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Zero Hour Contracts – Restrictions on Employers

Published 10 May 2017

Since last month, the ‘zero hour contract’ legislation has placed a number of restrictions on Employers and what is allowed in Employment Agreements. 

Employers are now restricted from requiring Employees to be available for work outside of their standard work hours.  Employers should state what hours, or what average of hours across a week/fortnight, employees are expected to be available to work.  These hours become the Employee’s ‘guaranteed’ hours.   If Employers do not guarantee their Employees hours, employees do not have to be available to accept any offers of work and Employers run the risk of not having staff available to perform the required work. 

Employers are able to include an ‘Availability Period’ in their agreement (also known as an ‘on call’ period).  During the agreed period of time, Employees may not necessary be offered work but have to be available should work be offered.  Employees must be compensated for their availability e.g. per hour, per availability period, or as included in salary.  Employers should only use this as an extension of guarantee hours and not as a mechanism to ensure Employees are always available without offering any hours of work.   Employers may be liable to pay at least the minimum wage for the entire availability period if there are constraints placed on the Employee’s freedom, the Employee is given significant responsibilities and/or the availability period is of great benefit to the Employer.

Employers are also restricted from cancelling Employee’s shifts without a "cancellation of shift" clause.  A "cancellation of shift" clause sets out the portion of compensation Employees will receive for the cancelled shift and how much notice will be given.  If Employers do not have this clause Employees must be paid in full for that shift.  The entire shift must also be paid if Employees have already arrived to begin the shift or the shift has commenced. 

The ‘zero hour contract’ legislation has made it increasingly difficult for Employers to restrict their Employees from working for another Employer. 

It is now unlawful for an Employer to restrict their Employee from taking up simultaneous employment with another Employer unless:

  • the employee has a "restriction on secondary employment" clause;
  • the employer has genuine reasons based on reasonable grounds for restricting secondary employment in the manner provided for in the clause; and
  • those reasons are stated in the clause.

Where you can only guarantee your Employee a limited number of hours, it is unlikely that a restriction on working for other Employees will be enforceable. In introducing this restriction the Government is balancing the business needs of Employers with the individual’s needs of earning a livelihood.

If Employers do wish to restrict their Employee’s secondary employment, we suggest that the agreement clearly sets out what type of alternative employment are restricted and the reasons for this.