knowledge 21 August 2017 |

Is a Zero-Tolerance Approach to Zero Hour Contracts on the Way?

What is a zero hours contract?

A zero hours contract is a contract of employment which requires an employee to be available to work for a certain number of hours each week. However, there is no corresponding obligation on the employer to provide working hours to the employee. Zero hours contracts demand maximum flexibility from employees and minimum commitment from employers, and are particularly useful in industries which experience seasonal highs and lows. They are used by many employers to optimise staffing levels throughout the year.

While there are many legitimate business reasons for use of such contracts, zero hours working practices have been a source of media criticism in recent years as workers can be faced with uncertainty regarding their income security and left in a precarious position when accessing financial credit and arranging childcare. The use of zero hours contracts has been the subject of a number of industrial relations disputes in recent years, particularly in the retail industry.

Much of the debate here has been driven by media reports in the United Kingdom. However, in contrast to zero hour workers in the UK, zero hour workers in this jurisdiction are protected by the Organisation of Working Time Act. 

Minimum payments for zero hour workers

Section 18 of the Organisation of Working Time Act 1997 provides that, where an employee is contractually required to be available for work and the employer does not give him/her hours, the employee is entitled to be paid for 25% of the hours for which s/he was required to be available or 15 hours pay, whichever is the lesser. Employees benefit, therefore, from a de facto "floor" below which their pay must not fall.

Section 18 does not apply to "casual" workers who are not contractually obliged to accept work from their employer. In Contract Personnel Marketing Ireland v Marie Buckley DTW1145, for example, the Labour Court found that a merchandiser whose working hours varied depending on client activity was not engaged under a "zero hours" contract. The worker in this case was not obliged to remain available for work during defined periods, and when she was offered work from time to time as it became available, she was not obliged to accept it. In these circumstances, the claimant was not protected by section 18.

In addition to "casual" workers, laid-off workers, workers on short time, ‘on call’ workers, and workers who have not been required to work due to an emergency are excluded from section 18. 

Prevalence of zero hour working practices 

Notwithstanding the significant media attention which has focused on the use of zero hour contracts in Ireland, it is fair to say that the use of zero hour contracts is far more prevalent in the United Kingdom, where up to 1.4 million workers are on such contracts. The UK has now banned exclusivity clauses in zero-hour contracts, so that employees cannot be prevented from working for another employer. Similar regulatory measures were proposed following a review in Northern Ireland. Meanwhile in New Zealand, the law has recently banned zero hour contracts.

In 2015, the Irish government commissioned the University of Limerick to report on the prevalence and impacts of zero hours contracts in the public and private sectors in this jurisdiction. It found zero hours contracts to be rare in this jurisdiction, and expressed concern about the growth of "if and when", casual, contracts. It found that, when used inappropriately, such contracts undermine existing legislative protections, especially remuneration entitlements.

Proposed changes to the legal position 

The Government is now proposing changes to the legal environment with a view to increasing the protection for zero hour workers.

While the text of the proposed legislation has not yet been published, the Government’s proposals include an amendment to the Organisation of Working Time Act 1997 which will prevent employers from recruiting employee on a zero-hour contract in which the employee will not have an entitlement to work any hours. There will be limited exceptions to this rule, such as for genuinely casual work, emergency cover or short-term relief work.

Employers will be required to inform employees in writing, within five days of commencing employment, of five core terms of employment, including what the employer reasonably expects the normal length of the employee’s working week will be. Failure to do so within one month of commencement of employment will constitute a criminal offence.

Where an employee is called into work but not provided with the hours expected, it is proposed that he/she will receive a minimum or floor payment of three times the national minimum wage or three times the rate set down in any applicable Employment Regulation Order.

The proposed legislation will create a new cause of action for employees whose contract of employment does not reflect the reality of the hours worked, on a consistent basis over a reference period of 18 months. Such employees will be able to request that they be placed in a band of hours reflecting the reality of their working time.

It is proposed that an employer will be entitled to refuse an employee’s request to be placed in an appropriate band of hours if it can demonstrate that

• significant adverse changes have affected its business; or
• there are emergency circumstances such as close of business due to flooding; or
• that the hours worked by the employee were due to a genuinely temporary situation, such as maternity leave cover (This will not apply to an employer who has entered into a banded hour arrangement by collective bargaining agreement with employees).

The proposals include protection for employees invoking their rights from victimisation or threats of victimisation. It is expected that the Workplace Relations Commission will have jurisdiction to enforce the new rules.

Conclusion

The proposals have now been sent to the Attorney General’s office for "priority drafting". The proposals, if enacted, would add to the regulatory burdens faced by employers and may act as a deterrent to businesses allowing employees to work more hours. Bodies representing employers have described the proposals as "crude" and indicate that they will increase the costs and administrative burdens of on employers.

If enacted in their current form, the proposals could significantly restrict an employer’s ability to streamline their employment practices and could potentially lead to criminal prosecution where employers fail to comply. Given that there is now a definite political impetus for reform of this area, employers who avail of zero hour working practices are advised to closely monitor the progress of this legislation as it is likely to significantly affect the way they do business.