UK: Zero Hours Contracts - How Reform Will Affect You

Last Updated: 19 May 2014
Article by Fiona Rushforth

Fiona Rushforth takes a look at the hot topic of "Zero hours" contracts and how the new proposals will effect the fashion retail sector...

"Zero hours" contracts have been a hot topic over the past 12 months, as employee organisations, the press and politicians have all voiced concerns over their growing use. Last month, Ed Miliband announced that Labour would reform the use of zero hours contracts to prevent "abuses". The proposals could have a major effect on sectors such as retail where zero hours contracts are commonly used.

What is a zero hours contract?

There is no legal definition of a "zero hours" contract. In a traditional zero hours arrangement, the employer is not obliged to offer any work, and the worker is not obliged to accept work when it is offered. The worker can therefore have multiple employers. However, another form of the contracts has become widely used – an "exclusive" arrangement whereby the employer does not have to offer any particular hours, but, when it does, the worker is obliged to accept them, and cannot work for another employer.

It is this type of "exclusive" contract which has attracted particular criticism, because workers are unable to predict or supplement their income from month to month.

An end to "exclusive" contracts

If the Labour proposals come into force, the exclusive type of arrangement with enforced acceptance of work would no longer be permitted. Retailers who currently use this type of contract would therefore have to change their practices and allow workers to turn down shifts and to work for whom they pleased.

In practical terms, most employers will be able to accommodate this change through better planning. The aim of zero hours contracts is to allow the employer flexibility to deal with fluctuating demand for workers and hours. It should be possible for most retailers to estimate when peaks in demand will occur, and make arrangements with workers accordingly. As such, it should not be necessary to have a pool of workers available at all times to accept work when it is offered.

If, for some reason, a particular retailer is not able to predict demand for hours in this way, another solution would be to have a larger pool of potential workers to draw from in order to allow for the fact that they are allowed to reject work. This, however, would only work for the first six months of the working relationship with a particular individual, due to the "fixed-hours proposal" explained below.

The right to fixed-hours contracts

After six months, any worker would have the right to request a fixed-hours contract, which could only be rejected for good reasons. After twelve months, the worker will automatically receive a fixed hours contract, unless he or she opts out.

The obvious solution for retailers who are unable to commit to fixed hours is to terminate workers after six or twelve months in order to avoid this obligation. This, indeed, is a clear weakness in the Party's proposals, since terminations are likely to rise as a result. However, in the field of fashion retail, this is far from an ideal solution, since fashion retailers often expect a high degree of product knowledge, training and sales skills, even in their part-time staff. Many fashion retailers will therefore prefer to provide a fixed-hours contract rather than have to continually dismiss, recruit, and train part-time staff.

Clarity of terms and the rights of zero-hours workers

A further proposal states that zero hours workers must have clarity with regard to their terms and conditions. This will not change the workers' entitlement to rights, but it is likely to make many zero-hours workers realise that they are entitled to more rights they currently receive. It is a common misconception that zero hours workers are not entitled to basic rights, such as paid leave, rest breaks, minimum notice periods and sick leave.

Even before this proposal takes effect, the upcoming Sports Direct litigation – a group action by employees of the retailer which will be heard in Tribunal this autumn – is likely to lead to widespread publicity with regard to the rights of zero hours workers. Sports Direct has allegedly failed to provide these minimum statutory rights to the 87% of its staff who are on zero-hours contracts. The retailer is also alleged to have denied these workers comparable benefits to full-time staff. It is unlawful to deny benefits on the basis of part-time status unless the different treatment can be objectively justified – a difficult hurdle for the employer to meet.

Employers who currently do not provide minimum statutory entitlements to zero-hours workers, or grant them lesser benefits than full-timers without justification, would be advised to remedy the position before the Sports Direct case comes to Tribunal. The publicity the case will undoubtedly generate is expected to start a wave of similar claims by zero-hours workers against their employers.

Originally published by Fashion Capital.

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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