Government launches consultation on zero hours contracts

The Department for Business Innovation & Skills (BIS) has launched a consultation on zero hours contracts. 

Background

Throughout 2013, zero hours contracts received much media attention. In light of evidence of an increase in the use of zero hours contracts, the government repeatedly stated that it would launch a consultation, to examine the problems and benefits of using such arrangements.

Consultation

BIS launched its consultation on zero hours contracts on 19 December 2013. The government wants to "maximise the opportunities of zero hours contracts while minimising abuse and setting out core standards that protect individuals". To this end, the consultation looks at the issues, seeks evidence and invites views on possible options for the government and employers. It warns that there is a risk that the issues identified in the information-gathering part of the process could "undermine" the government's vision of "a labour market that is flexible, effective and fair". The consultation will close on 13 March 2014.

The consultation identifies the main advantages of using zero hours contracts for employers as flexibility, supporting company expansion and retaining workers who have skills and knowledge of the business. For individuals, the advantages of these contracts are said to be that they offer workers greater choice and opportunities to enter the job market, as well as offering flexible retirement plans. According to the consultation, the two main concerns about the use of zero hours contracts are exclusivity clauses and transparency. The consultation explores these two concerns:

• Exclusivity clauses. Such clauses may prevent a zero hours worker from working for another employer while engaged under the zero hours contract. The consultation says that although some exclusivity clauses may be justifiable (such as to protect confidential commercial information), "there is not always a clear or obvious reason why this should be part of the employment contract". A key consideration is therefore how much individuals feel informed and able to withhold their agreement to any such clause. The consultation invites views on some possible options:

  • Legislation to ban the use of exclusivity clauses in contracts that offer no guarantee of work.

  • Government guidance on the fair use of exclusivity clauses.

  • An employer-led code of practice on best practice, with possible government endorsement.

  • Relying on workers' existing common law rights to challenge restrictive covenants in the courts.

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• Transparency. The government is concerned that some workers and employers may not be clear on the terms of a zero hours contract and the corresponding rights. Individuals may not know that they have been employed on a zero hours contract. Employers may not fulfil or understand their responsibilities towards zero hours workers. Some employers may deliberately avoid complying with employment laws, while others may penalise workers for not being available when requested. Some uncertainty exists around how zero hours contracts affect individuals' benefit entitlement, which the government believes will be partly addressed by the introduction of Universal Credit. The consultation identifies some options to improve transparency:

  • Improving the content and accessibility of information and guidance on employment rights and benefits for zero hours workers. This could include improving existing resources or creating new resources, such as online tools to calculate holiday, sick pay or redundancy entitlement, guidance on creating employment contracts or simplified guides to employment rights.

  • Encouraging an employer-led code of practice on the fair use of zero hours contracts, and whether the government should endorse such a code.

  • Producing model clauses for zero hours contracts. The contract could include a "key facts" section to help individuals understand the terms of the contract.

    A further option identified by the consultation is the possibility of stronger enforcement of national minimum wage breaches relating to underpayment of travel time.

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    Comment

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    Before the consultation launched, some of the political debate touched on whether zero hours contracts should be banned outright. This did not seem like an option that the government was likely to pursue, given its maintained desire for a "flexible" workforce. Indeed, introducing new legislation does not feature among the consultation's options, save for the possibility of banning exclusivity clauses (even then, with the warning that such a ban "might make any jobs which legitimately need an exclusivity clause unviable"). The government's sentiment therefore seems in keeping with its overriding "light-touch" approach to employment law.