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Zero hour contracts – a Scottish perspective and litigation update

Nick Thorpe
24/04/2014
It's been a while since we last reported on zero hour contracts. While we may have abstained from posting anything on zero hour contracts during Lent, we thought another post on zero hour contracts It's been a while since we last reported on zero hour contracts. While we may have abstained from posting anything on zero hour contracts during Lent, we thought another post on zero hour contracts was now long overdue.

As many of you will know, the UK Government has been consulting on the use of zero hour contracts following last Summer's media furore over their apparent increased use in the UK. The UK Government's consultation, which closed in March, focused on the issues of exclusivity and transparency, with the Government stepping back on some of the more radical, headline grapping proposals suggested by some.

The Government has yet to publish its response to the consultation. However, in the meantime, the House of Commons' Scottish Affairs Committee has produced an interim report on the use of zero hour contracts in Scotland. The Scottish Affairs Committee is a cross party select committee chaired by Ian Davidson MP, the Labour/Co-op MP for Glasgow South West.

While the focus of the Committee's report is, as one might expect, on the current practice in Scotland, the Committee's findings and recommendations have wider application to the UK as a whole.

The Committee is critical of the Government's consultation, describing it as "too narrow". It is also critical of the Government's main proposal to introduce an "employer led" Code of Practice. It suggests that any Code should only be used as a stepping stone to more significant legislative change aimed at reducing the use of zero hour contracts and protecting those who are on them.

The Committee concluded that, in the majority of cases, zero hour contracts need not and should not be used. Some employers have already taken steps to phase out the use of zero hour contracts, by guaranteeing minimum hours, with the option to offer additional hours if and when required. However, the fact remains that many employers continue to engage individuals on zero hour contracts. In the retail sector alone, the Committee heard evidence that across the UK, approximately 83,800 McDonalds staff, 20,000 Burger King staff, 20,000 Sports Direct staff, 24,000 JD Wetherspoon staff, and 4,000 Boots the chemist staff were all on zero hour contracts. And the list goes on.

The reasons why so many individuals are engaged on zero hour contracts are clear; they offer the flexibility to manage fluctuations in demand, avoid recruitment costs and can allow companies to expand services whilst limiting the risk of over-recruiting permanent staff. However, as the Committee noted, they can give rise to confusion in terms of the individual's status and what rights they are entitled to.

Employers need to be clear, in particular, on what benefits should be offered. A case in point concerns Sports Direct. Sports Direct is currently facing a claim in the Employment Tribunal under legislation which protects part-time workers from being treated less favourably compared to full time workers, with lawyers for the Claimant arguing that there is no practical difference between the obligations put on those placed on zero hour contracts and full time staff. It is understood that this case is listed for a 10 day hearing in November. Sports Direct is also facing civil court litigation in which it is alleged that Sports Direct's failure to award employee shares to one of its zero-hour workers is a breach of contract. If successful, these claims could result in significant awards, potentially, totalling millions of pounds.

While the Government is unlikely to ban the use of zero hour contracts, or go any further than is currently proposed in its consultation document (notwithstanding the appeals of the Committee to use "every lever in their disposal" to change the current culture), employers still need to take care when using zero hour contracts and understand the attendant benefits which come with such arrangements for both themselves and the individuals concerned. What may, at first, appear to be an operational and cost advantageous arrangement for your business can prove costly if poorly implemented.

For more information on the use of zero hour contracts and the attendant benefits for your business and the individuals concerned, please do not hesitate to contact any member of the team.

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