Ask Auntie - How to deal with zero hours contract workers

November 11, 2013

Dear Auntie

I work for a fashion retailer. We employ all of our part-time staff on zero-hour contracts (around 500 of them). We also have around 50 full-time staff, who are on permanent contracts. One of our long-serving part-time staff members who does a number of regular shifts, Sarah Ours, who is on a zero hours contract has recently fallen pregnant. My understanding is that we do not have to pay Sarah or keep her job open for her if she takes time off to have the baby because she is not an employee but only works under a zero hours contract. We are planning to issue a large cash bonus for all our permanent staff. One of the zero hours contract staff has told me that she considers this to be unfair – surely it is perfectly acceptable to differentiate between permanent employees and zero hours contract workers in this way?

Yours sincerely

Ina Directly


There is currently no legal definition as to what constitutes a “zero hours contract”. Usually this will be a casual/bank worker, who has an arrangement with the company under which there is no obligation for the company to offer work and no obligation for the individual to accept work. The individual is paid only for the hours he or she has actually worked.

Those members of staff working under zero hours contracts could be employees or workers. Depending on the nature of the arrangements, they could also be employees while they are working, but not during the intervening periods whilst they are not working (which would affect the length of their continuous service and accrual of various statutory rights).

Is Sarah an employee?

It is not clear from your letter what the practical arrangements with Sarah are, since you refer to the fact that she does a number of “regular” shifts. If there were a dispute in a court or Employment Tribunal as to whether Sarah were an employee or not, the court would look at the reality of the arrangement, not just the contract between the parties. The factors a court would normally take into account would be:

  • whether there were mutuality of obligations (to provide Sarah with regular work and for Sarah to work);
  • personal service (whether Sarah is required to provide their services personally);
  • control (the degree of control exercised by the company);
  • exclusivity (whether Sarah is free to work for other organisations);
  • the nature and length of the engagement;
  • pay and benefits;
  • integration into the Company; 
  • facilities and equipment; and 
  • financial risk (who bears the financial risk of there being insufficient work).

There have been varying approaches in the cases that have been dealt with in the courts in relation to zero hours contract workers. In Carmichael v National Power (2000), the House of Lords focussed on mutuality of obligation and stated that the overarching contract "did no more than provide a framework for a series of successive ad hoc contracts of service for services which the parties might subsequently make". When the individuals were not working, they were found not to be in employment.

In two more recent cases, however, the Employment Appeal Tribunal (EAT) has found that an employment relationship did exist. In ABC News Intercontinental Inc v Gizbert (2006) the EAT decided that there was an implied obligation on Mr Gizbert to accept or refuse assignments in good faith and found that there was an overarching umbrella contract under which Mr Gizbert was employed by ABC even when he was not working on an assignment. In Drake v Ipsos Mori UK Ltd (2011), the EAT decided that, despite the parties' ability to terminate the relationship at will, and the fact that there was no sanction for not completing a particular assignment, there was sufficient ‘mutuality of obligation’ to establish an employment relationship.

Is Sarah entitled to maternity leave and pay?

Workers do not have the right to maternity leave or pay, whereas employees do. For that reason it will be important for you to consider the factors listed under ‘Is Sarah an employee?’ in order to determine whether Sarah is an employee. You will then need to work out if she has the necessary level of service to qualify for maternity leave and pay.

Some of the factors you have mentioned, such as her long-standing service and the fact that she has regular shifts would imply that Sarah may be an employee and would be entitled to maternity leave and pay. However it is not possible to assess this accurately with the limited information you have given and it would be best to conduct a detailed analysis with your usual Fox Williams contact, to ensure that you properly consider all of the relevant factors.

Should we pay zero hours staff a bonus?

Individuals on zero hours contracts do not enjoy any specific protection from discrimination. However, given the breakdown of the workforce you have described, where full-time staff are permanent employees, and part-time staff are working under zero-hours contracts, you should consider the risk of a claim under the Part- Time Workers (Prevention of Less Favourable Treatment) Regulations 2000. The practice of denying part-time staff permanent contracts could itself fall foul of these provisions. You should consider carefully whether it can be objectively justified for the Company to only provide bonuses to permanent staff.

It would also be worthwhile reviewing the demographics of your workforce and considering whether there are significant numbers of individuals in your zero-hours workforce with any particular protected characteristics when compared with the demographic of your full-time/permanent workforce. Both of the individuals you have referred to are female and there is a risk that women (and perhaps also young people) might make up the majority of your zero-hours workers. This could give rise to the risk of an indirect sex (or age) discrimination claim, and is worth considering when you make your bonus allocations.


Related pages:

Experts on the human side of enterprise more

icons Addthis Print Contact Register

Contact

tel: +44 (0) 20 7628 2000
10 Finsbury Square, London, EC2A 1AF
View map

Accreditations

  • Top Ranked Chambers UK 2014 - Leading Firm
  • Ranked in Chambers Europe 2013 - Leading Individual
  • Ranked in Chambers Global 2014 - Leading Firm
  • Legal 500 - Leading Firm
  • The Lawyer UK 200 - Listed Firm
  • The Law Society Excellence Awards 2012 - Shortlisted
  • Investors in People - Bronze