The zero hours contracts problem: which political party holds the solution?

Author: Darren Newman

In the run-up to the general election, consultant editor Darren Newman looks at the hot topic of zero hours contracts and what both the coalition partners and the Labour Party propose to do about them.

In this general election year, there is one employment law issue that the major political parties are agreed on: something needs to be done about zero hours contracts.

The coalition partners obviously have a current advantage over the Labour Party in that they can put their proposals into law. The Small Business Enterprise and Employment Bill is currently before the House of Lords and the current clause 151 proposes that zero hours contracts should not be able to contain "exclusivity clauses" - contractual requirements placed on the employee not to work for any other employer for the duration of the contract.

This is unobjectionable in itself, but it is important to understand that the measure is almost entirely symbolic. In the first place, there is no real evidence that such exclusivity clauses are currently in widespread use. The Department for Business, Innovation and Skills (BIS) estimates that there are just 17,000 employees affected in the UK, but also relies on a survey conducted by the CIPD (Zero hours contracts - myth and reality) which suggests that the figure could be as high as 120,000. That larger figure, however, is based on a sample size of about 500 employees, and the question asked in the survey was whether or not the employer allowed them to work for other employers. It is unclear how many of the employees who thought that their employer would object to their working elsewhere actually had anything as formal as a contractual exclusivity clause.

Even if there is a serious problem with exclusivity, this measure will not solve it. The Bill would render exclusivity clauses unenforceable, but gives employees no means of challenging the terms of their contract. While the Bill has a Regulation-making power, which could result in employees being given protection against detriment or dismissal for asserting their right to work for other employers, such rights are not set out in the Bill itself.

It is probably fair to say that the issue of tackling zero hours contracts is one that is closer to the Labour Party's heart than the coalition's - and many would presume that Labour's approach to the issue would be more radical. Speeches and policy pronouncements are always carefully phrased, however, claiming that Labour will put an end to the exploitation of employees through zero hours contracts. There is no suggestion that the contracts themselves will be banned, although a casual listener to some speeches may form that impression. It is the exploitation that is the target, and it seems that exploitation is being carefully and narrowly defined.

At page 15, the policy document Changing Britain together says that Labour will "ban exploitative zero hour contracts so that if you work regular hours you get a regular contract".

The detailed policy proposal on which this is based was made in the Pickavance report on zero hours contracts, which proposed that, after a period of 12 months' continuous employment, workers on zero hours contracts who are working regular hours should have the right to be offered a contract that is "other than zero hours" and that provides a minimum amount of work (see page 17).

On examination then, the Labour Party's proposals will not make much difference either. Does anybody really think that a worker who has been given regular hours to work over a 12-month reference period is the main victim when it comes to exploitative zero hours contracts? And to what extent is a contract for regular hours that much of a benefit if an employee is working regular hours already? Surely it is the employees who have no pattern to their work who experience the greatest exploitation.

To be fair, the Pickavance report made a number of other suggestions - including a right to compensation when a shift is cancelled at short notice - but these would involve modest improvements to the rights of employees on zero hours contracts. In reality, most such employees would be better served by a more proactive approach to enforcing the minimum wage.

The proposals from the major parties allow them to claim that they are tackling "the problem" while doing no such thing. There is a reason, I think, why the proposals developed thus far are so weak. The label "zero hours contract" has caught on with the media, but the phenomenon at the root of the problem is not so easily pinned down and defined. A law directed forcefully and specifically at zero hours contracts will be almost bound to fail simply because it will create an incentive for employers to draft contracts in such a way that avoids the legal definition. Instead of zero hours contracts we will have contracts for one hour a week and nobody will be any better off.

The Government does recognize this problem and the Small Business Enterprise and Employment Bill allows for Regulations setting out "anti-avoidance measures". BIS carried out a consultation on the issue in the autumn and the results are awaited. But I think that if anybody really knew how to draft a provision that prevented an employer from using such avoidance tactics then it would have been set out in the Bill itself rather than being left to be included at some later stage.

The uncomfortable truth is that zero hours contracts are a product of the current state of the labour market and they are here to stay until the labour market changes. That is not to downplay the problem. There is too much glib talk about how many workers value the flexibility that a zero hours contract gives. That may be so for some, but it seems undeniable to me that the current widespread use of these ultra-flexible contracts gives most of the flexibility to the employer while the employee is left in limbo, unable to make plans or earn a regular and reliable income.

Zero hours contracts are a genuine problem. However, not every employment problem can have an employment law solution.