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Countdown to zero – reform looms for the zero-hour contract

About The Author

Edmund Day (Former Writer)

Edmund is a 3rd year student of Law with French at the University of Birmingham, currently studying towards the Certificat de Droit Français during his year abroad at l'Université Montesquieu - Bordeaux IV. Edmund aspires to be a solicitor, with a particular interest in the aviation sector.

Following Georgia Mitchell’s article ‘Zero hour contracts: Zero hope?’ last month, Edmund Day provides further insight into what form impeding reforms may take. For more information on zero hour contracts, please visit Georgia’s article, linked above.

The rise of the zero-hour contract has attracted much media coverage and critique in recent months, with the Christmas period likely to underline the wholesale use of such employment agreements.  Zero-hour contracts are noted for their flexibility, being particularly prominent amongst students and part-time workers seeking seasonal employment to supplement their additional commitments.  But these are by no means the only workers affected; Sports Direct was recently revealed to employ close to 90% of its employees using such contracts.  So much so have these contracts surged in number and use that they have attracted comment from some of the leading figures in business and politics.  Ed Miliband, to name one, has pledged to tackle the exploitative use of zero-hour contracts in his party manifesto, whilst Natalie Bennett, leader of the Green Party was not alone in calling for an outright ban of the practice.

To recap, zero-hour contracts are neither defined nor specifically addressed by any pre-existing legislation, but they are widely recognised to be employment agreements through which the employer is not obliged to offer the employee a minimum threshold of hours per week as would be expected in a traditional employment contract.  Meanwhile, this lack of obligation is matched by the employee's freedom, in theory, not to accept any of the hours offered to him or her.  It is unsurprising from its obvious flexibility that this form of contract carries numerous pros and cons for both parties, and is hence so controversial amongst those concerned. For more detail regarding the nature of zero-hour contracts, please see Georgia's article, published last month.

If reform does go ahead in the near future as expected, what exactly does the future hold for the zero-hour contract?

Earlier this year Secretary of State for Business, Vince Cable, ruled out a ban of zero-hours contracts that some had called for, but remained positive towards reform following a review of their use.  The UK has one of the least regulated labour markets in the Western world and continues to boast a superior employment rate to most of Europe.  Flexibility is viewed as desirable across the political spectrum, provided, of course, that it does not come at significant cost to the employee.  Ed Miliband expressed precisely this view on the matter, stating, "We need flexibility, but we must stop flexibility being used as the excuse for exploitation."

John Cridland, Director General of the Confederation of British Industry, who has publicly disagreed with Miliband on more than one occasion, this time seemed to be in agreement on the matter.  He underlined the importance of zero-hour contracts' flexibility in maintaining both business profitability and employment rates, arguing “If we hadn’t had this flexible working when the economy contracted, unemployment would have topped 3 million” (20% higher than it otherwise reached). 

A degree of short-term uncertainty has been the price of medium term business profitability and higher levels of employment for some years.  Without it, wounds inflicted by the economic downturn may have cut deeper still.  Bearing this in mind, it would be foolish to go as far as some had suggested and scrap the zero-hour framework all together.  The zero-hour contract presents an employment mechanism that in the vast majority of cases is mutually beneficial, in which neither party would call for change.  Most commentators, however, would agree that having spread beyond the realms in which its use was intended, the zero-hours contract is certainly in need of some legislative reform to put an end to the exploitative use we have begun to see.  It is my opinion that the legislator will be keen to guard against the use by employers of what are considered to be three of the worst practices in this field. 

The first is the imposition of pressure on employees to accept work offered to them, which corrupts what is otherwise a benefit to the employee, rendering each business a highly fluid and free micro-labour market.  Second, is the practice of drastically cutting hours to the effect of rendering an employee redundant. The problem here is that because an 'official' redundancy is never declared, employers avoid the relevant formalities and payments which places employees in a very precarious position with little they can do to remedy the situation.  The third is not as common as the previous two, but involves an agreement enforced by the employer that the employee will not engage in any other work contract with any other employer.  This provides that the employee is available almost at will for the benefit of the employer, but obviously tilts the scales heavily in favour of the employer in terms of flexibility, completely unbalancing the agreement to the detriment of the employee. 

So in practice, how might issues such as these be dealt with?

The first and most obvious option open to legislators is a simple statutory ban on the poorly viewed practices mentioned above.  A framework would be developed through which employers could be held accountable for breaches of these statutory provisions, simultaneously enhancing employees' rights.  This all sounds fairly simple in theory, but in practice how easily will employees find these practices to prove?  Fully and effectively ruling out such malpractice would require a relatively onerous burden being placed on the employer, which the legislator will be keen to avoid.  Further to this, from the perspective of an employee working a few hours a week, would enforcing these provisions against his or her employer realistically be a likely and worthwhile resort, particularly considering that many of the jobs concerned are entry-level and hence susceptible to frequent changes in staff anyway?  Maybe this kind of solution would be more constructive in relation to the traditionally salaried jobs previously mentioned.

The second option to consider is the enforcement of an obligation on the part of the employer to inform any worker employed on a zero-hour contract of any similar full time position that becomes available.  This right of first refusal would operate effectively as a pre-emption right for the benefit of a company's workers.  Whilst studies suggest that the significant majority of zero-hours workers are satisfied with their hours, this would allow the legislator to address the concerns that other such workers are trapped on zero-hours contracts, unable to find more stable and predictable employment, without interfering with that majority who are perfectly satisfied with the state of their work and level of hours.

What appears to be the most likely option is to place an obligation on employers to explain the substance of a zero-hour contract prior to any worker being contracted on such an agreement.  The employer would be required to explicitly bring the worker's attention to certain notable clauses to ensure that he or she fully understands its content and implications as well as the nature of the employment agreement between the two parties; principally that he or she is guaranteed no minimum number of hours whilst he or she is equally under no obligation to accept the hours offered by the employer.  Inspired by contract case law, this approach mirrors to an extent the stance taken by UK Court of Appeal on exclusion clauses in Spurling v Bradshaw [1956] 2 All ER 121, and more precisely what became known as Denning's 'red hand rule'.  This rule requires companies to 'flag up' any clause unreasonably excluding liability, expressly bringing it to the attention of a consumer prior to the conclusion of the contract.  This kind of solution could be broadly implemented with relative ease, providing the clarity, transparency, and mutual understanding that zero-hour contracts have come to require without impacting adversely on the majority of workers who are wholly satisfied with their circumstances.

It remains to be seen what kind of solution will be advanced by the legislature; we can expect to see reform to some degree before the end of the current government’s term. In the meantime, employers will be watching on nervously, hoping to avoid a heavy-handed intervention swinging the balance excessively in favour of the employee.

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Tagged: Commercial Law, Contract Law, Employment Law

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