Zero hours contracts and guaranteed hours
We have heard a lot about "exploitative" zero hours contracts, ending the use of them was one of the Labour party's most publicised pledges during the run up to the general election earlier this year. The chosen method of implementing that pledge is by requiring employers to offer workers on zero hours or low hours contracts a varied or new contract that guarantees them a minimum number of hours. While regulations will lay out the detail of how this process will work, and a considerable amount of consultation has been promised on that, we can glean from the Bill and supporting documentation, including the explanatory notes to the Bill and the Next Steps to Make Work Pay policy paper ("the Next Steps paper"), that:-
- The inclusion of "low hours" contracts as well as zero hours contracts is an anti-avoidance measure, preventing employers from offering very low hours contracts in place of zero hours contracts to circumvent the right to guaranteed hours. What amounts to "low hours" is to be consulted upon.
- The right to guaranteed hours will only be triggered where conditions (to be set out in secondary legislation) as to "number, regularity or otherwise" are met.
- The guaranteed hours offered to workers are intended to reflect the amount of work the workers have carried out in a particular reference period. The Next Steps paper refers to a 12-week period.
- Regulations may require employers to not only guarantee the same number of hours, but also the same days, times or working patterns as the worker has worked during a reference period.
- A worker is under no obligation to accept the offer of guaranteed hours and can choose to continue to work on a zero or low hours contract.
- Potentially, employers may enter into a cycle of having to repeatedly re-offer workers a guaranteed hours contract at the end of every reference period should hours increase over time - this seems unduly onerous. Consultation has been promised as to how these subsequent review periods will work in practice.
- In certain circumstances employers will be able to limit the offer of guaranteed hours to a fixed period, subject to it being reasonable to do so.
- The right will not be triggered during notice periods where a worker has resigned or been fairly dismissed; and
- Where employers fail to comply with the guaranteed hours provisions, workers will be able to bring claims before an employment tribunal with remedies including a capped number of weeks' pay.
The level of the compensation cap may be pivotal in encouraging a business that these provisions need to be complied with, rather than simply being a risk that will come with engaging workers on zero hours contracts. The provisions may also encourage some employers to offer those on zero hours contracts fewer hours on a continuous basis to limit exposure should they be converted into guaranteed minimum hours contracts.
Reasonable notice of shifts and shift changes
The Bill also provides for a new right to reasonable notice of a shift. This right will apply only to workers on less secure contracts, such as zero hours contracts or those with irregular shift patterns. Employers must also provide such workers with reasonable notice when shifts are changed or cancelled. Where the employer fails to comply with these notice requirements, the worker will have a remedy before an employment tribunal.
Such workers are also to be entitled to payment where shifts are cancelled, moved, or curtailed at short notice. Regulations will set out the detail of what the payment due will be in these circumstances and any exceptions applicable. Workers will be able to make a complaint to an employment tribunal where an employer fails to make the payment.
Where an employer wishes to rely on any of the exceptions, with regard to the provision of guaranteed hours or to payment for altered shifts, it is required to explain at the time that they are relying on such an exception and why they are able to do so. The evidential value that these notices may have should a worker subsequently raise a tribunal claim remain to be seen - will they limit the evidence an employer can bring, or only form part of a subsequent defence?
Both the guaranteed hours contracts and notice of shift changes are to be adapted and applied to agency workers. A consultation on how this is to be achieved opened on 21 October and will run until 2 December 2024. The consultation is available at the application of zero hours contract measures to agency workers.
Fire and rehire and collective consultation
The UK government intends that fire and re-hire practices can only be used where there is genuinely no alternative. To achieve that, the Bill creates a new category of unfair dismissal where the reason (or principal reason) for the dismissal was that the employee refused a variation of contract sought by an employer. The dismissal will also be unfair if the employee is then replaced by someone else who has accepted the varied terms. An employer will only be able to escape liability if it can show that the reason for the variation was to eliminate or significantly mitigate financial difficulties affecting the employer's ability to carry on the business, and that in all of the circumstances, the variation could not reasonably have been avoided - this is a high threshold to meet. The consultation that is undertaken about the variation with the employee or a recognised union will also be a factor in assessing fairness.
As with all of the provisions in the Bill, what is set out as regards to fire and rehire, is subject to amendment as the Bill passes through Parliament. However, given the high threshold for escaping liability, the introduction of this provision in its current form may push employers to consider redundancies in favour of attempting to vary contracts and retain employees.
The changes to collective consultation rules set out in the Bill will impact on both the procedures for varying contracts and redundancies. Currently, the trigger for collective consultation relates to numbers of redundancies at a single establishment within a period of 90 days. Reference to a single establishment is to be removed, with the trigger relating to numbers of redundancies over an employer's whole business.
On 21 October the UK Government opened a consultation on the lifting of the cap on the protective award (currently 90 days gross pay per dismissed employee) if an employer is found to have not properly followed collective consultation procedures generally, and the availability of interim relief (an employment tribunal order to continue paying salary pending a hearing and final judgment) to employees bringing claims for either the protective award or unfair dismissal claims arising from fire and rehire practices. This consultation is due to close on 2 December 2024 and can be found at collective redundancy and fire and rehire.
Fair Work Agency
The Bill also sets up a statutory labour market enforcement agency - referred to as the "Fair Work Agency" in the Next Steps paper. The Agency will have the power to enforce basic fundamental employment rights such as minimum wage, the unpaid employment tribunal award penalty scheme and modern slavery legislation. It appears this will be an enforcement agency with teeth - where labour market offences are suspected and court orders obtained to prevent the risk of non-compliance, failure to comply with those orders will be an offence punishable by up to 2 years in prison. With powers to extend the remit of the Agency in the future, this appears to be a move towards greater state enforcement of employment rights.
