Small Business, Enterprise and Employment Bill

Written evidence submitted by Citizens Advice Scotland (SB 06)

Citizens Advice Scotland (CAS), our 61 member bureaux and the Citizen Advice Consumer Service helpline form Scotland’s largest independent advice network. Advice provided by the Scottish CAB Service is free, independent, confidential, impartial and available to everyone. Our website, Adviceguide, also provides the public with up to date information on a range of topics. We are champions for both citizens and consumers and in 2012/13 we helped over 314,000 people deal with over a million issues. We want a fairer Scotland where people as citizens and consumers are empowered and their rights respected

Summary

1. With an estimated 1.4 million zero hours employment contracts in the UK [1] , their growing prevalence has given rise to a number of serious causes for concern. Citizens advice bureaux in Scotland have highlighted a number of different problems stemming from the way zero hours contracts have been used by employers, particularly in the last year.

2. Whilst zero hours contracts may be suited to particular types of work, such as casual or seasonal labour, the misuse of zero hours contracts is becoming a major problem, which should be addressed to prevent exploitation and hardship. Misuse can include situations where zero hours contracts are issued by employers inappropriately, such as where a full-time or part-time contract may be better suited and have led to a number of serious problems for CAB clients including:

· Lack of work causing destitution

· Serious debt and budgeting difficulties due to a fluctuating income

· Difficulty accessing support from the benefits system

· Lack of entitlement to certain employment rights and confusion over employment status

· ‘Zeroing down’ – effective dismissal deterring workers from enforcing basic rights

3. Citizens Advice Scotland welcomes the ban on exclusivity clauses in zero hours contracts proposed in the Bill. It is extremely unfair for an employer to prevent someone from taking on another job, ‘just in case they’re needed’. However, this move will not prevent the misuse outlined above. CAS believes that more must be done to prevent these situations and recommends the Small Business, Enterprise and Employment Bill is used as an opportunity to ensure that workers are protected from the misuse of zero hours contracts. We recommend the Committee consider options for strengthening the Bill in this area including:

· Workers on a zero hours contract should be given a statutory ‘right to request’ a contract that guarantees hours, without suffering dismissal or detriment for making the request

· Legislate to ensure that where mutuality of obligation for the employee to undertake work provided by the employer is present, an individual is classed as an ‘employee’ rather than a ‘worker’ even if their contract states zero hours

· Extending protection from unfair dismissal to workers as well as employees

· Extending full rights to parental leave and pay to workers as well as employees

· Requiring employers to inform prospective candidates that the vacancy is on a zero hours basis, for instance by publishing it in the job advertisement, or by informing them at interview.

Exclusivity clauses in zero hours contracts

4. Citizens Advice Scotland welcomes the ban on exclusivity clauses in zero hours contracts introduced by the Bill. Whilst not the biggest problem facing CAB clients with zero hours contracts, instances of restrictive exclusivity clauses have been reported. A ban on exclusivity clauses in contracts that guarantee no work is an attractive solution that would prevent workers being stopped from seeking other employment if their current employer has no work to give them. It is extremely unfair for an employer to prevent someone from taking on another job, ‘just in case they’re needed’.

5. It also complements the Government’s aim for a labour market that is ‘flexible, effective and fair’, by promoting flexibility for individuals to balance the flexibility enjoyed by their employer.

Ø A West of Scotland CAB reports of a client who is currently on a zero hours contract, but was offered a permanent full time job doing similar work to what they currently do. However, their current employer contacted their prospective employer to complain and ‘put a stop to’ the client going to work for the company.

Lack of work causing destitution

6. One of the key features of zero hours contracts is that no work is guaranteed in any week. For a growing number of workers, far from offering flexibility and choice in their working patterns, their zero hours contract has left them with very little, or no income whatsoever for a period of time. Citizens advice bureaux in Scotland advised clients who found themselves in crisis and destitute as a result of a sustained period without work – in some cases being unable to afford to eat and requiring a referral to a food bank.

Ø A North of Scotland CAB reports of a client who is employed in a laundry on a zero hours contract. She has been laid off work for the past three weeks due to a machinery breakdown. She is currently facing hardship due to loss of income and was consequently referred for a food parcel.

Ø An East of Scotland CAB reports of a client who works on a zero hours contract. He has only had three days’ work in the last month and as a result will have earned only about £150. The client has been to the Jobcentre for help and been advised that the only way they can help is if he signs on for Jobseeker’s Allowance (JSA). The client was referred to a food bank.

Ø An East of Scotland CAB reports of a client whose Jobseekers Allowance (JSA) was stopped 11 weeks ago as he no longer meets the required criteria. He is working on a zero hours contract and some weeks has no income. He is in a single household and in receipt of Housing Benefit and Council Tax Reduction. He sometimes struggles to buy food and wanted to know if he could access a food bank.

7. The provision of food aid has grown significantly in Scotland in the last three years. The Trussell Trust which operates 26 foodbanks in Scotland, provided five times as many food parcels in 2013-14 compared to the previous year. Between January and March 2014, 1 in every 50 clients who received advice at a citizens advice bureau required a food parcel. Around 11% of clients that need to make an application for charitable support are in employment. [2] The parallel rise of zero hours contracts and food banks reflects an extremely concerning trend in 2014.

Serious debt and budgeting difficulties due to fluctuating income

8. Workers on zero hours contracts can often find their working pattern - and therefore their income - unpredictable. Citizens advice bureaux have advised clients on zero hours contracts whose working hours have dropped or fluctuate leaving it extremely difficult to budget and quickly accruing substantial debt.

Ø A North of Scotland CAB reports of a client who had accrued rent arrears over a period which now totals £982.76. She has a repayment arrangement with the Council, but her payments recently lapsed because she was on a zero hours contract cleaning on a building site and there was no work. The client has now been summoned to appear in the Heritable Court over her arrears.

Ø An East of Scotland CAB reports of a client who was employed as a driver through an agency on a zero hours contract. However, he has had little work over the last two weeks and has no hours for the coming weeks. The client has signed on for Jobseeker’s Allowance (JSA) but has multiple debts. He was seeking advice about possible bankruptcy.

Ø An East of Scotland CAB reports of a client whose employment varies significantly because of a zero hours contract. She can work between 7 and 13 hours per week and her income can vary from £60 to £100. The client struggles with her budget and to address her debt issues as she is not sure how many hours she will be working on a week to week basis and has no guarantee of any work.

9. High-cost short-term credit (popularly known as payday loans) is a type of loan

agreement which allow consumers to borrow for a short period of time (typically

less than three months) for a small amount of money (between £50 and £2,000). In the last three years payday loans are one of the fastest growing areas of advice both made to local

citizens advice bureaux and to the citizens advice consumer helpline service. They can represent a way for workers on zero hours contracts to cope with fluctuations in their income in the short term caused by irregular working hours. However, when large repayments are due in a week where little work is available, workers can find themselves in a situation where they have no way of paying back the loan.

Ø An East of Scotland CAB reports of a client who is unable to pay various payday loan companies. Her total debts amount to £4,850. Whilst she lives with her mother and pays no rent, she works as a waitress on a zero hours contract, sometimes earning more than £200 per week, but next week will only earn £70. She is due to pay three separate payday lenders a total of £173 next week and has no way of paying.

Difficulty accessing support from the benefits system

10. Workers on zero hours contracts can slip through the benefits system as they have difficulty claiming in-work benefits and means tested benefits. To be eligible for Jobseeker’s Allowance (JSA) an individual must work less than 16 hours, and to be eligible for Working Tax Credit a claimant must work more than 30 hours a week (more than 24 hours a week for couples with children). If a person works between 16 and 24 hours, and those hours fluctuate, it is likely that their income will be very low – potentially lower than those in receipt of out of work benefits.

Ø An East of Scotland CAB reports of a client who was working as a relief cleaner on a zero hours contract. For the last four months he has only had 11 or 12 regular hours work a week. His partner was prevented from claiming Employment and Support Allowance (ESA) by the Department of Work and Pensions (DWP) as they were told it is possible the client could be working more than 24 hours per week if he was on a zero hours contract. The DWP has also told the client that it is not worth applying for Jobseeker’s Allowance (JSA), as he might be working over 16 hours in some weeks. The client is therefore very anxious about their income.

Ø An East of Scotland CAB reports of a client who has a zero hours contract at the cinema where he has worked for 13 years. He previously received Working Tax Credit (WTC), but the payments stopped because his hours for the past year averaged less than 30 hours a week, which the client had not realised because of the erratic nature of his working hours. He was asked to phone to make arrangements to repay the overpayment of WTC, but as the client has a hearing impairment which makes it difficult to use the telephone he did not do so. Now he is facing legal proceedings to recover the debt, and has also been told he has been overpaid Housing Benefit because he had not informed the council that his WTC has stopped.

11. With unpredictable hours it is extremely difficult for zero hours contract workers to estimate their average weekly earnings for the purposes of claiming in-work benefits. For in-work claimants whose earnings fluctuate, their weekly earnings can be averaged over a period of five weeks for the purposes of the benefits system. However, even this can prove difficult for some workers, who can be working almost full time hours in one week, then hardly at all in the next. Citizens advice bureaux have advised clients who have been overpaid benefits in one week, which they must repay, then been underpaid in the next due to their hours reducing, leaving them facing an income crisis.

Ø An East of Scotland CAB reports of a client who had started a new job as a carer on a zero hours basis and has no guarantee of the number of hours per week. For example, she worked almost a full week over Christmas, but she has had varying amounts from 10 hours down to as little as 4.5 in one week. The client was seeking advice about benefits to which she might be entitled.

Sanctions and zero hours contracts

12. Not getting enough working hours can be a reason for a number of workers to leave zero hours contracts, or to decline the offer of a zero hours job. Citizens advice bureaux have advised a number of clients who were concerned that if they did so, they would be prevented from claiming Jobseeker’s Allowance (JSA) or sanctioned for turning down an offer or voluntarily leaving a job. In October 2013, the UK Government confirmed that workers in this situation should not be sanctioned. [3] CAS strongly welcomes this clarification, but believe that more could be done to communicate this to benefits claimants, prospective claimants and Jobcentre staff.

13. However, recent indications from the Department of Work and Pensions (DWP) that claimants may be sanctioned for these reasons when Universal Credit is rolled out [4] , is of concern. Supporters of zero hours contracts justify them on the basis that they offer ‘flexibility’ to the worker and the employer – requiring jobseekers to apply for them or risk a benefit sanction has the potential to further undermine that flexibility.

14. We would recommend claimants under Universal Credit should not be sanctioned for not applying for a zero hours vacancy if it does not meet their needs.

Lack of entitlement to certain employment rights and confusion over employment status

15. There is a problem with workers being unclear about the terms of their contract, and workers and employers being unclear on what rights they are entitled to on a zero hours contract. However, many of these difficulties are caused by misuse of zero hours contracts which, by accident or design, exploit weaknesses in the law in this area, rather than because information and advice is not available.

16. Uncertainty over whether those engaged on a zero hours contract are legally workers or employees is at the root of this problem in a number of cases. A number of Employment Tribunal rulings, which have looked beyond the written contract and considered what has taken place in practice when determining whether someone should be classed as a ‘worker’ or as an ‘employee’ [5] , have further muddied the waters.

17. Citizens advice bureaux have reported a number of cases of workers whose employment rights were far from clear, and whose employers do not grant them certain rights on the basis of their zero hours contracts.

Ø A West of Scotland CAB reports of a client who is single and expecting her first child. She was working on a zero hours contract, but has now left her employment as her employer told her she would not be due any maternity pay due to the fact that her contract was zero hours.

Ø A West of Scotland CAB reports of a client who has worked for her employer as a home carer since January of last year. She underwent an operation to her hand in May of this year and has been off sick from work since. She does not receive Statutory Sick Pay as she is on a zero hours contract. She has had a meeting with her employer about taking on lighter duties but this request has been refused. She is not looking for reduced hours but does not feel that she can carry out the same duties due to pain. She has qualifications in support/social work and would ideally like a similar post. Her employer is not taking any action to dismiss her and is quite happy to keep her on as long as she continues to hand in medical certificates. She is not sure if she should comply with this or simply resign.

Ø An East of Scotland CAB reports of a client who came in and reported that she had been employed for around two years and she had not had any paid holidays. She spoke to her manager about this and was told that as she was on a zero hours contract she was not entitled to any paid holidays. The bureau assisted the client in writing a grievance letter.

‘Zeroing Down’ – effective dismissal deterring workers from enforcing basic rights

18. In a number of cases relating to the misuse of zero hours contracts, poor employment practices are reported by workers engaged on them. Whilst this is not necessarily because of the contract in itself, in practice employers have used their ability to cut their hours to the individual as a ‘punishment’ to deny them their basic statutory rights, deter them from asserting their rights, or in an attempt to make them resign. This has become known as ‘zeroing down’.

Ø An East of Scotland CAB reports of a client who has been employed for four years on an ‘as and when required’ basis. Over the last six months he has worked around 50 hours per week. He has now been advised that there are no further hours for him, but that he is not being made redundant or his contract terminated. Two days later the client went online to see what work was available and the job which he did was advertised by his employer. The client has been advised by one manager that if he chooses to leave, he would receive a good reference, but does not wish to leave the job and has worked nearly every week whilst he has been employed there.

Ø An East of Scotland CAB reports of a client employed on a zero hours contract which specifies ‘no more than 25 hours per week’. The client reports that she has been consistently working about 25-27 hours per week for the past year, until recently when her hours were cut back to 6 per week. The reason given is because there is less work to do during winter, but the client feels the real reason is due to a clash with her new manager, stemming from her refusing to do additional admin work for no extra pay. This resulted in an unpleasant meeting, where the owner and manager shouted at her and threw a pen, immediately prior to her hours being cut.

Ø A West of Scotland CAB reports of a client who is employed on a zero hours contract. His best friend was previously the assistant manager, but had left on bad terms with the current manager. Since then, the client’s hours have been cut from 30 hours per week to 6, and the client feels he is being singled out and treated unfairly by the manager.

Ø An East of Scotland CAB reports of a client who works as a waitress and feels she is being unfairly treated by a new manager, including undermining her in front of the staff and customers. The client did not have a copy of her contract, but it seems likely it is a zero hours contract. Recently she has been told that, as they are employing some full time waiting staff, there is no need for her to do so many hours. On a number of occasions she has been told on arrival at work that she is not needed because the restaurant is quiet and sent straight home.

19. This ability to dramatically cut the amount of work offered can act as a barrier to workers being able to enforce their rights in the first place, offers no flexibility or fairness to the individual, and is an example of clear misuse by unscrupulous employers. Increasing the amount of information available will not help workers in this situation, if attempts to assert their rights at work are met with their working hours being slashed.

Recommendations

20. In terms of employment law, there are some potential areas where it could be strengthened to guard against the misuse of zero hours contracts. Unfortunately no single option would entirely prevent misuse, but some reforms may help to protect workers from some of the situations outlined in this briefing. CAS would recommend the following options be considered for inclusion in the Bill:

21. Give workers on a zero hours contract a statutory ‘right to request’ a contract that guarantees hours, without suffering dismissal or detriment.

One of the reasons that misuse of zero hours contracts occurs is because they are issued in situations for which they are not suitable – for instance, where a worker requires regular full-time or part-time work. One possible remedy to this would be to give workers the right to request their contract be altered to a stable one that is more suitable, with a legal protection from being dismissed or suffering detriment for making the request. There would be no obligation on the employer to grant the request, but by giving reasons for declining it would encourage them to consider the implications of the contract on the worker, whether it is appropriate and alert them to the worker’s desire for a more stable working pattern. It is envisaged this would operate in a similar manner to the right to request flexible working currently afforded to employees.

22. Legislate to ensure that where mutuality of obligation for the employee to undertake work provided by the employer is present, an individual is classed as an employee rather than a worker even if their contract states zero hours

Employment Tribunals generally operate on this basis at present, if a case comes before them. However, ensuring that this was put on a statutory footing has the potential to provide clarity for employers and individuals prior to a case being brought to Tribunal. It may dissuade employers from issuing zero hours contracts in unsuitable situations based on the mistaken belief that the contract prevents an individual being classed as an employee, even if they are expected to undertake work on a frequent basis.

23. Extend protection from unfair dismissal to workers as well as employees

This option would strengthen the rights of workers on zero hours contracts by giving them some redress in situations where the amount of work provided is dramatically cut in an apparent attempt to ‘get rid of them’. This would represent a significant change in employment law and the impact would need to be carefully considered as it would extend to other workers including those on appropriate zero hours contracts. However, it may be a necessary measure to protect workers from extremely poor treatment at work.

24. Extend full rights to parental leave and pay to workers as well as employees

Citizens advice bureaux have reported cases where workers are denied paid maternity leave, including those on zero hours contracts. This reduces the flexibility of the individual engaged on a zero hours basis. One step to address this could be to extend the paternal leave and pay rights currently enjoyed by employees to workers.

September 2014