Zero Hour Contracts

17 November 2017

by Rebecca McLeod, Senior Associate

Availability provisions were in the headlines last year following the reaction of workers to what were termed “zero hour contracts”. These were contracts that did not guarantee any weekly hours for workers, but workers were prevented from working elsewhere.

The law was amended to prevent this and now we see its first application in the Courts. Unfortunately the Employment Court decision has not provided all the answers that we would have liked, but there are some useful points to take away from it.

The law

An availability provision allows an employer to ask an employee to work over and above their agreed weekly hours. These extra hours are at the employer’s discretion, and the employee is required to work those additional hours if requested.

A common example would be “The Employee will work Monday-Friday 8.30-5pm. The Employee will work Saturdays as and when required”.

The law now says that this type of example is unacceptable.

If employers need their employees to work “as and when required”, but can’t actually guarantee when or for how long that work will be, the employer has to ensure:

  • They have a genuine need for asking the employee to be available to work;
  • Specify the guaranteed hours that the employee will work on any given week; and
  • Provide reasonable compensation for the worker to be available (a type of “on-call” payment) plus pay them their usual rate for the time that they do work outside their guaranteed hours.

If the employment agreement does not contain an availability provision that covers these requirements, the employee can refuse to do any additional hours of work, and cannot be treated adversely for that refusal.

The case

Two employees raised a personal grievance against McDonalds on the basis that they were unjustifiably disadvantaged by their employment agreements. They claimed that those agreements did not comply with the requirements of the Employment Relations Act 2000 for availability provisions

McDonalds had provided employees with a minimum number of hours they would be working per week (which was based on a percentage of their average hours worked in the previous quarter). They were also rostered to work additional hours within periods that the employees had indicated they would be free.

The relevant clause stated:

From time to time you may be requested to work hours in addition to [your] work schedule.

Following the posting of your schedule by Tuesday, if your schedule includes hours over and above your security of hours number, you have 24 hours from the posting of your schedule to advise you are not able to work these additional hours.

If you are unable to work these additional hours, we may either reduce these additional hours or reissue your schedule at our discretion.

We will continue to ensure that your security of hours conditions are met and that all shifts offered meet with your pre-agreed availability.

The employees who raised the grievance argued the provisions were unlawful because they were required to be available for additional rostered hours, that they were rostered on for over and above their guaranteed weekly hours.

The Court’s interpretation

The Court stated that it will not be taking a “black-letter approach” to the wording of the law on availability. In other words, all of the circumstances of the employment relationship, the intentions of the parties, and the operational requirements of the business would be considered.

This meant that the Court focused very much on the specific case at hand, and determined the agreements did not include an availability provision. This was due to the following factors:

  • when applying for the job, the employees indicated when they could be available to work. 
  • They were then rostered onto shifts only within these times. 
  • The agreements provided for guaranteed hours which were always within the hours that the employee’s had indicated that they would be free.
  • Any extra hours were arranged by mutual agreement. 

So we did not receive any guidance on what might be reasonable compensation for being “available” to work, but not actually working. The case does however reaffirm the distinction between requiring and requesting an employee to work additional hours.

It also highlights that many factors are relevant and scrutinised in any employment dispute, including the true nature of the employment relationship, the intentions of the parties, and the operational requirements of the business.

If you are uncertain about your own employment agreement or that of your employees, do not hesitate to seek advice.