Guernsey: Zero-Hour Contracts - What’s All The Fuss About?

Last Updated: 4 September 2013
Article by Hana Plsek and Emma Parr

Can you imagine being an employer with a work force on-call, no overheads, no obligations to pay sick or holiday pay, being able to tell your employees when to work and if they don't turn up, you simply don't pay them?

Surely, this sounds like an employer's dream?

Zero-hour contracts are typically drafted to maximise flexibility for the employee and the employer. Used appropriately, zero-hour contracts are an efficient way for employers to manage their staff and time respectively. In theory, the employer has access to many employees at any one time who are keen to work, the downside is - the employee has the ability to accept or decline the work as they see fit.

But recent case law and commentary on the subject is starting to question at what point a zero-hour contract begins to entitle the employee to more than just the option to work. For example, when does an employer become legally or contractually responsible for the employee in terms of health care, maternity, sick leave and holiday entitlement - all of the usual entitlements that most employees take for granted?

Whilst zero-hour contracts are drafted to avoid conferring employment status on employees, thereby preventing them from acquiring any contractual or statutory protection, as the old adage says: "actions speak louder than words"!

Case law has recently decided that should the arrangements between an employer and employee be one that encompasses a mutual obligation then, regardless of what the zero-hour contracts states, that employee may be afforded certain contractual rights and statutory protection. The mutuality of obligation is just one of the key ingredients to create an employer / employee relationship - specifically, the obligation for an employer to provide work and pay, in return for the employee accepting the work and performing the services. The Tribunal in Pulse Healthcare v Carewatch Care Services considered this very issue.

Here, the Tribunal looked beyond the terms set in the zero-hour contracts and focused more on the reality of the arrangement between the parties. It decided that caretakers, engaged to assist and aid a special needs person, were employed on a regular basis and at reoccurring times and intervals; as such, they were deemed to be employees of the care service and entitled to contractual and statutory protection; despite entering into zero-hour contracts.

It is very difficult for an employer to pinpoint exactly when this mutual obligation arises. However, in Pulse the Tribunal decided that it was the repetition and assumption of work that indicated the mutuality of the relationship. The care services offered the same shifts at the same times under the same conditions, which the caretakers readily accepted. The zero-hour contracts were set subsequently aside and the reality of the mutual obligation arose.

Not an employer's dream as such, more of a cautious tale!

All employers that attempt to engage staff on zero-hour contracts should be mindful of the potential inference that can be drawn from a mutuality of obligation. You should ensure that the employee is made aware that the employer is under no obligation to offer work. Likewise, there is no obligation on the employee to accept the work, if offered.

Despite the increased use of zero-hour contracts, the longevity of these contracts going forward may be in doubt as both trade unions and politicians are calling for their abolition. Some critics feel that the use of zero-hour contracts is simply just another way of re-classifying the unemployed and adjusting the unemployment statistics. The insecurity and lack of stability is just too much worry for some and prevents ordinary people from being able to plan for the future; there has also been recent debate surrounding the rates of pay. In particular, many on zero-hour contracts believe they are significantly underpaid compared to their permanent counterparts.

Others feel that these contracts give them the flexibility that they need (particularly those in seasonal trades) and play a positive role in creating working opportunities. In particular, parents of young children, carers and students are able to fit the possibility of work around their other commitments and this has a profound impact on the work / life balance.

The Chartered Institute of Personnel Development, commonly known as the CIPD, recently conducted a survey involving 1,000 employers. The survey results showed that almost one in five UK employers retained staff on zero-hour contracts, despite not being able to guarantee when, or what, work would ever be made available. These results just prove that such contracts are more commonly used than official UK statistics suggest.

Perhaps, rather than a complete abolition, maybe employers would find it beneficial to have clearer guidelines on how and when to use such contracts. Clearly, they do have a place in today's modern society and their use cannot be underestimated. However, the use of zero-hour contracts is open to exploitation and worryingly, an increasing number of employers have jumped onto the bandwagon. Maybe the trade unions and politicians should concentrate on making the present situation clearer rather than un-do it altogether?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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