Zero hours contracts: How far can (and should) the law go?

Not everyone is happy with the government’s proposed legislation on zero hours contracts. The TUC said it doesn’t go far enough, UNISON called for much tougher measures and John Philpott dismissed it as kitten toothed.

Of the recommendations in Norman Pickavance’s report, published in May, the only one the government plans to bring into law is the ban on exclusivity clauses. These are clauses which prevent employees from working for another firm, even though the employer does not guarantee to provide them with work. Workers therefore can’t even cover their risk of low hours by taking on a series of contracts with different employers.

This is the most obviously unfair abuse of zero hours contracts. There will be little opposition to outlawing it. That said, even in the harsh world of zero hours employment, such clauses only affect a minority of workers. According to the CIPD, around 10 percent are prevented from working for other employers with a further 15 percent facings some restrictions, though the data is somewhat hazy. (See Page 23 here.)

Furthermore, not everyone is convinced that the ban is workable. Here’s employment lawyer Elizabeth George:

Banning exclusivity clauses will result in precisely NO benefit at all to the overwhelming majority of zero-hours workers.

Yes it is ludicrous for an employer to think it can demand exclusivity from someone when it is offering no guaranteed work in return, but exclusivity clauses (which are not particularly widespread amongst the million plus zero hours contracts out there) are not the real issue here.

The crux of the matter is why are employers choosing to use contracts that provide their staff with no security and the bare minimum of employment rights in situations when work is clearly available and demand not the least bit unpredictable? The answer is – because they can.

And this means that, even if there is no longer an exclusivity clause, employees who works for someone else can simply have their hours stopped. There is no guarantee of work so, if you piss off your employer, you don’t get any more.

Darren Newman agrees:

What this means (I suppose) is that an employer will not be able to sue a zero-hours worker who has – out of some selfish determination to earn a living – gone off and done some work for somebody else. I’m sure I won’t be the first to point out that they won’t need to. The clause might be legally unenforceable, but that will hardly matter if a worker can be denied any further work as a result of breaching it and there is nothing in the Bill, so far, which creates a right for a worker not to suffer a detriment for breaching an exclusivity clause.

In reality this provision will be inserted into employment law with little practical effect. It will gather some headlines but do next to nothing to improve the lives of those who are trapped in precarious and low-paid employment.

The trouble is, these objections apply to many of the other recommendations in the Pickavance Report too. 

1. Ensure that workers on zero-hours contracts are not obliged to be available over and above their contracted hours

Fine, you’re not obliged to be available but if we call and you’re not free, it’s the last call you’ll get.

4. Give zero-hours workers a right to compensation when shifts are cancelled at short notice

Sorry, your shift has been cancelled. What? You’re taking us to a tribunal for compensation? OK, here’s an hour’s pay. Yeah, I know you’re entitled to 2 hours but is it really worth going to court for the extra? Oh, and don’t expect a call next week.

The only recommendation with any force is Number 3, which recommends that zero hours contracts automatically become permanent after 12 months. (Also recommended in the Resolution Foundation’s report.) Even this doesn’t help those in their first year, though, and might well lead to contract termination after 11 months becoming the norm.

That phrase “because they can” is important. It sums up the imbalance of power in the relationship. Zero hours contracts grew out of a weak labour market where employers hold the power over those desperate for work. The contracts themselves are one-sided because the employer has a pool of labour. People need the hours more than the employer needs any one individual. Because the contracts don’t guarantee work, the employer doesn’t even need to discipline or sack a worker, he can just stop calling them.

As I said last time I looked at zero hours contracts, they reflect an economic power imbalance and, short of banning them completely, I’m not sure how far the law can go to mitigate the effects of their abuse. Banning them seems draconian when, by a number of measures, most people on them are satisfied with the arrangement. According to the CIPD, only 27 percent are dissatisfied and a UKCES study found that only a third were on zero hours contracts because they could not find a job with regular hours. (As an aside, these figures are broadly similar to the numbers of people who say they are dissatisfied with self-employment.)

Even if zero hours contracts were banned, the casual labour market might simply shift to other forms; yet more self-employment, for example. To stop employers abusing their workers requires some form of Big Power pushing in the opposite direction. That used to be what the trade unions did. We now assume the state will take that role but, without the sort of far-reaching powers that few politicians would be prepared to grant, legislation is unlikely to achieve much.

The government’s ban on exclusivity clauses might scare a few employers away from some of the worst abuses but the exploitation associated with zero hours contracts will continue. Employment relations are determined, largely, by social and economic factors with the law simply providing the scaffolding. Set against low growth, low investment, low pay and underemployment, there is only so much the law can do.

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8 Responses to Zero hours contracts: How far can (and should) the law go?

  1. changinghr says:

    Jesus, that was depressing reading. Wonderful insight but a realisation of how far we have slipped over time to providing a buffer in this country to the excesses of business. The PR people churn out pre-Thatcher 1970s Britain but all we have done is replaced that with a huge pendulum swing to the right, destroying any checks and balances from state or trade unions on the way. What’s the tipping point going to be ? Building a shanty town of the underclass on the banks of the thames ?

  2. Jackart says:

    The only thing worse than being exploited, is not being exploited. The main “skill” employers want from unskilled people is the ability to turn up, sober, on time and not abuse the customers. Prove you can do that, and you’re already a long way to a full time job with a contract and pension, where the employer will invest time and money in training you. What zero-hours do is allow the long-term unemployed a means to prove they can turn up, on-time, sober and not abuse the customers at zero risk to employers. The result: The UK has amongst the lowest unemployment in Europe, and one of the highest labour force participation rates. Despite having one of the worst recessions. This ability of employers to put low productivity people to work in the UK also explains the low productivity of the UK workforce. Other countries have higher productivity, and higher unemployment. Of course lefties would rather the unemployed rotted on benefits as state serfs for life than ever work, via contracts of which they disapprove, towards self-sufficiency.

    • Rick says:

      There is little evidence of zero hours contracts being used as a stepping stone to a full time job with a contract and pension. Around half of the people on them have been on them for over 2 years, a quarter for over five. ZHCs are being used by employers as a long-term strategy, not a short-term measure.

      Intrigued by the idea of productivity as a human characteristic, given that so many different factors determine an organisation’s productivity.

  3. Jessica says:

    Great post (if depressing)

    I’ve not been following the detail of all of this but I still struggle to see how many of the arrangements described in the media are legal. Everyone is entitled to holiday pay and SSP even if they don’t have contracted hours. It sounds like lots of employers and employees are confusing genuine casual contracts which don’t have mutuality of obligation with employment contracts where no hours are specified.

    However, the minimum rights are pitiful if you don’t have many hours in the first place so perhaps I am quibbling here.

    Another related issue that government could tackle effectively is employers keeping weekly hours down to avoid crossing the NI threshold. I know of at least one supermarket chain that is doing this – ie it is better for them to have 2 employees at 15 hours each than 1 at 30. If government charged employer NIC from first £ this would not incentivise employers to act in this way.

    • Jackart says:

      Or maybe, just maybe scrapped the ridiculous fiction that is employers’ NICs altogether. But that would mean admitting the top rate of tax is in fact 62% (on income just over £100k).

    • Bill Quango MP says:

      We do this all the time. 80% of the workforce is under the ni threshold.
      But then they pay no tax and no ni either.

      Very few have ever asked for more full time hours. Most have another job. Or are students. Or retired. Or work for their partners , or have children of school age, or babies, or nursery age. Or do grandparent duties. Or care for a relative.

      It’s not just EVIL EMPLOYERS. It’s also what some people want. Several members of the team have been here 30 plus years. Many for ten or more.

      Now, when I was a yoof, in a jewellery store, we had eleven ft and 2 pt people working there. Today, there would be 3 ft and 1 or 2 pt maximum.

  4. In a zero hours contract you get paid for the work that you do, which is exactly how it should be: http://malcolmhenry.com/2013/08/22/i-love-zero-hours-contracts/

    The problem of precarious income affects many more people than those on zero hours contracts. No amount of employment legislation is going to help the half of the population that are unable to participate in paid employment (pensioners, children, carers, sick, disabled, etc.)

    The solution is a universal basic income at a level that ensures everyone can pay the essential bills. Then employees will be on equal terms with employers, able to choose when and where to sell their labour.

  5. Alex says:

    Just institute workplace democracy. Then workers can’t be abused by bosses because workers and bosses will be one and the same.

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