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‘Zero Hours Contracts – worth the paper they’re printed on?’

Added by Berlad Graham
January 7, 2021

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Apologies for commencing an article with a blatant example of Betteridge’s Law. However, in respect of so-called Zero Hours Contracts (‘ZHC’) it is a valid question.

Occupying that awkward space between settled Law and political football, ZHCs are a favoured polemical tool used to help illustrate one’s societal viewpoint, whatever that may be. Popularly, to the Left, they represent the unfeeling suppression of the ‘precariat’, tying those perceived to be at the bottom of society’s ladder in permanent bondage, and excluding them from the benefits of secure employment in a uniquely British manner. To the Right, they are a valuable tool in Labour Market Flexibility, maximising sudden opportunities and allowing individuals to arrange their working arrangements to suit them, rather than to suit their ‘employer’. Unsurprisingly, in the cold light of day, neither interpretation is entirely accurate.

As a method of organising a workforce, they have the benefit of flexibility, of possibly being cheaper than Agency staff, of not having to guarantee future work.

This type of contract is constantly changing, partly as a result of the febrile atmosphere surrounding their supposedly ‘political’ import. Unfortunately, a lot of that change has been Judge-led, but at a fairly low level (Employment Appeal Tribunal), and so the prospects for successful appeals and reversals exists. It is useful to recall how these initially came about. A whole range of cases over the years have focussed on this area, but the defining moment came in Carmichael -v- National Power (2000), which had commenced under the aegis of the Central Electricity Generating Board (‘CEGB’), unlamented and und unknown to those under 40, and concluded in the new world of privatised utilities. Essentially, a failure of mutuality of obligation, intended by the contract, distinguishes such workers from employees. The employing body was not obliged to offer work, nor was the worker obliged to accept the offer, a situation anathema to the traditional employment relationship. The original protagonists were casually employed guides who showed tourists around electricity generating plants as and when required. Hence, they proved a useful legal vehicle, if a somewhat niche interest.

ZHCs are often portrayed as a uniquely British development, but even in Europe are quite common. In fact, they are unremarkable in Cyprus, Finland, Ireland, Malta, Norway and Sweden as well as the UK. They also exist in Germany, Italy, the Netherlands and Slovakia, although they are more heavily regulated – a situation which is, as we shall see, being de facto replicated in the UK. They are also not unknown – if unusual – in Austria, Belgium, Czech Republic, Estonia, Lithuania, Luxembourg and that paragon of labour market regulation, France. Their extent is also less than is often portrayed. In the UK they form around 2.5% of all those in work. The ONS reports that approximately 70% of those on such contracts prefer them to other arrangements, allowing flexibility in working patterns, and the ability to work at more than one organisation, as attempts at exclusivity in such agreements have been struck down by the Courts. Indeed, as time has gone on, employment rights have accrued to ZHCs such that, with the exception of certain fundamentals (such as non-mutuality; non-exclusivity and the like) greatly reducing differences between them and other categories of ‘worker’. Indeed, a definition has been retrospectively inserted into the Employment Rights Act 1996 to cater for this. Taken together with new regulations introduced in 2015 and 2016, the uniqueness of the ZHC as compared to other temporary worker and Agency contracts has been greatly eroded.

Originally, the concept was that, in effect, each engagement of work was a separate contract, unique and whole to itself. No engagement afforded any rights, or suggestion of concept or continuity of employment. No rights or obligations accrued to either (willing) party. Obviously, in our all-encompassing world of legal protection, such a state of affairs was hardly likely to persist, and so it has proven. Workers employed under a ZHC now have all the panoply of rights of any who satisfy the definition of worker, inclusive of protection from discrimination, rights to the Minimum Wage, paid annual leave, whistleblowing, pension enrolment etc. There are proposals to allow ZHC workers to apply for more permanent contracts/employee status. Indeed, the Welsh Government has already legislated to ensure ZHC care workers in Wales to transfer to permanent employees after 3 months work. It has been ruled unlawful not to consider ZHC workers alongside temporary working employees for the award of contractual benefits.

One might therefore reasonably ask, why the furore over ZHCs, as their exceptionalism/utility appears to be fading fast? One might reasonably answer that it is based more on heat than light. With additional reforms proposed here and in the EU, the usefulness of this type of working arrangement for employers may not be long for this world.