23 February 2016

By Mark Freedland and Jermias Prassl, Oxford Human Rights Hub

Over the course of the past year, we have repeatedly highlighted the problems facing workers on so-called ‘zero-hours contracts’ (‘ZHCs’), and criticised the government’s inadequate regulatory response in the Small Business, Enterprise and Employment Act 2015, section 153 of which rendered exclusivity terms in such work arrangements unenforceable as against the worker.

The 2015 Regulations

In addition to this outright ban, a newly enacted section 27B of the Employment Rights Act 1996 provided that the ‘Secretary of State may by regulations make provision for the purpose of securing that zero hours workers … are not restricted by any provision … of their contracts or arrangements … from doing any work otherwise than under those contracts or arrangements.’ This power was exercised by the government in December of last year, with the resulting Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 entering into force on January 14, 2016.

As stated in the explanatory note, the new regulations purport to ‘makes provision in relation to the right for individuals on a zero hours contract not to be unfairly dismissed or subjected to a detriment for a reason relating to a breach of [an exclusivity] provision of a zero hours contract’. In concrete terms, this means that an employee dismissed for the (principal) reason that she breached an exclusivity provision in her contract of employment (reg 2(3)) by working for another employer is to be regarded as unfairly dismissed for purposes of the unfair dismissal regime in Part X of the 1996 Act (reg 2(1)); the usual two-year qualifying period does not apply (reg 2(4)). Finally, a ‘worker who works under a zero hours contract has the right not to be subjected to any detriment by, or as a result of, any act, or any deliberate failure to act, of an employer’ in response to her breach of an exclusivity clause (reg 2(2)).

Protecting Zero-Hours Workers?

Some commentators have suggested that with the 2015 Regulations ‘[a]t last, some real protection has been introduced for zero hour contract workers.’ However, we suggest that the new measures fail to offer any real protection: first, because their key entitlement (automatic unfair dismissal protection from day one) is limited in scope to employees, the narrowest legal category of workers in English law. Secondly, it would seem that employers can in practice escape unfair dismissal liability simply by starving zero hours employees of remunerated hours of work rather than formally dismissing them, thus avoiding not only outright dismissal but also constructive dismissal, since this starvation of hours will, almost by definition, not amount to a repudiatory breach of a ‘zero hours contract’, at least in the absence of more robust judicial interpretation than has hitherto occurred. Thirdly, moreover, given the real difficulties faced by employees in vindicating their claims since the recent introduction of tribunal fees, it is unlikely that we will see litigation arising under the 2015 Regulations, as the fee system disproportionately discourage the low-value actions associated with zero-hours workers’ claims.

The 2015 regulations thus confirm many of the fears we first voiced in a 2014 paper written jointly with our colleague Abi Adams of the Cowles Foundation at Yale University. In particular, they show that whilst the exclusivity provisions pretend to take the sting out of ZHCs so far as workers are concerned, in fact they address but a side issue which was never the main problem for workers in the first place, not least because such provisions were scarcely likely to be effectively enforceable against workers at common law. Moreover, these provisions have a powerfully legitimating effect upon the institution of ZHCs. They denote the ZHC as a legal category, and almost certainly as a type of contract of employment; and they send a message that this is a fully accepted pattern of employment. Indeed, the Government has even provided a handy set of guidance notes for employers on how to use zero-hours contracts, including a (non-exhaustive) list of ‘examples of when a zero hours contract might be appropriate’, from new business and seasonal work to special events and testing a service.

Further Regulation?

PersonnelToday have suggested that the Government intends to ‘pass further legislation so that employers will be unable to circumvent the prohibition on exclusivity clauses by offering workers a symbolic number of guaranteed hours per week. [The Government] will introduce a threshold, taking into account pay and hours, below which an employer cannot require an employee to enter into an exclusivity agreement.’ We remain convinced, however, that any such measure would similarly fail to address the underlying labour market problems arising from the growing use of ‘zero-hours’ work.

This blog was originally published by the Oxford Human Rights Hub