Have we really abolished zero-hour contracts?

Recent amendments have been made to the Employment Relations Act 2000 to tighten up the legal loopholes that allowed for the enforcement of the dreaded ‘zero-hour contract’. Under these contracts, which were particularly popular in the hospitality industry, an employer did not have to guarantee their employee any minimum hours, but the employee was obliged to accept work if requested. These zero-hour arrangements were previously achieved through the inclusion of ‘availability provisions’ in employment agreements, requiring employees to remain available in case they were offered more hours, which they would then be contractually bound to take.

The recent amendments came into effect on 1 April this year, and while many have hailed them as a major victory for workers’ rights in New Zealand, they have only tailored availability clauses in employment agreements rather than banning them outright.

These are the key changes:

• An employee can refuse to perform work additional to their guaranteed hours if the agreement does not contain an availability provision. If there are no guaranteed hours, an employee is not required to make themselves available to work (s 67E).
• An availability provision provides a period for which an employee is required to be available in addition to any guaranteed hours. The provision may only be included in an employment agreement that specifies the agreed hours of work (including guaranteed hours of work) (s 67D(2)).
• An availability provision must only be included in the agreement if the employer has “genuine reasons based on reasonable grounds” for including it. It must also provide for the payment of reasonable compensation to the employee for making themselves available to perform the work (s 67D(3))

If an availability provision does not comply with these requirements, it is unenforceable:

• Employers can only cancel an employee’s shift if the employment agreement specifies a reasonable period of notice that must be given before the cancellation. The agreement must also specify the reasonable compensation that must be paid to an employee if the cancellation does not comply with the notice requirements (s 67G).
• Employers will also be prohibited from placing restrictions on secondary employment unless they have genuine reasons based on reasonable grounds to do so, with these reasons being stated in the employment agreement (s 67H).

These new amendments aim to retain flexibility in employment arrangements while also increasing certainty in the employment relationship. They attempt to address the power imbalance present under zero-hour contracts that had previously left employees financially uncertain and unable to plan their lives. The goal of allowing the employee to refuse to perform any additional work that is not specified in their employment agreement – as well as ensuring that they are provided with reasonable compensation for being on call – was to create a more level playing field. In practice, however, these amendments still do not address the issue of work insecurity and have been accused of further entrenching zero-hour contracts into our legal system rather than eliminating them.

While employers now have to state the agreed amount of hours when using an availability provision, there is still no minimum limit on set hours offered, meaning that zero-hour contracts are still very much alive. When an employee is required to be available, they have to be offered reasonable compensation, but the Act fails to confirm exactly what is considered ‘reasonable’. The Act provides some matters that must be regarded when deciding what a reasonable level of compensation is (s 67D). However, no further guidelines to compensation or even a determination that the compensation must be monetary is provided.

A vulnerable worker looking for employment may still be offered only a token amount of work in their employment agreement, such as one hour per week, while being told that there is the possibility of more hours on top of this that can be accepted by agreement. A worker who needs full-time employment may still encounter hours that change radically from week to week as a result. Further, the change does not prevent employers from employing a pool of of workers with intentionally low guaranteed hours. Such employers could then meet their need for labour by offering additional hours to employees in the pool. In that scenario, there is little to prevent the employer retreating to the minimum guaranteed hours if they became dissatisfied with an employee. The reality for vulnerable workers is that work is often scarce, and they will likely accept a role with low guaranteed hours on the promise of the availability of further agreed hours.

Casual employment arrangements remain unaffected. Arguably, this class of contract is defined by the fact that there is no obligation on the employer to offer any hours of work and no obligation on employees to accept hours. Hence, they are unaffected by the legislation change. The true use for such agreements is genuinely intermittent work for the purpose of matters such as covering sick employees. The changes to the legislation seem intended to leave such agreements intact. The reality is that casual agreements are often misused. Many casual workers are required to work regular part-time hours but are vulnerable to employers simply declining to provide hours if the employee falls out of favour.

Labour and the Greens have claimed these amendments are a major win for their parties in forcing National to ‘get rid’ of zero-hour contracts. The practical reality is that the effect of the amendments is only slight, and the amendments may not actually have a true impact on the everyday lives of workers. A true victory for Labour and the Greens, in the writer’s view, will only come if there are further amendments creating more practical enforceability. Solutions that are based on an assumption of comparable bargaining strength (in this case, the ability to agree additional hours) will always fail the vulnerable as they simply aren’t on an even footing with employers due to socioeconomic factors such as the availability of suitable work.