Workers may be able to show they are employees with unfair dismissal right
Zero-hours contracts have been in the news again recently, with both Vince Cable and Ed Miliband saying that they want to stamp out abuse of these agreements. However, two EAT decisions offer a reminder that workers on zero-hours contracts may count as employees and as such qualify for unfair dismissal rights.
For an individual to be an employee various elements must be present in the relationship with the employer. There must be an obligation on the employer to offer and on the employee to accept work; this is known as mutuality of obligation. The employee must also be under an obligation to do the work personally, while the employer must have a degree of control over the work carried out. Finally, there must be nothing in the contract that is inconsistent with the existence of an employment relationship.
Where individuals are engaged on a casual or zero-hours basis, employers will usually argue that they cannot be employees because there is no mutuality of obligation. However, the workers may still be able to show that they are in fact employees, either because their work has been carried out under an “umbrella” contract of employment that governs the relationship, or because each individual assignment amounts to a contract of employment.
Pulse Healthcare Ltd v Carewatch Care Services Ltd provides an example of an “umbrella” contract. The claimants in the case were engaged as care workers on zero-hours contracts which stated that “the employer is not under an obligation to offer the employee any work and has specifically reserved the right to reduce the employee’s working hours wherever necessary”. Following a TUPE transfer to another care provider, the new employer argued that this meant the claimants were not employees because there was no mutuality of obligation.
The EAT concluded that the zero-hours agreement did not reflect the reality of the relationship. The claimants were employed as part of an established team to deliver a care package for a specific individual for an agreed number of hours each week. They had all worked significant hours on a regular basis over a number of years. This meant that they were employed on global contracts of employment, even though they could query particular shifts when a new roster was produced. They were employees and entitled to argue that they should have transferred to the new care provider.
In Drake v Ipsos Mori UK Ltd the claimant worked as an interviewer. There was no obligation on the company to offer him work or on him to accept work that was offered, but a “verbal contract” was said to be in existence if work was offered and accepted. The respondent argued that there was no mutuality of obligation, because even once work had been offered and accepted, it could be reallocated or the claimant could decline to complete it.
The EAT concluded that in deciding whether the necessary degree of mutuality existed, two key questions needed to be asked. First, was there a contract between the parties? Second, was it a contract of employment? While the claimant was actually undertaking an assignment, it was clear that a contract was in existence – the reference to there being a “verbal contract” between the parties showed this. That contract was capable of amounting to a contract of employment, even though the company could take the work away, or the claimant could choose not to finish it. The individual would be an employee if he could show the necessary ingredients of personal service and control.
There are undoubtedly cases where zero-hours contracts are abused. However, as these EAT decisions show, individuals may still have protection against unfair dismissal as employees, even though they are engaged on zero-hours contracts. In practice, the more regularly an individual works over a period of time, the more likely this is to be the case.
Jo Broadbent is a senior professional support lawyer at Hogan Lovells
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