Settlement agreements and zero hours contracts

Settlement agreements are often used to settle employment status or contract disputes.

Many support the flexibility that zero hours contracts can offer both employers and workers whilst there are significant numbers who feel that these types of working arrangements are unfair and exploitative to the workforce. However, there seem to be a number of recurring points of misunderstanding when it comes to zero hours contracts.

Definition – what is a zero hours contract?


There is currently no legal definition of a zero hours contract and therefore contracts which fall under this umbrella term can vary significantly. Generally the term is understood to mean a “working relationship between an employer and a worker where there are no specific hours and payment is made only for work performed”. There is no single type of zero hour contract and therefore the criticism in the press is often misplaced.

Background


In law, an individual can be an employee, a casual ‘worker’ or someone who is genuinely self employed. Each of these groups have different levels of protection in law with employees enjoying the highest level of protection.

Employee


An employee is someone who is engaged under a contract of employment. As they have a contract of employment they enjoy employment rights including Unfair Dismissal protection unlike workers. The issues that have been raised by Business Secretary, Vince Cable relate to these types of contracts i.e. where the contract does not provide set hours. Sometimes under this contract an employee is required to be available for work. He is concerned that this allows employers to exploit employees. In extreme cases, employees can be restricted from working elsewhere and told to be ‘on standby’ for work but to remain at home. This would allow the employer to avoid paying National Minimum Wage as they may have to if the employee was on call in the employer’s premises. It is understandable that this type of contract could exploit employees as they cannot work elsewhere but may receive no hours and therefore no wages. This has prompted the government to respond to the debate and The Department for Business Innovation and Skills (BIS) published a consultation in December 2013. We are awaiting the result of this consultation. The consultation focussed on exclusivity in agreements and lack of transparency for employees.

This type of contract should be used for employees who work set hours even if they are minimal. A good example would be an employee who expects to work (and is expected to work) every Saturday. They are particularly popular in the retail sector.

Workers


It is very common to have an agreement between an employer and a worker which simply says that the employer will not guarantee hours and the worker is free to turn work down.

This is not an employment contract, but a causal worker agreement. This type of agreement can be very useful for employers and workers. For employers, it allows them to have a bank of workers to be called upon if necessary. For workers, they can be great to allow for flexibility in working hours. This is helpful if a worker is trying to fit work around studying or child care commitments.

This type of agreement has received criticism as reports would suggest that a worker is deprived of holiday and sick pay entitlement. This should not happen. A worker has the same right to holiday as an employee as the Working Time Regulations apply to all workers. Also, if a worker is scheduled to work a shift but is off sick, they may be entitled to Statutory Sick Pay. Importantly, this type of relationship does not confer employee status on a worker so they will not have employee’s rights such as the right to claim Unfair Dismissal but, generally, the worker is free to work elsewhere too and is free to turn down the offer of hours from the employer.

It is important that you are aware that the labels that the parties apply to a relationship are not definitive – i.e. that the individual would not be deemed an employee, even if their agreement provided expressly that they are not. The Tribunal will apply a range of tests, and will look through a ‘sham’ document if it does not reflect the genuine working arrangement in practice.

These type of agreements should not be used where a worker is working consistent regular hours as this may confer employment rights. Instead it should be used by businesses which have varying requirements relating to staffing. A catering company may well use causal workers for big events. They are also used frequently for seasonal workers.

Self employed


The self employed are different again. Generally they invoice the business, are free to work elsewhere, use own equipment etc. Businesses must make sure such workers are genuinely self employed to ensure that they do not attract worker’s rights to holiday and so forth. This type of arrangement is generally governed by a consultancy agreement which deals with the obligations on each party.

Comment


The point for readers to note is that flexible working arrangements definitely have their place and merits for both sides. A carefully drafted causal workers agreement will allow you to work on a casual worker basis. To recap, the real point of caution is that you must ensure that the contract or agreement you receive reflects what happens in practice.

If you have had any issues in relation to challenging your terms of employment and require assistance with your terms of settlement, please do get in touch.

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