Blog: Government acts on ‘zero hours’ contracts

Patrick Walshe, partner and employment law expert at Philip Lee in Dublin, writes on Government action on zero hours contracts.

The Department of Jobs, has announced that it intends to take immediate action regulating the use of so-called “Zero Hours” contracts in Ireland. It has referred draft legislation to the Attorney General for ‘priority drafting’.

Zero Hours contracts are a model where an employee must be available for work, but does not have any specified hours of work – effectively amounting to being ‘on call’. The employer retains complete discretion when it comes to the employee’s working hours and is free to decline to take up an employee’s services if it wishes to.

These contracts have been the subject of intense criticism, particularly in the UK, where they are quite widely used. Among other things, they have been criticised as abusive of employees because the employee has no way of knowing in advance what their income will be in any particular week.

The position is ameliorated to an extent in Ireland because the Organisation of Working Time Act, provides for guaranteed minimum amounts of remuneration in situations where the employee does not actually work any hours. The Act provides that if an employee is required to be available for work, but does not actually work the hours they were bound to be available for, they will be paid the value of 15 hours or of 25% of the hours, whichever is the lesser.

Notwithstanding this additional layer of protection enjoyed by Irish workers, the Government commissioned a report in 2015 from the University of Limerick in relation to the use of Zero Hours contracts.

That study revealed that approximately 5.3% of Irish workers were employed on such contracts. The study also noted the prevalence of “If and When” contracts in the Irish workplace. “If and When” contracts are different in that the employee is not obliged to take up the offer of work – unlike a Zero Hours contract model where the employee has no choice.

It appears that the State has decided to take action following on from the release of the report. The legislation is still only in draft form and the text has not yet been published. The information available, however, suggests that it will make a number of significant changes, as follows:-

1. Employers will be obliged to provide certain information to new employees including the expected contract duration, the manner in which pay will be calculated and what the employer reasonably expects the normal extent of the working day/week to be. It will be an offence if the employer fails to comply. Obviously the requirement to provide information in relation to the normal extent of the work is to give an employee key information early on.

2. It is proposed to introduce a new minimum floor payment of three times the National Minimum Wage where an employee is called into work but is not actually provided with the hours expected This is clearly designed to discourage employers from summoning employees to work for short periods.

3. Perhaps most fundamental of all, the legislation will create a new cause of action where employees can argue that their actual hours worked are not accurately reflected in their contracted hours.

If there is a difference between what the contract says and what happens in practice, the employee can seek to be placed in a band of hours which is closer to the hours they actually worked.

4. Whether or not they consistently work more than their contracted hours is to be determined by examining the hours worked against an 18-month reference period. This is deemed to be a sufficiently long period as to allow peaks and troughs of business to be factored into the calculation – for example seasonal fluctuations.

5. Finally, the legislation will include reinforced anti-victimisation provisions for employees who initiated claims under this new legislation. This, as in other legislation, is designed to prevent employers from penalising employees who make a complaint.

In the absence of a published text, it is difficult to say definitively, but the intention is apparently to eliminate Zero Hours contracts in their entirety (although there may be exceptions in the cases of genuine casual work, actual emergency cover or short-term relief work, as in the case of maternity cover).

These developments are most interesting. There has been speculation for some time as to whether the Government would introduce legislation to deal with the issue of Zero Hours (and related) contract use in Ireland. Most of the political parties referred to these contract models in their election manifestos last year – but until now, there has been no suggestion of actual action. The next steps, including the published text of the legislation, are eagerly awaited.