Employment law issues - Small Business, Enterprise and Employment Bill

The Small Business, Enterprise and Employment Bill (“SBEE”) has now been published. The main publicity has surrounded the introduction of a mechanism for improved regulation of zero hours contracts and that is our focus below, together with an interesting public-sector redundancy payment clawback provision regarding senior departures.

The Government is also targeting the behaviour of what it views as a small but nevertheless significant number of “rogue employers” by providing that the increased maximum fine of £20,000 for the failure to apply the minimum wage can now apply on a per worker basis.

That punitive theme is also seen in the introduction of a specific penalty for failure to pay awards of compensation ordered by an Employment Tribunal and increasing the outstanding amount by 50% subject to a minimum of £100 and a maximum of £5,000.

Zero hours contracts

The key message, which was hinted at in the Queen’s Speech and earlier announced by the Business Secretary, Vince Cable, is that exclusivity clauses will be unenforceable in zero hours contracts.

Zero hours contracts have been the subject of much debate and despite trade union attempts to render such contracts illegal the Government has acknowledged that they “have a place in today’s labour market”. However, the Government is persuaded that exclusivity provisions – namely clauses which prohibit the worker from doing work or performing services under any other contract or under any other arrangement - undermine the choice and flexibility zero hours contracts can otherwise bring and can be an “abuse”. Hence the need for regulation.

For the first time, zero hours contracts are given a statutory definition, namely:

“a contract of employment or other worker’s contract under which¬ (a) the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and (b) there is no certainty that any such work or services will be made available to the worker.”

So it is clear that the prohibition extends both to contracts of employment and arrangements which confer a “worker” status upon an individual; but it will not capture independent contractors who do not attain worker status.

In particular further provisions may be made to:

  • impose financial penalties on employers,
  • require employers to pay compensation to zero hours workers and
  • confer rights on zero hours workers.

Significantly, Vince Cable also announced that the Government will consult further on how to prevent evasion of the exclusivity ban – such as using a series of 1 hour fixed contracts - and work with unions and business representatives to develop a code of practice on the fair use of zero hours contracts by the end of 2014.

Where confidentiality is a key factor for an employer, the absolute prohibition suggests that it may not be possible for an employer to list a series of direct competitors for whom the employee/worker may not work. However, normal confidentiality clauses would clearly be possible, but may not be sufficient. Therefore zero hours contracts may not be suitable for senior employees in any event.

Public sector exit payments

The aim of this measure is to ensure a consistent approach to recovering redundancy and exit payments for “high earners” leaving a public sector role and then returning to a role in the same part of the public sector in a short period of time.

The details will have to be captured in Regulations that will be prepared by the Treasury. It remains to be seen whether they will be broad enough to capture post-termination consultancy appointments (or indeed zero hours arrangements!) with former high-earners. Such Regulations may have to grapple with the application of early retirement pension provisions and not merely lump sum cash payments, but that remains to be seen.

The Government wishes to strike the right balance by encouraging a system which is flexible enough to restructure public sector workforces. It presumably also wishes to avoid requests for Ministers and Senior Civil Servants to appear before the Public Accounts Committee to explain such revolving door senior appointments.

Additional provisions

In addition the SBEE will provide for annual reporting requirements for protected disclosures by prescribed persons, and will amend the employment tribunal procedural rules relating to postponements of hearings to limit the number of such postponements and require costs orders to be considered when postponement requests are successful.

This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, click here.