Irwin Mitchell | Focus on Employment | Are zero hours contracts likely to be banned soon?

The Small Business Enterprise and Employment Act received Royal Assent at the end of March.  It includes provisions which purport to ‘ban’ exclusivity clauses in zero hours contracts (which are those that seek to prevent a worker from working for another business).

This is a hot topic and had been fiercely debated on the first party political live television debate.

Although there appears to be a political consensus to tackle the widely held belief that zero hours contracts are unfair to workers, it is less clear whether the restrictions contained in the Act will, in fact, come into force because they require a separate Commencement Order and it is not yet known whether this had been made.  Much may therefore depend on the outcome of the General Election and it may be left to whichever party forms the next Government to move this forward.

Does the Act ban all zero hours contracts?

No, the Act seeks to insert two new sections into the Employment Rights Act 1996. The first of these will ‘render unenforceable’ those terms in zero hours contracts which prohibit workers from working for other employers, rather than zero hours contracts per se. The other new section enables the Secretary of State to make future Regulations to ‘further ensure’ that this objective is met.

The Act was published last year and attracted a lot of criticism. It was argued that unscrupulous employers would be able to avoid the ‘ban’ by offering workers a minimum number of hours work per week (it was suggested that this could be achieved by offering as little as an hour’s work).  In response, the Government has issued the draft Zero Hours Workers (Exclusivity Terms) Regulations 2015 for consideration by Parliament. These will apply to all contracts under which a worker works less than a set number of hours each week, or earns less than a set amount per week and are specifically designed to protect low paid staff.

The level of weekly income will be set by multiplying the agreed number of contractual hours by the adult national minimum wage.

The idea is that if the worker’s weekly income is less than a certain amount (not yet determined), their employer can be penalised if they seek to rely on an exclusivity clause, by for example refusing to offer the worker work unless he/she commits to only work for its business. 

Will all exclusivity clauses be banned?

No, some jobs will be exempted. To avoid inadvertently including highly paid workers who choose to only work a few hours a week, the exemption will not apply to jobs paying £20 an hour or more. 

Will workers be able to bring a claim if their contract includes an exclusivity clause?

The draft Regulations provide a route for disgruntled workers to bring claims in the Employment Tribunal. Any worker with a zero-hours, or other relevant contract, whose employer subjects them to a detriment because they have worked for another employer can pursue a claim. If successful, the remedy for the worker is payment of compensation by the employer. 

There is also some suggestion that Tribunals will also be able to impose financial penalties on employers of up to £5,000 who breach the ban and lose such cases. However, in reality, this may not act as a disincentive. Financial penalties were introduced in April last year and up to December 2014, no orders had been made against any employer. This is probably because the Tribunal has to be satisfied that there are ‘aggravating features’ and without helpful guidance or case law it is difficult to know what type of conduct will be included.

Key Contact

Omer Simjee