Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015

Lord Stevenson of Balmacara Excerpts

Monday 7th December 2015 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for introducing these regulations. He was not, I think, involved in the previous Government’s detailed work on the Bill from which these regulations stem. In that sense perhaps he could be forgiven for not really getting to the heart of the issue before us. While I reluctantly agree that these regulations are a step in the right direction, I hope to persuade him that they are nothing like what was intended when the matter was debated in the Bill to which he referred. The Small Business, Enterprise and Employment Act should have outlawed people being discriminated against for having more than one zero-hours contract. Instead, it offers a false choice for those who are affected to seek redress—at their cost, let us be clear—through the employment tribunal system.

The key issue I would like the Minister to focus on is that these regulations do not in fact ban exclusivity clauses. They will exist after these regulations go through and I would be grateful if the Minister would confirm that. Individuals will not have many rights in terms of how they get redress against that, as I will explain. As I said, the regulations represent a small step in the right direction but they will not provide zero-hours workers with effective protection. The Government’s proposals really fail to address the main abuses expressed by those who have studied this issue—and, indeed, the points that were raised when the Small Business, Enterprise and Employment Bill was discussed. They are little more than window dressing. The Minister said that the abuse of zero-hours contract workers seeking a second job was wrong but he has not taken the opportunity to outlaw it.

There are a number of points worth making. The regulations use a much narrower definition of zero-hours workers than is allowed for in the Act. I would be grateful if the Minister will confirm that the Act would permit the Government to extend the ban to individuals who are employed in freelance arrangements, for instance, but are economically dependent on a limited number of employers. The Government have decided not to act to protect this group—perhaps the Minister will explain why.

In March 2015, the coalition Government indicated that they were minded to extend the ban on exclusivity clauses to all workers, not just those on zero-hours contracts, who earn less than £20 an hour. The aim expressed then was to ensure that those employed in more insecure and lower-paid forms of work could not be forced to remain available for one employer but could seek employment from a range of employers. This is a very good idea and we welcomed it at the time. The Government seem to have backtracked on that approach. Will the Minister explain the thinking behind that decision?

The Government claim that providing a right for zero-hours contract workers to go to an employment tribunal and, after the next regulations come forward, a chance to go into conciliation services using a fast-track system, will actively deter employers from using exclusivity clauses. I think the Minister said that it would make employers “think twice” before acting. That seems a very weak form of protection. They should not be thinking about this at all. The idea that they should think twice about it is rather risible.

We are talking here about very poorly paid employees—who often are not paid at all because they do not get called in for work—and about those employed on zero-hours contracts in any way having to pay up to £1,200 for any claim for unfair dismissal. As well as being low-paid and not being offered the right possibility of a range of work, they will have to pay £1,200 upfront in order to take this forward. Obviously, if they want to do a detriment claim it is £390, but I think even that would be difficult.

The MoJ statistics reveal that only around two-fifths of individuals who have applied for a remission in employment tribunals have been successful. This low success rate is well understood to be due to the fact that remission claims have to be based on household income rather than the income of the individual concerned. The individual has a choice to make if he or she has a partner who is working because the cut-off point at which they will be able to do a remission may well have been breached by the partner’s earnings, and the cost of going themselves is £1,200. It is a rock and a hard place.

Finally on this catalogue of defects in the process, the regulations make it clear that any compensation awards will actually be very limited because they have to be linked to losses or expenses which the individual incurred as a result of the employer’s actions. A zero-hours contract worker is going to find it rather difficult to prove that they incurred any loss. Individuals such as hotel and bar staff, many of whom make up this group, are often working on a series of zero-hours contracts with different employers. Under these contracts, they have no legal rights to ongoing employment so it is very difficult for them to prove that if they had not remained available to work for employer A they would have been guaranteed a certain amount of pay from employer B. This test will also trip up a number of people.

A lot of rethinking is required in this area if we are going to make this stack up in any sense to the issues that were raised by the Minister. He thought that these regulations have resolved matters but I think they are actually making things worse. What is needed is a new think about redress in matters of this nature. What we really need is legislation that includes those on zero-hours contracts, as well as other people in casual employment, to make sure that they have the basic employment rights—including, for example, redundancy pay, the right to request flexible hours, and the right to return to work following maternity or paternity leave—which are often not available in these areas because of a misunderstanding of the law, although technically employees are entitled to them. That could be rolled back into an overarching arrangement around issues to do with exclusivity terms. As I said, these regulations are a step in the right direction but it is really a very small step.

[The Earl of Courtown]

My Lords, I thank the noble Lord, Lord Stevenson, for even reluctantly agreeing that this is a step in the right direction. He made a number of points, which I will deal with. If I do not deal with them, I will of course write to him. We agree that these regulations are a welcome step for those on zero-hours contracts. We must, however, send a message to the minority of employers who may attempt to ignore the exclusivity ban. As such, it is important that the Government create this additional layer of protection for individuals.

The noble Lord, Lord Stevenson, suggested that exclusivity still exists. No, an individual cannot be prevented from looking for work elsewhere and should simply ignore the exclusivity terms made by the employer. The individual has no obligation to inform the employer. We understand that employers could potentially offer no further work as a result of finding out that the individual has worked elsewhere, and that is why it is important that these redress regulations create a route of redress for individuals who suffer a detriment in such a case.

The noble Lord also asked why we have backtracked on the income threshold. This Government’s first priority was to introduce the ban on exclusivity clauses in zero-hours contracts. As I said earlier, we did this on 26 May this year. Our next priority was to introduce a route of redress to ensure that individuals on zero-hours contracts with exclusivity clauses were protected from employers who dismissed them or subjected them to unfair treatment if they sought work elsewhere. We are introducing that route of redress now.