other means of permanent or temporary employment may be better? 
• Use ZHCs only where necessary and where the flexibility benefits both the employer and the worker.
• Review the employment status of individuals working on ZHCs at regular intervals to ensure this hasn’t changed. Consider if there is there any real difference between the employees and zero hour workers?
• Consider whether (as recommended by the CIPD) it would be fair to provide reasonable recompense in circumstances where any pre-arranged shift is cancelled at short notice.
• Establish a fair system of how and when work is offered to workers with ZHC arrangements.
• Follow the Department for Business, Innovation and Skills (BIS) guidance from October 2015 when making ZHC arrangements.

Future developments

In 2017, the employment law landscape was transformed by the Supreme Court when it ruled that the requirement to pay a fee (since July 2013) in order to bring claims in an employment tribunal was unlawful. That decision is of great significance to those working under ZHCs.  Such individuals now have free access to enforce the rights referred to above, whereas under the fee regime it was often prohibitively expensive to make a claim. Moreover, from April 2019, it is anticipated all workers including those with ZHC arrangements, will be entitled to an itemised payslip.

In addition, the UK government recently consulted on some of the recommendations coming out of the Taylor Review. This includes a possible right to request “more predictable and stable” working arrangements (mirroring EU Commission proposals). It has also asked the Low Pay Commission to report in Autumn 2018 on possible higher rates of pay for workers not on guaranteed hours, to incentivise the provision of guaranteed hours and to address the perceived one-sided flexibility of such arrangements.

Loved by some for their flexibility, loathed by others for their apparent insecurity, it’s more important than ever for the worker and business alike to understand the rights and obligations offered within a ZHC arrangement.

Kenny Scott is a senior associate at Shoosmiths