Comment: Are zero-hours contracts worth retailers using at all?

A new consultation exercise, aiming to gather views from businesses and trade unions about how to go about closing loopholes arising from the proposed ban of ‘exclusivity’ clauses in zero-hours contracts, was launched by Vince Cable, Liberal Democrat business secretary last month.

Zero-hour contracts currently allow employers to secure an employee on an exclusive contract that gives the employer exclusivity over the employee but in return, it guarantees the employee no hours of work and instead requires them to work when asked. The government is planning to legislate to ban the use of exclusivity clauses in zero-hour contracts freeing employees to accept work from other employers.

Retailers are unlikely to lose much, even if the ban becomes law, but it could make such contracts less attractive overall, particularly if the Government decides to introduce penalties and remedies if employees are treated detrimentally by their employer.

In reality, retailers will still have full control over the number of hours they give to individual employees under the terms of their zero-hours contract and the removal of the exclusivity clause will not really change this. For this reason, any disagreement about how to legislate for this could be described as a storm in a teacup.

The planned ban on exclusivity could lead to problems, however, if retailers find they are no longer able to rely on their existing pool of workers to provide the necessary flexible resource. Some workers could lose their opportunity to work as a result because employers may need to increase the number of people they can go to.

From the employee’s perspective, the removal of exclusivity might seem beneficial as it would mean they could be on the books of more than one employer at once. Some employees may be doing this already of course, in the hope of securing more shifts, but in reality they are likely to find that their contracts are short-lived because the nature of these contracts mean that letting down an employer is likely to result in employees receiving no hours or a reduction in the number of hours of work that they are offered.

While the Government has acknowledged that zero-hours contracts can be valuable to employers and employees alike on the grounds of their flexibility, the threat of legislation and/or a code of practice to control their use inevitably mean they will be less appealing to employers.

Zero-hours contracts are not heavily regulated currently and this is part of the reason for their popularity among retailers as they provide a low-risk, flexible resource option. If this is going to change, retailers are bound to think again about whether such contracts are still meeting their needs.

Employers in the retail sector tend to use zero-hours contracts for a relatively small group of workers to fill gaps in employment caused by peaks in demand and absenteeism, for example. These employers may find that in future it is possible to reduce the need for zero-hours contracts altogether by placing these workers on short, fixed-term contracts, based on a limited number of hours per month.

To cover seasonal employment demand, annualised contracts could be agreed, whereby employees are required to do 50% of their total annual hours in the summer months, for example, and the remainder spread across the year.

Many alternative employment models are available to employers and depending on the nature of the retailer’sbusiness, some will be more appropriate than others.

In theory, the use of zero-hours contracts could leave some retailers exposed to a greater risk of discrimination claims, although employees would probably find this difficult to prove. This may be another reason to think twice about using them.

Issues can arise with zero-hours contracts if the same few employees are called upon to cover additional shifts and others are not given as many hours. This may lead to allegations that the system is not fair to everyone and could be viewed as discriminatory.

Equally, if a mother or carer is unable to do shifts at short notice, due to their responsibilities, this could lead to allegations that the ad hoc nature of the shifts is discriminatory.

Retailers using such contracts may not have fully considered such risks and in some cases placing workers on a more standard, fixed-term employment contract would be beneficial while also offering individual employees greater certainty about when and how much they are required to work.

Depending on the outcome of the consultation, which closes on 3 November 2014, draft legislation to further regulate zero-hours contracts may be included in the Government’s small business, enterprise and employment bill.

• Vanessa Di Cuffa is an employment law partner at Shakespeares Solicitors