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Employment Law

Legal guidance - compliance - software

02 NOV 2015

Zero hour contracts - guidance for employers and legislating to enforce ban on exclusivity

Zero hour contracts - guidance for employers and legislating to enforce ban on exclusivity
Colin Godfrey
Senior Associate, Veale Wasbrough Vizards

The Department of Business, Innovation and Skills (BIS) has published guidance for employers on zero hours contracts. The government has also published draft Regulations aimed at enforcing the ban on exclusivity.

Legal background

The use of exclusivity clauses in zero hour contracts has been controversial. The idea that an employer could sign up an employee to a contract which provided no guaranteed work, but also stopped them from undertaking work under any other contract or arrangement, risked placing many employees in real hardship.

On 26 May 2015 the government banned exclusivity clauses in zero hours contracts through section 153 of the Small Business, Enterprise and Employment Act 2015. The new draft regulations are designed to add teeth to the legislation.

Draft regulations and guidance

The draft Exclusivity Terms in Zero Hour Contracts (Redress) Regulations 2015 propose that individuals employed under a zero hours contract have a right not to be unfairly dismissed or suffer a detriment if the reason is their failure to comply with an exclusivity clause. Any such dismissal would be automatically unfair, meaning that employees will not need to have the two years' service necessary for an ordinary unfair dismissal claim.

At the same time that the draft Regulations were published, BIS produced guidance for employers about the use of zero hour contracts. The guidance provides useful examples of the appropriate use of zero hours contracts (which may include for new business start-ups, seasonal work and special events), as well as providing suggestions for what to include in zero hours contracts and alternative options for employers to consider, such as fixed term and annualised hours contracts.

Best practice

Whilst the Regulations are only a draft at this stage, the clear intention is to ensure that employees on zero hours contracts who refuse to comply with exclusivity have adequate redress. If you use zero hours contracts, it would be sensible to review them to remove any exclusivity requirements, or to ensure that they are not relied upon.

There remains the risk that some employers will seek to circumvent the legislation by, for example, offering a guaranteed one hour of work per year. It is, however, anticipated that anti-avoidance measures will be introduced in due course.

Whilst zero hours contracts continue to provide a useful tool for employing individuals in circumstances where the requirements and level of work varies, it is important to ensure that contractual arrangements are kept under review. Fluctuating arrangements can, over tie, crystallise into a more regular, definite need for work and it is important that the contractual relationship reflects what is needed in practice.
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