Written evidence submitted by GMB

 

Ending the abuse of zero hours contracts

 

Introduction

GMB is the United Kingdom’s third largest trade union with over 620,000 members in all sectors of UK economy, in both the public and private sector ranging from low paid workers to highly paid, highly skilled, technical and managerial grades.

 

GMB is a TUC affiliated union and we welcome the opportunity to respond to this consultation. GMB believes that trade unions play a key role in securing workplace justice and protecting our members against all forms of exploitation.  

 

Principally GMB believes that zero-hours are symptomatic of the wider growth in insecure employment, which should remain the ultimate target of any legislative proposals. We are opposed to the development of a labour market built on precarious, informal work and flexible wages.

 

Whilst atypical employment still represents a minority of employment, there is increasing concern that the UK labour market is moving towards lower paid, less secure and more exploitative forms of employment, at a time when job opportunities are scarce and many households are struggling with an unprecedented fall in living standards. Of particular concern has been the rapid growth in zero-hours contracts.

 

GMB responded to the ONS consultation on the collection of data on Zero hours as we feel that the early estimate from the ONS was misleading and a large underestimate.  In line with the TUC and other unions, GMB feel that the true figure is closer to or exceeds one million workers.  There is a need for further research to be done to produce more accurate official figures to show the true picture of the numbers involved. This should include anyone working reduced hours contracts, agency work and other forms of precarious employment. In March 2014 ONS have revised their figures to show nearly 583,000 employees are affected, this is more than double their original estimate.

 

Employers argue that zero-hours contracts are beneficial for both employers and workers, providing employers with flexibility and offering workers a stepping stone into permanent employment and the ability to balance their work and caring commitments.

 

At present we believe that in the absence of any legislative barriers employers use zero-hours contracts simply because the ‘market’ allows them to, and arguably under pressure from competitors, many are actually forced to use them, which undermines the position of many employers with whom GMB currently has recognition and membership, forcing them into a vicious cycle of cuts in order to compete.

 

GMB considers that zero-hours contracts are increasingly a conduit for the exploitation of working people.  The growth in casual employment is contributing to the growth in in-work poverty and the increasing reliance by working people on food banks and pay-day loans.

 

GMB policy is to call for

 

GMB believes there is an urgent need for the government to legislate to protect zero hours contract workers and others employed in casual, insecure employment.

GMB welcomed the government’s decision to carry out of review on the use of zero-hours contract, in the vain hope that the review might lead to genuine reforms which raised living standards for zero hours contract workers and protected them from exploitation.   This fails to protect vulnerable workers. 

 

There seems to be an underlying assumption that the use of zero-hours contracts offers employers and workers welcome flexibility. 

 

It is clear that the use of zero-hours contracts benefits employers:

 

 

However, as the Regulatory Policy Committee recently highlighted, when drawing up the consultation document and accompanying impact assessment the government has failed to consider the market power of employers over employees.  This imbalance of power means that employers are able to glean all the ‘flexible benefits associated with zero-hours contracts; whilst all the financial and security risks are transferred to the workers.

 

GMB recognises that a minority of workers are attracted to the flexibility of zero-hours contracts.  This includes professional staff, who due to the demand for their skills, are in a position to negotiate good remuneration alongside flexible working patterns and nurses who have a permanent job but use the bank system to top up their hours when they want to increase their income.

 

However, there is no evidence that zero hour contracts benefit workers more widely.  Employers argue that zero-hours contracts provide a stepping stone for into more secure employment. However the official statistics confirm that for many zero hours working is not short-term.  Overall 44 per cent of zero hours contract jobs had lasted for two years or more with the same employer and 25 per cent had lasted for five years or more.

 

Employers also argue that zero hours contracts are beneficial for workers with caring responsibilities.  However, the lack of a work guarantee, and related unpredictability of work from week to week (and day to day) can put a strain on families and make it very difficult to arrange childcare or elder care.  Due to their uncertain employment status and the intermittent nature of their employment, many parents also lose out on family friendly rights, including the right to request to work flexibility and the return to their substantive job after maternity or paternity leave.

 

Employment on a zero-hours contract is also often not a matter of choice for workers, particularly in those sectors where it is the predominant form of employment, for example in the care sector.  Research for the Low Pay Commission found that nearly 60 per cent of domiciliary care sector workers and around a quarter of their managers and supervisors were on zero-hours contracts.  In such sectors, workers must either accept employment on a zero hours contract or not have a job.

For many being on a zero-hour contract offers no tangible benefits but rather leads to mistreatment and abuse at work.  

 

GMB supports the concerns of the TUC and other trade unions that the policy proposals under consultation will do very little to address the major forms of abuse experienced by many zero hours contracts on a day to day basis. These include:

 

 

If the government is serious about cracking down on any abuse of exploitation of individuals they should consider implementing the following policy recommendations:

 

 

GMB

GMB has been actively working with two of the largest employers in the Security sector who are carrying out workplace audits to ascertain the extent of zero hours working in their companies. Early results indicate that there is not an overuse of zero hours contracts (with the exception of the events part of the business which lends itself to this way of working).

 

Both companies are aware of the implications of zero hours working for some employees and have introduced a positive programme to move employees from zero hours contracts onto more appropriate permanent contracts. One security company has put a policy in place and issued guidance for their managers to seek to reduce the number of Zero Hours contracts they offer.

 

April 2014

 


Appendix

GMB Response to the BIS consultation questions

Addressing exclusivity

Question 1:

Are there circumstances in which it is justifiable to include an exclusivity clause in a zero hours contract? If you answer yes, please describe the circumstances that justify such a clause.

No. 

GMB does not believe that it is justifiable for employers to use an exclusivity clause. The effect of this would be to prevent an individual from seeking additional or alternative employment, when at the same time the employer refuses to guarantee the individual a regular income on which they can afford to live.

Question 2:

Do you think the Government should seek to ban the use of exclusivity clauses in employment contracts with no guarantee of work?

Yes.

Most workers would choose to have secure, well paid, permanent employment with a single employer.  As this choice is not always available, GMB agrees that all workers should be free to work for more than one employer. 

GMB therefore agrees there is a case for introducing a legislative ban on the use of exclusivity clauses.  The legislation should state that an exclusivity clause should be void and unenforceable.  If exclusivity clauses are included in contracts, workers should be entitled to compensation.  Workers should have a right not to suffer a detriment or to be dismissed for accepting work with another employer.

GMB believes that such a ban should not be limited to zero-hours contracts but should extend to all forms of employment contracts.   This approach would avoid the need to define what amounts to a zero-hours contract.  It would also ensure that all workers would be protected from the abuse use of exclusivity clauses. 

Alternatively, the government should introduce legislation which requires any employer using exclusivity clauses to recompense workers in full for their agreement to forego the right to accept additional work from another employer.  We support the TUC suggestion that employers should be required to pay individuals who are subject to an exclusivity clause the equivalent of 48 hours pay per week.  Pay should be calculated on the basis of the going rate for the job, including bonuses, commission and over-time pay. 

GMB is calling for workers to have the right to secure a "deemed" contractual number of hours based on what they actually have worked in any previous 12 week period.

 

It is also important to recognise that the use of exclusivity clauses is not the only abusive practice in this area.  One of the major problems associated with zero-hours contracts is the ability of employers to require staff to remain available on the off-chance that they will be offered work.  Such practices are contributing to the growing problem of under-employment amongst zero-hours workers.

Findings from the CIPD survey suggest that a sizeable minority of employers (15 per cent) contractually require zero-hours workers to be available for work, while a further 17 per cent report that in some circumstances zero-hours workers are expected to be available for work.    Other zero-hours workers feel pressurised into remaining available, even though they are not subject to any contractual requirements. They fear they will be penalised by not being offered future opportunities if they turn down an offer of work. 

GMB believes that there is an urgent need for the government to take action in this area. One way of preventing employers from placing unreasonable expectations on staff would be the introduction of a right for all ‘workers’ not to suffer detriment if they turn down an offer of work beyond their contracted hours.  Detriment should be specifically defined to include circumstances where an employer refuses or fails to offer zero-hour contract workers future employment.  It should also be automatically unfair for an employer to dismiss a ‘worker’ for refusing or failing to be available for work beyond their contracted hours.

Findings from the recent CIPD survey also reveal that zero-hours workers often receive very limited notice when work is available or when it is cancelled. The lack of adequate notice places pressure on families, and makes it difficult to organise child or elder care. 

GMB believes that employers should be required to specify in a written contract or statement of terms and conditions how much notice will be given of available work or before work is cancelled.  Legislation should provide for a minimum period of notice. 

Workers should also have the right to reimbursed by employers for travel costs where a shift is cancelled at short notice.  Employer should also be required to pay the workers for their scheduled shift. These changes would ensure that workers are not left out of pocket.  They would also encourage employers to plan their staffing needs well in advance.

 

Question 3:

Do you think an outright ban on exclusivity clauses in employment contracts with no guarantee of work would discourage employers from creating jobs?

No. 

There should not be a link between the use of exclusivity clauses and employers’ decisions to create jobs. 

The use of exclusivity clauses may be attractive for some employers enabling them to retain a pool of workers, who are familiar with their business practices and who can be called on with short notice. 

However a growing use of exclusivity clauses in zero-hours contract has a seriously detrimental impact on labour market performance and on the wider economy.  It hinders the ability of workers to take up additional employment, leading to the increased risk of under-employment and declining incomes amongst zero-hours workers.  Such practices also have significant cost implications for the treasury in the form of reduced income tax returns and increased reliance on in-work benefits.

 

Are there any other unintended consequences of Government action that should also be considered?

GMB believes that it would be difficult for the Government to limit a legislative ban on exclusivity clauses to ‘zero-hours contracts’ especially as the concept of a zero-hours contract is not recognised in UK labour law.  In our ONS response we stated that we were extremely concerned at the lack of a clear legal definition as Zero Hours Contracts covers an umbrella of atypical and precarious contracts.  The government would need to adopt a new statutory definition.  It will be difficult to ensure that the definition is water-tight and will prevent employers from devising new contractual arrangements designed to avoid the new regulations.

 

GMB understand that the government is considering applying a ban on exclusivity clause to contracts which do not guarantee the worker at least one hour of work per week.   Experience of the pay between assignments provisions in the Agency Worker Regulations suggests that this approach will have significant adverse and unintended consequences.  It will encourage the use of short hour contracts.   Employers will retain the ability to vary – or ‘nearly zero down’ – the employee’s working hours with limited or no notice. The employees will receive very limited additional protection, as compared with a zero-hours contract. 

GMB would be opposed to this approach.  Instead we would recommend that the ban on exclusivity clauses should apply to all ‘workers’ and that the existing statutory definitions should be used.

 

Question 4:

Do you think Government should provide more focused guidance on the use of exclusivity clauses, for example setting out commonly accepted circumstances when they are justified and how to ensure both parties are clear on what the clause means? If you answer yes, what information should be included?

The adoption of good practice guidance by itself will not prevent the misuse of exclusivity clauses.  Legislation is required if the misuse of exclusivity clauses is to be prevented.

If good practice guidance is to be developed, it should not only describe the circumstances where the use of exclusivity clauses may be justified.  It should also explain where the use of such contracts would be inappropriate and is likely to amount to a restraint of trade.

 

Question 5:

Would a Code of Practice setting out fair and reasonable use of exclusivity clauses in zero hours contracts (a) help guide employers in their use, and (b) help individuals understand and challenge unfair practices? Please explain your response.

Whilst GMB recognises the merits of good practice guidance, a voluntary code of practice is unlikely to change employers’ practices or to prevent the misuse of exclusivity clauses.  As the Regulatory Policy Committee noted, many zero hours contract workers do not have the market power to resist the use of exclusivity clause which disadvantage them.  The adoption of a voluntary code is unlikely to make any difference.

We have further evidence to support this as in 2009, GMB worked closely with other key unions to develop greater transparency for workers and consumers on what happens to service charges, tips or gratuities. We were disappointed that the Government response was to have a Code of Best Practice which has been in force since 2009 and has not made any difference to consumers or workers in the sector.

 

Our main concerns with a Code of Practice are on the enforcement side and this need to be clearly stated and that we would have preferred a statutory rather than a voluntary code of practice which has more “teeth”.

 

If the government decides to introduce legislation banning or regulating the use of exclusivity clauses, then a statutory code of practice could assist employers to comply with the law.

As with the TUC, GMB does not agree that guidance or a code of practice should be ‘employer-led’.  This would be equivalent to asking those who are responsible for abusive practices to define what constitutes acceptable forms of mistreatment. 

Rather any Code or guidance should be agreed by employers and worker representatives.  Acas should therefore be asked to prepare the text.

Question 6:

Do you think existing guidance and common law provision are sufficient to allow individuals to challenge exclusivity clauses and therefore no specific action from Government is required?

No. 

We also do not agree that existing common law rules offer adequate protection for workers or can effectively prevent abuse. 

GMB recognises that the many exclusivity clauses will be unenforceable as they are in restraint of trade and are too restrictive and not in the public interest.  However, to challenge such clauses the worker will need to make a claim for breach of contract to the county court if they are still in employment or an employment tribunal if their job has ended.  Such challenges are both expensive and complex.  This route is therefore only likely to be available to trade union members or those who can afford legal advice and representation.  Many zero-hours contract workers will be deterred from making such claims.

In addition there are barriers in place to access to justice in respect of fees and costs. Zero Hours workers are more likely to be low paid and not unionised and therefore would not have the support of a trade union. We feel that many would not go down the legal route to challenge these clauses or their contracts.

 

Improving the transparency of zero hours contracts

Question 7:

If you have sought employment information, advice, or guidance on zero hours contracts before, (a) where did you receive it from, (b) how helpful was it to you in terms of explaining your position in regard to zero hours contracts, and (c) how could it have been improved?

GMB note that the old DIRECT GOV website had much better guidance for workers on their rights and we have a number of concerns about the simplistic entries in the new GOV.UK website especially for NMW workers.

The Acas website currently contains limited guidance on zero-hours contracts.  The advice explains the circumstances in which employers may decide to use zero hours contracts.  It would be helpful if the guidance also explained when the use of zero hours contracts is not appropriate and if the website provided more detailed advice on how to calculate holiday pay and redundancy pay for zero hours contract workers.

 

Question 8:

Would the additional information, advice and guidance suggested in the first option (first bullet point, para 41), help individuals and business understand their rights and obligations? If not, what other information should Government provide?

GMB agrees that there is a need for additional clear, practical and impartial advice on the rights of zero-hours contract workers.   Such guidance should set out the circumstances where it might be legitimate for employers to use zero hours contracts and where it is inappropriate.  

The advice should also contain guidance on employment status rules.  The direct.gov website used to contain helpful guidance setting out the factors which were most commonly associated with employment status for workers, employees, the self-employed, casual workers, and agency workers.  This has been replaced with less clear guidance on the gov.uk website.

Future guidance should also contain best practice advice for employers on zero hours contracts. For example, it should encourage employers to inform workers of their employment rights.

GMB believes that all workers should be given a clear written contract which reflects their expected hours of work and that these should be regularly reviewed.

Our policy is that if a Zero Hours worker has a regular patter of work over a fixed period of time then they should be offered guaranteed minimum hours and they should be offered a more permanent contract.

Working regular hours over a period of time should also encourage employers to allow all workers to use workplace grievance and disciplinary procedures and to be accompanied by a trade union official.  Such procedures can be used to resolve employment disputes early and amicably.

Question 9:

Further to your answer to Question 5, would a broader employer-led Code of Practice covering all best practice on zero hours contracts encourage more transparency?

As stated in our response to question 8, GMB recognises there is a need for good practice guidance on the use of zero-hours contracts and other insecure forms of employment.  However, such a Code as envisaged would have no legal effect and therefore will not achieve the cultural shift that is required if the abuse of zero-hours contract workers is to be ended.

GMB are concerned by the proposal that a code of practice should be employer-led.  Such a Code would be unbalanced, would assert the rights of businesses and would do nothing to address the power imbalance between employers and employees which was highlighted by the Regulatory Policy Committee.

Acas should be asked to lead on the preparation of advice.  This would help to ensure that any text would have credibility and would balance the interests of both employers and working people. As a more effective alternative, GMB would naturally be happy to contribute to discussions with ACAS

Question 10:

Do you think that model clauses for zero hours contracts would assist employers in drawing up zero hours contracts, and support employers and individuals to better understand their employment rights and obligations? If you answer yes, what should be the key considerations be in producing model clauses?

No. 

The development of such model terms would legitimise such contracts and may encourage their wider use.  GMB believes that the government should encourage the use of well-paid, secure and permanent contracts rather than the use insecure, casual forms of employment. 

 

Question 11:

Do you think that existing employment law, combined with greater transparency over the terms of zero hours contracts, is the best way of ensuring individuals on zero hours contracts are making informed choices about the right contract for them to be on?

No.  

Recent CIPD research highlighted the level of confusion amongst employers and workers about individuals’ employment status and their entitlement to employment rights.  This confusion stems from the complexity and inconsistency in the rules on employment status.  The uncertain employment status of zero-hours contract workers and the intermittent nature of their employment also mean that employers are able to avoid employment law obligations and to undercut competitors. 

As the Regulatory Policy Committee report highlighted workers often have no choice over the type of contract they receive due to the lack of market power. The Committee’s report stated:

“If employers did not have market power, then employees – if they wished - would presumably, for example, be able to negotiate a move to guaranteed hours contracts without Government intervention. This might also explain why employees with zero-hours contracts accept clauses like exclusivity which disadvantage them.”

These problems cannot be remedied through the adoption of good practice guidance.  We believe that the government’s policy proposals are completely inadequate to deal with the problems highlighted by the CIPD research or to meet the Secretary of State’s commitment to ‘crack down on any abuse or exploitation of individuals.’

If the government is serious about improving transparency in the employment relationship and ending the mistreatment of zero hour contract workers they need to adopt the following measures.

The right to receive a written statement of employment particulars is currently limited to employees whose employment contract lasts one month or more.  Employers are required to provide the written statement within 2 months of the start of employment.  All workers should have the right to receive a written statement of terms and conditions of employment before their employment starts or on the first day of work at the latest.   The content of the written statement should also be extended.  Employers should be obliged to state what hours workers should be expected to work.   This would prevent employers from labelling individuals as zero-hours workers, when in practice they are expected to work regular hours. All workers should also have a right to an itemised pay slip and we have made this call in all our submissions to the Low Pay Commission.

The issue of employment status is critical for staff employed on zero-hours contracts, as it determines which employment rights they are entitled to.  

GMB recognises that many zero-hours contract workers and in particular those with more regularly working patterns, will qualify as employees and therefore benefit from a fuller range of statutory rights.  The likelihood of zero-hours contract workers qualifying as employees has grown in recent years as the courts are increasingly looking at the entirety of the employment relationship when determining an individual’s employment status rather than just concentrating on the terms of their contract. Nevertheless, it is not uncommon for employers to inform zero-hours staff that they are not ‘employees’ or to issue contracts which state that zero-hours contract staff are not entitled to basic ‘employee rights’.   Such practices can only be challenged if an individual is willing to take a claim to an employment tribunal.  Many, especially the lower paid, are likely to be deterred from doing so by the new employment tribunal fees and the fear of losing their employment and their income.

Zero-hours contract staff are less likely than other employees to benefit from rights with qualifying periods due to the irregularity of their working hours.   Many will also lose out on basic workplace rights, including unfair dismissal protection, statutory redundancy pay and the right to request to work flexibly, because they lack the necessary continuous employment. 

Zero-hours workers are particularly disadvantaged by current continuity rules, following the well known GMB case of Carmichael v National Power plc [1999] 1 WLR 2042.  The House of Lords decided that individuals, who were employed on casual contracts, were employees whilst working as tour guides at a power station. Their contract came at the end of each shift as their employer had no legal obligation to offer them future work and they were not legally required to accept future work.  

 

GMB believes the employment status rules should be reformed to ensure that not only zero-hours contract workers, but also casual workers, agency workers and freelancers, are protected from mistreatment at work.   We believe that the following policy should be adopted:

            Adopting a new, single definition of ‘a worker’ which covers all current employees and workers and applies to all statutory rights. 

            Alternatively, employee-only rights could be uniformly or incrementally extended to ‘workers’.

Yes. 

GMB believes that there is a need for greater transparency and guidance for all workers.

As stated in response to question 11, GMB believes that employers should provide all workers with a written statement of terms and conditions of employment before their employment starts or on the first day of work at the latest.   The statement should specify the hours that the worker is expected to work, as well as their pay rate and holiday entitlements.

Employers should also ensure that all workers have access to workplace grievance and disciplinary procedures and have the right to be accompanied by a trade union representative in all grievance and disciplinary meetings.

GMB supports all workers receiving written contracts to reflect the expected hours they work. GMB support an assessment of hours worked over the first (and any subsequent) 12-weeks period consistent with existing rules.

 

Question 13:

Are there unintended consequences of introducing any of these options? Please explain your response.

The policy proposals outlined in the consultation document fail to meet the government’s stated objective of ‘cracking down on any abuse or exploitation of individuals.’  If the government is serious about preventing the mistreatment and abuse of zero hours contract workers they need to commit to a fuller reform of UK employment law.

 

 

GMB is not in a position to address the additional Questions 14 to 41 contained in the consultation as these are directed at employers and individuals

 

 

 

GMB,

22 Stephenson Way, London   NW1 2HD

General Secretary: Paul Kenny

 

For further information please contact:

Heidi Benzing – Political Liaison Officer

Heidi.benzing@gmb.org.uk

 

 

March 2014