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What status do workers on casual or zero hour contracts fall under?
- AuthorEmployment Team
Having an individual that is said to be engaged on a casual or zero hours contract is not enough to determine their status.
Whether they are a worker or employee will largely depend on the nature of your working relationship in practice. The terms "casual contract" and "zero hours contract" are often used interchangeably by employers and there is a large degree of crossover between the two types of contract. In this article, our Employment team detail the differences between a casual contract and a zero hours contract, and how Employment Tribunals (ET) have been viewing them.
What is the difference between an employee and a worker?
An employee is defined in the Employment Rights Act 1996 as “an individual who works under a contract of employment” but this single definition is not sufficient to determine an individual’s status. It is necessary to consider whether the key factors identified in case law are present. These factors include:
- whether the individual provides their work and skills personally to the employer,
- whether the individual is under a high degree of control by the employer and,
- whether the individual is entitled to be provided with work and obliged to accept that work.
This obligation for you to provide work and pay for it, together with the obligation of your employee to personally do the work is referred to as mutuality of obligation.
Like an employee, a worker also works under a defined contract. The dominant purpose of the contract is for the individual to perform work personally and is not carrying out the work under a contract where the principal is a client or customer of a professional or business undertaking. However, the key-difference between employees and workers is that a worker is not entitled to be provided with work and not obliged to accept it.
What is a casual contract?
Under a casual contract, usually:
- you are not obliged to offer work to the individual and,
- there is no obligation on the individual to accept any work that is offered.
This means that mutuality of obligation does not arise and so the individual is less likely to have employee status.
However, an ET will look at what happens in practice. If it can be shown that, over a sustained period, an individual has accepted all of the work you have offered, even if they have the contractual right to refuse the work, then there is a significant risk that the ET will find that mutuality of obligation exists. This will mean that an employment relationship has been established under an overarching or "umbrella" contract and the individual will be an employee.
What is a zero hours contract?
A zero hours contract will typically differ from a standard casual worker agreement in that:
- you are under no obligation to offer work but,
- the individual is usually obliged to be available to accept the work when offered.
ETs have held this arrangement to be sufficient to fulfil the requirement of mutuality of obligation for an employment relationship to arise.
For example, in Pulse Healthcare Ltd v Carewatch Care Services Ltd and others, the claimants were engaged under contracts entitled "zero hours contract agreement". However in practice, they worked fixed hours on a regular basis over a number of years. Once the employer created the rota, the individuals were required to work and the employer was required to provide that work. This created a mutuality of obligation between the parties. The Employment Appeal Tribunal (EAT) therefore concluded that the claimants were employees.
What happens if an individual is ruled as an employee?
If an individual is determined to be an employee then they will accrue service with the company. After two years continuous service the individual will be protected from unfair dismissal. A worker will not have the benefit of accruing service and protection in this way.
You will need to ensure you are careful with which type of contract you place your casual or zero hour staff on and make certain that the terms reflect what happens in practice, as putting them on the wrong contract could result is a tribunal claim. If you would like to have your employee contracts reviewed or would like any assistance with determining your casual employees’ employment status, you can contact a member of the Employment team 023 8071 7717 or email email@example.com.
This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice. All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.