Member Article

The changing status of zero-hour contracts

The upsurge in zero-hours contracts has been the focus of intense political debate and has prompted extensive media coverage over recent weeks.

The Government has now confirmed that it will embark upon a consultation on the abuse of such contracts. In the main, however, the coverage of this issue has failed to address one of the key features of such a contract: employment status. The person engaged to work under a zero-hours contract will generally be a ‘worker’ and therefore not entitled to the enhanced rights and protection afforded to an ‘employee’ such as the right not to be unfairly dismissed. This difference in employment status was the focus of the recent Court of Session case of Docherty and another v S W Global Resourcing Ltd [2013] CSIH 72.

In order to avoid redundancies, reduce labour costs and offer more competitive tenders, the employer decided that it would move its employees to a zero-hours contract with no obligation to provide them with any work and no guaranteed salaries. A consultation process was conducted and notice given to the employees of this intention. Whilst the employer had sound business reasons for this change, the employer had not appreciated nor seemingly intended that the effect of this change would be to alter the employment status from that of ‘employee’ to ‘worker’ with the result that individuals would lose accrued statutory rights such as the right to redundancy pay. The employees brought claims of constructive unfair dismissal in response to their employer’s actions.

At first instance the dismissals were found to be unfair; having not intended the change in status, the tribunal found that the employer could not rely on the potentially fair ‘some other substantial reason’ nor could the employer be said to have followed a fair procedure having failed to consult on that issue. This decision was reversed on appeal to the Employment Appeal Tribunal. The Court of Session has now confirmed that an employer’s ignorance or mistaken view of the law may mean that the dismissal was fair but this will be just one of the factors to be determined. Consideration must also be given to whether the employer’s ignorance was excusable which requires account to be taken of whether professional advice ought to have been sought. The radical nature of the change gave rise to the suggestion that the employer ought to have been aware that there may have been a legal problem. The matter has been remitted for the tribunal to consider whether the dismissals were fair taking these factors into account.

This case not only serves to highlight the important legal distinction between engaging staff on a contract of employment and a zero-hours contract, but also demonstrates the importance of treading carefully when looking to change terms and conditions.

For further information, please contact Jean-Pierre van Zyl, Head of Employment at Square One Law on 0843 224 7925.

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