The publicity surrounding Sports Direct over recent months has once again brought the issue of zero hours contracts into sharp focus. The topic first caught the attention of the public in early 2015 when the abolition of these types of contracts was referred to in party manifestos in the run-up to the general election.
A zero hours contract is unusual in that it does not oblige an employer to provide a minimum number of hours work. Contracts of this type, primarily used in hospitality, retail and manufacturing, can give either "worker" or "employee" status. Zero hours workers have the same rights as regular workers such as the right to minimum wage and holidays and zero hours employees can also gain protection from unfair dismissal.
Initially the big bad wolf was the use of exclusivity clauses preventing workers from accepting work with other companies while engaged under a zero hours contract. They were therefore entirely dependent on getting work from one company, and if none was offered, they had no way of earning an income.
In May 2015, the UK Government brought into force regulations preventing the use of exclusivity clauses in zero hours contracts. Further protection took effect in January 2016 with regulations providing protection from unfair dismissal for employees where the principal reason for the dismissal is that the employee breached an exclusivity clause in their contract.
Unlike normal unfair dismissal claims (which require an employee to have at least two years' service), there is no service requirement needed to make a claim.
Workers benefited from the introduction of these regulations. They are now protected from any detriment (which can include termination of their contract) should they work for another employer in breach of an exclusivity clause.
Over the summer, the activities of Sports Direct have been the subject of scrutiny, with the use of zero hours contracts linked, by the press, to numerous abuses of workers. These were alleged to include punishing staff by reducing their hours when they had to take time off to collect sick children from school or visit a dying relative. Sports Direct subsequently offered staff the opportunity to move off zero hours contracts onto a contract guaranteeing a minimum number of hours each week. Large companies like McDonalds and JD Wetherspoon have done the same.
But is this more to do with PR and public perception of zero hours contracts than the contracts themselves? Will the move just be to contracts with a nominal number of guaranteed weekly hours, with the majority of work still offered at the employer's discretion? And does the alleged detriment caused by using these contracts outweigh the benefits of them to both the economy and individuals?
The advantages to businesses of zero hours contracts are perhaps easier to identify than advantages to workers. Businesses where demand for services fluctuates, like tourism and hospitality, can avoid the costs of fixed overheads by using zero hours contracts.
In times of economic uncertainty it can be argued that is good for the business and good for workers who at least have the opportunity of some work.
But compare that to research by the TUC that average weekly earnings for zero hours contract workers are £188 compared to £479 for permanent workers.
Additionally, those most likely to be employed on these contracts are women. Yet statistics published last year suggest 1.4 million workers are employed on zero hours contracts, and research published by the CIPD says 65 per cent of those say they are satisfied or very satisfied with their jobs – a higher proportion than the working population as a whole (63 per cent).
It seems unlikely a ban on zero hours contracts (similar to the one in New Zealand) will take place any time soon. Yet while Sports Direct will not have enjoyed the publicity focused on the contracts over the summer, press scrutiny has arguably been the most effective way of getting other large employers to reconsider both how they use these contracts and whether they need to use them at all.
Innes Clark is Head of Employment and Partner at Morton Fraser.