Zero-hour contract

A zero-hour contract (or low-hour contract)^[1] is the name given to a type of contract, where the employer purports to have the discretion to vary the employee's working hours, usually anywhere from full-time to "zero hours". The employer typically asserts that they have no obligation to provide work for the employee.^[2] The employee may sign an agreement to be available for work as and when required, so that no particular number of hours or times of work are specified.^[3] The employee is expected to be on call and receives compensation only for hours worked.^[4][5][6] Depending on jurisdiction and conditions of employment, a zero-hour contract may differ from casual work.

These clauses spread widely in the United Kingdom after the global financial crisis. They are often used in agriculture, hotels and catering, education and healthcare sectors.

Zero-hour contracts are controversial. British business leaders have supported it, stating that they provide a flexible labour market. They may be ideal for some people such as retirees and students who want occasional earnings and are able to be entirely flexible about when they work.^[7] It has been reported that 60% of people on zero-hours contracts are happy with the hours they do.^[8] On the other hand, under UK labour law, they are of doubtful legality because it undermines the employee's reasonable expectation to a stable income.^[9] For people in the general working population, the risk of unpredictable hours and earnings can be high. Trade union groups and others have also raised concerns about the possibility of exploitation and the use of such contracts by management as a tool to reward or reprimand employees for any reason or no reason raises issues about how workers can adequately assert their employment rights or maintain decent employment relations.^[10]

Global

Itinerant day labourers and part-time workers are employed under terms similar to a zero-hour contract in many countries. The term "zero-hour contract" is British English for an employee who is on call with no set minimum hours or definite schedule who works under an employment contract which nevertheless meets the requirements of the Employment Rights Act 1996, a statute of the United Kingdom.

United Kingdom

In the United Kingdom, under the National Minimum Wage Act 1998, workers operating under a zero-hour contract on stand-by time, on-call time, and downtime must be paid the national minimum wage for hours worked. Prior to the introduction of the Working Time Regulations 1998 and the National Minimum Wage Regulations 1999 zero-hour contracts were sometimes used to "clock-off" staff during quiet periods while retaining them on site so they could be returned to paid work should the need arise. The National Minimum Wage Regulations now require that employers pay the national minimum wage for the time workers are required to be at the workplace even if there is no "work" to do.^[11][12] Some employees subject to a zero-hour contract have in some cases^[13] been told that they are required to obtain permission of their employer before accepting other work.^[6] In Autoclenz Ltd v Belcher [2011] UKSC 41, the UK Supreme Court delivered a groundbreaking judgment on workers who were on a zero hour contract. Lord Clarke held, at paragraph 35, that in employment relations which are characterised by inequality of bargaining power, the written terms of a contract may not in truth represent what was the contract in law. In 2013, the reasoning in Autoclenz was applied by Supperstone J in the Employment Appeal Tribunal^[14] to hold that a security guard who was given a zero hours contract was entitled to a stable working pattern: the contract's written terms were invalid. Together, this indicates that all zero hours contracts are potentially unlawful, and would entitle all workers to sue their employers for an unlawful deduction of wages if they are willing and able to work.^[9]

In 2011, zero-hours contracts were prevalent in many parts of the UK economy:^[15]

• in the hotels and restaurants sector, 19% of all workplaces (up from 4% in 2004)
• in the health sector, 13% (up from 7%)
• in the education sector, 10% (up from 1%)

For domiciliary care workers, the incidence was reported to be as high as 55.7% of all workers during the period 2008–12.^[16]

As of December 2014, the Office for National Statistics estimated that there were around 700,000 workers on zero-hours contracts, with 1.8m such contracts (as some people may have more than one contract),^[17] with a further 1.3m where no hours were worked.^[18] Some commentators have observed that the number of such contracts may be under-reported, as many people may be confusing them with casual employment,^[19] and may not be reporting them as temporary.^[20] The Chartered Institute of Personnel and Development (CIPD), based on a poll of 1,000 workers, reported in August 2013 that as many as 1 million workers in the United Kingdom, 3-4% of the workforce, work under the terms of a zero-hour contract.^[21] Based on a survey of 5,000 of its members Unite, Britain's largest labour union, estimates that as many as 5.5 million workers are subject to zero-hour contracts, 22% of those employed privately. The survey, conducted by Mass 1, showed that zero-hour contracts were more prevalent in northwest England, among young workers, and in agricultural work. Often workers said that holiday pay was denied (which is illegal)^[21] and in most cases sick pay. The National Farmers Union, which represents farmers, supports zero-hour contracts as offering needed flexibility for tasks such as harvesting.^[22]

According to the CIPD research about 38% of those employed under zero-hours contracts considered themselves to be employed full-time, working 30 hours or more a week. While 66% of those on zero-hours contracts were happy with the hours they worked,^[17] 16% felt they did not have an opportunity to work enough hours. About 17% of private employers used zero-hours contracts while they were used by 34% of non-profits organisations and 24% of public employers. Zero-hours contracts were frequently used in hotels, catering and leisure (48%), education (35%) and healthcare (27%).^[21]

Under UK law a distinction is drawn between a mere "worker" and an "employee," an employee having more legal rights than a worker.^[23] Whether a person working under a zero-hour contract is an employee or a worker can be uncertain; however, even in cases where the plain text of the zero-hour contract designates the person as a "worker" courts have inferred an employment relationship based on the mutuality of obligation between employer and employee.

Thus, when deciding whether a zero-hours contract constitutes a contract of employment, conferring employee status, the wording of the contract will not be determinative of whether there is, in practice, a mutuality of obligation. The tribunal will look closely at the reality of the agreement. If the reality is that there is a pattern of regular work which is regularly accepted, the tribunal may deem the contract to be one of employment.^[24]

In March 2015, the Small Business, Enterprise and Employment Act 2015^[25] received Royal Assent. On a date to be appointed, s. 153 of the Act will amend the Employment Rights Act 1996, so that exclusivity terms in zero hours contracts will no longer be enforceable, and regulations may specify other circumstances under which employers may not restrict what other work zero hours workers can do.

Social Security

Zero-hours contracts provide basic social security benefits;

• Maternity/Paternity pay
• Holiday
• Health insurance

If a zero-hour contract employee earns less than £5,772 a year they will not receive any credits for the state pension.

Employers in the United Kingdom

Zero-hour contracts were being used in an increasing number of jobs after the global financial crisis in the private, non-profit, and public sectors in the United Kingdom:

• Sports Direct, a retailer, has 90% of its workers on zero-hour contracts^[26]
• In August 2013, The Guardian reported that J D Wetherspoon, one of the UK's largest pub chains, has 24,000 staff, or 80% of its workforce, on contracts with no guarantee of work each week.^[27]
• 90% of McDonald's workforce in the UK - 82,000 staff members - are employed on a zero-hour contract. According to a McDonald's spokesperson all work is scheduled in advance with no employees being "on call" and meets the needs of workers who desire or need a flexible schedule.^[28]
• Hobbycraft use zero-hour contracts for the majority of their distribution staff in Burton-upon-Trent ref:indeed.com
• Tesco uses zero-hour contracts.^[29]
• A major franchise of Subway also uses the contracts, which state, "The company has no duty to provide you with work. Your hours of work are not predetermined and will be notified to you on a weekly basis as soon as is reasonably practicable in advance by your store manager. The company has the right to require you to work varied or extended hours from time to time." Subway workers are also required, as a condition of employment, to waive their rights to limit their workweek to 48 hours.^[26]
• Burger King franchisees and Domino's Pizza operations in the UK extensively use zero-hour contracts.^[30]
• The Spirit Pub Company has 16,000 staff on zero-hour contracts.^[31]
• Boots UK has 4,000.^[31]
• Buckingham Palace, which employs 350 seasonal summer workers, also uses them.^[32][21]
• The National Trust, a nonprofit organization which manages extensive historic sites and nature preserves in England, Wales, and Northern Ireland, which must deal with variable weather, uses zero-hour contracts but at the same benefits and pay as permanent employees.^[21] The Tate Galleries also use zero-hour contracts.^[6]
• All non-management staff at Curzon and Everyman cinema chains.^[33]
• Cineworld, a leading cinema chain, uses zero-hour contracts for 3,600 people, about 80% of its workforce, and Stephen Wiener, the founder, stated in August 2013 that he will continue using them.^[34]
• Hertz Car Rental UK employs workers on a zero-hour contract yearly rather than give guaranteed contracts to save on costs through the winter months. Zero-hour staff are expected to do any evening or weekend work as the full time staff do not want to work these hours,
• Yo! Sushi employs all non-management staff on zero hour contracts, despite advertising falsely as full time. ^[35]

The Workplace Employment Relations Survey conducted by the government of the UK in 2004 and 2011 shows that the proportion of workplaces that have some employees on zero-hours contracts has increased from 4% in 2004 to 8% in 2011. The survey found that larger companies are more likely to use zero-hours contracts. 23% of workplaces that have 100 or more employees used zero-hours contracts in 2011, compared to 11% of those with 50-99 employees and 6% of those with fewer than 50 employees.^[24]

Criticism

A Channel 4 documentary broadcast on 1 August 2013 employed secret cameras in Amazon UK's Rugeley warehouse to document worker abuses and claimed that Amazon used "controversial" zero-hour contracts as a tool to reprimand staff, and were "tagging" employees with GPS and subjecting them to harsh working conditions.^[36]

Workers subject to zero-hour contracts may be subject to exploitation as they may be denied work at any time for any reason, including declining to respond to a demand to work. A refusal to work in any one instance for any reason can result in a prolonged period of lack of work.^[37] In 2014, millions of workers were still trapped in low-paid, highly insecure jobs, where mistreatment is the norm and where there is limited prospect of escape, said the Trade Union Congress. Due to the uncertainty of the workers' schedules zero-hour contracts present problems for workers with children due to the difficulty of arranging child care.^[11] The rapidly growing use of zero-hour contracts was the subject of a series of articles in the late July 2013 by The Guardian and as of 2013 was of concern to Parliament.^[11] Vince Cable, business secretary of the government, is considering closer regulation of the contracts but has ruled out a ban.^[38] Labour MPs Alison McGovern and Andy Sawford have campaigned to ban or better regulate the practice.^[26]

The Institute of Directors, a chartered organization of British business leaders, has defended the contracts as providing a flexible labour market, citing the lack of flexibility in Italy and Spain.^[26] Jacob Rees-Mogg MP has also argued that they benefit employees including students by providing flexibility and could provide a route into more permanent employment.^[39] The Entrepreneur wrote "The tried and tested ‘Hollywood model’ is spreading to other industries. While zero-hours contracts are particularly common in fast food and retail, other sectors where workflow is unpredictable, such as the creative industries (advertising, PR, film and design), have long employed ‘per project contract’ freelance talent to deal with the ups and downs, and the specific skill requirements of individual projects. Think of a Hollywood film. The script writer, director, actors, extras, make-up artists, in fact everyone, is contracted on a temporary basis. When the project is completed, each has to find the next contract. That’s a trend that’s spreading to other, less ‘arty’ areas of work." ^[40]

Canada

Casual labour contracts in Canada can have "no guaranteed minimum hours,"^[41] place "no obligation on the employer to provide work", and pay can be "pro rated in line with hours worked."^[42]

Ireland

On 2 April 2015, members of the Mandate Trade Union staged a one-day dispute at 109 branches of Dunnes Stores. The dispute concerned low-hour contracts (typically 15 hours per week), income and employment security, and the continued failure of Dunnes Stores to recognise or engage with the Mandate Trade Union, contrary to the recommendations of the impartial Labour Court.^[1]

New Zealand

In 2015, Campbell Live revealed that large corporate hospitality companies such as Burger King and McDonalds, KFC, Starbucks, Pizza Hut, Carl's Jr. (all under Restaurant Brands), Sky City and Hoyts, all participate in such practice in order to further reduce costs, despite over-staffing and/or gaining record profits.^[43] On April 9, Restaurant Brands agreed to do away with zero hours contracts.^[44]

See also

• UK labour law
• On-call room
• Flexicurity
• Labour market flexibility
• Precarious work
• Underemployment
• fivesquid.com
• Marginal employment
• Casual employment

Notes

References

• E McGaughey, 'Are Zero Hours Contracts Lawful?' (2014) SSRN
• Douglas Pyper; Daniel Harari (4 July 2013). "Zero hours contracts" (PDF). House of Commons Library. Retrieved 15 July 2013. 
• Matthew Pennycook; Giselle Cory; Vidhya Alakeson (June 2013). "A Matter of Time: The rise of zero-hours contracts" (PDF). Resolution Foundation. Retrieved 15 July 2013. 
• Ioulia Bessa; Chris Forde; Sian Moore; Mark Stuart (February 2013). "The National Minimum Wage, earnings and hours in the domiciliary care sector" (PDF). University of Leeds. Retrieved 15 July 2013. 
• "Working at Sports Direct is no fairytale for part-timers"
• "Zero hours Britain: 'I didn't know week to week what I was going to get'"