Zero Hour Contracts
In the past employers have been able to employ people on contracts which do not offer a set minimum number of hours a week but require the employee to be ‘on call’ to work if needed. These contracts have become known colloquially as ‘zero hour contracts’ and have posed significant challenges for employees who would find themselves working 40 hours one week and declined any work at all the next week in the most extreme cases, all the while being required to be available and not have another job.
Due to a rise in the number of zero hour contracts in recent years, and protests of employees engaged on such contracts, the Employment Standards Legislation Bill was passed on 1 April 2016 to restrict the use of these agreements.
Employers are still able to require workers to be available during certain times, however now if they wish to do so, they must give reasonable compensation to employees for being ‘on call’ as well as being required to give workers a minimum number of guaranteed hours.
Importantly, the legislative changes do not require employers to implement the changes for another 12 months.
As an employer who wishes to employ workers with an ‘on call’ period that they are required to be available must adhere to the following standards:
• Provide a minimum number of guaranteed hours;
• Specify agreed hours of work in the employment contract;
• Specify the amount of availability they require from the employee;
• Have genuine reasons based on reasonable grounds for including the on call provision and for the number of hours of work agreed on. These reasons will include consideration of whether they are able to practically meet business demands without such a provision, and whether the amount of availability required is reasonably proportionate to the number of agreed hours.
A sticking point in the legislation which will no doubt pose problems over the coming years is the requirement to provide ‘reasonable compensation’ for workers who are on call beyond their guaranteed hours. The legislation does not provide guidance as to what constitutes reasonable compensation as it will be heavily dependent on the industry and on the effect of the provision on the individual employee. It is up to the employer and the employee to decide what will constitute reasonable compensation in the circumstances.
It has been common in the past for employers of shift workers to adopt a ‘tough luck’ approach to paying their employees when shifts are cancelled for any reason. Shift work is defined in the legislation as rotating shifts of continuous blocks of time with shifts potentially occurring at different times and on different days. The new law means that this is no longer acceptable and employers have the following obligations:
• The employment agreement should specify a reasonable notice period to be given before a shift is cancelled;
• The employment agreement should specify reasonable compensation for when the shift is cancelled outside the specified notice period.
The same problems arise here as with zero-hour contracts as there is much scope for interpretation when assessing what is reasonable notice and what is reasonable compensation.
The new amendments also contain significant changes in the Paid Parental Leave scheme and include heftier penalties for employers who do not stick to the minimum standards for wages, holiday leave, sick leave and other entitlements, and for those employers who are not strict on recording employees’ working hours. If employers are unsure about how the changes will affect them it is advisable to review their current employment agreements and consult a lawyer for assistance in implementing the new requirements.
This post was published in the FMCG Business magazine.