Over the last few years, zero hours contracts have rarely been out of the press, and last month, the Office of National Statistics announced the number of people working on contracts with no minimum hours, widely referred to as ‘zero hours contracts’, has yet again increased.

What are zero hours contracts?

It is generally acknowledged that the term ‘zero hours contract’ refers to a contract under which the employer does not guarantee any minimum hours, and under which the individual is under no obligation to accept the work offered.

The specific provisions of this type of contract will depend on whether the individual is classed as an employee or worker.

Rights and obligations under zero hours contracts

However, there are certain rights and obligations, which apply irrespective of whether the individual is an employee or worker (e.g. paid annual leave).

On the face of it, this type of arrangement seems ideal for many businesses where there is a fluctuating, and sometimes unpredictable, demand for staff.

However, zero hours contracts have proven a controversial topic and some businesses have been criticised for inappropriate use, e.g. using zero hours contracts when another type of contract would be more suitable, perhaps requiring the individual to remain available even though no work is guaranteed, and/or including terms which seek to prevent the individual from working elsewhere.

Ban now introduced on exclusivity clauses in zero hours contracts

In the run up to the General Election, the Labour party announced it would ban what it described as ‘exploitative zero hours contracts’ if it won. Amongst other things, Labour pledged it would ban exclusivity clauses (clauses which state that an individual on a zero hours contract could only work for that business, or could only work elsewhere with consent) and would make provision for compensation when a shift is cancelled at short notice.

Although the current government has not gone quite this far, earlier this year, the Small Business, Enterprise and Employment Act 2015 amended the Employment Rights Act 1996 to bring into effect a ban on exclusivity clauses in zero hours contracts.

As of 26 May 2015, clauses in zero hours contracts which seek to prohibit a worker from working under another contract, or from doing so without consent, have been unenforceable against the worker.

It has also now issued some guidance on the appropriate use of zero hours contracts and on 15 October 2015, the Department for Business Innovation & Skills (BIS) published its guidance for employers. To see the guidance, click here.

Therefore whilst zero hours contracts remain a political hot topic, and are likely to remain subject to ongoing scrutiny, it seems widely accepted that zero hours contracts do have a place in today’s labour market. However it is vital that businesses using these types of arrangements are aware of their obligations and the individual’s entitlements.

Businesses are urged to seek legal advice when using zero hours contracts

If you are considering engaging someone on a ‘zero hours contract’ and are unsure what type of contract best suits your arrangement, it is best to seek professional advice.

Equally, if you already engage individuals on a zero hours contract, it is worth reviewing these now to ensure that the terms are compliant and that you are aware of the implications.

If you are an individual considering whether to accept work on a zero hours contract and would like advice on your rights, we also recommend that you seek professional advice.

If you need any advice on employment law, then please call us on 01636 671881.