HR 7 September 2016

Should employers re-examine zero-hours contracts after the Sports Direct case?

Sports Direct
The decision to scrap zero-hours contracts by Sports Direct owners may encourage smaller employers to look again at the legislation

With retail giant Sports Direct pledging to offer casual retail staff guaranteed hours rather than zero-hours contracts, Peninsula HR Director Alan Price clarifies the differences for employers.

After a 2015 newspaper investigation found that Sports Direct paid warehouse staff effective hourly rates of £6.50 – below the statutory rate of £6.70 – the firm has now guaranteed workers will be paid above National Minimum Wage.

There is no specific legal definition of zero-hour contracts, however they are similar to normal employment contracts in so far as they both represent agreements between two parties to perform work in exchange for remuneration.

Zero-hours contracts are distinguished as they do not specify a minimum number of contracted hours, guaranteeing payment only for hours actually worked. A worker usually does not have to accept work offered to him or her, but must carry out work if they accept it.

Employers and workers can benefit from the convenient and flexible nature of zero-hours contracts. An individual can have a flexible working pattern, fitting work around other responsibilities, while their employer isn’t obliged to offer a certain number of hours when work is scarce, for instance, but can do so in order to meet demand during busy periods.

As such, zero-hours contracts can appeal to employers as excellent ways to cover unexpected events, such as temporary staff shortages during heavy demand.

In the past, it was quite a common occurrence to see an exclusivity clause in a zero-hours contract, stipulating that a worker was not permitted to procure work for another employee, or to look for more work with another employer, without first getting permission from their existing employer.

In May 2015, exclusivity clauses were banned, and employers are no longer able to put them into operation. In order to allow workers to enforce new rights, a tribunal claim was created, coming into effect on 11 January 2016.

Zero-hours employees can therefore claim unfair dismissal if they are dismissed for taking on more work with a different employer, or for doing so without the existing employer’s permission.

Those working on zero-hours contracts who are not employees can make a claim for detriment at an employment tribunal if they are subjected to poor treatment because they have looked for more work. This claim can be made from day one of employment, as the usual two-year qualifying service does not apply.

Employers need to be aware that individuals on zero-hours contracts should not be treated any less favourably, as they have the same employment rights as workers on part-time or full-time contracts.

All zero-hours workers have the same rights to a 20-minute break every six hours of work, 11 hours of uninterrupted rest in every 24-hour period and 24 uninterrupted hours of rest in every seven-day period as other workers.

Additionally, like other workers, zero-hours staff are not allowed to work more than 48 hours per week unless they have been contracted out of that requirement. Zero-hours contract workers have the same right to 28 days’ annual leave (including bank holidays) although this is pro rata based on the average number of days they work per week.

In terms of sick pay, these workers must also be paid statutory pay from the fourth day of their sickness absence, if they have been ill for at least four days and their average weekly earnings over the previous eight weeks are less than the lower earnings limit (£112 per week in 2015/16) in the last eight weeks.

Most importantly, they are entitled to the National Minimum Wage, and further to that, employers should not subject workers to detriment, treating them less favourably because they have rejected work or rarely accept it.

If an employer follows through with a disciplinary procedure for the above reason, it might suggest that a zero-hours worker is being treated as an employee, and it is important to note that employees have additional employment rights, such as the right to statutory notice.

If an employer wants to use zero-hours, they should carefully study the legislation, and give the employee a written copy of the terms and condition of a contract. They should also review the performance of zero-hours employees regularly, and gauge feelings towards the contract to see if employees ever want to change, at risk of disillusionment.

Alan Price is HR Director at Peninsula. 

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