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15 August 2012

Continuity of Employment under Zero Hours Contract

Employers using zero hours contracts should be aware of a recent decision of the Employment Appeal Tribunal (EAT), in which it was held that individuals engaged under such a contract had continuity of employment.

This case concerned a group of care workers, employed to provide 24 hour care to a severely disabled woman.  The contract for the provision of the care service between their employer, Carewatch Care Services Ltd (Carewatch), and the local primary care trust was terminated and a new contract was entered into with Pulse Healthcare Limited (Pulse).  The individuals who were engaged to provide the care claimed that their employment transferred to Pulse under the provisions of TUPE.

Pulse denied that the claimants were employees on the basis that they were engaged under a contract headed “Zero Hours Contract Agreement”, which included a provision stating that they were free to work for other employers.  Pulse therefore claimed that the ‘mutuality of obligation’ necessary for an employment relationship did not exist.  If the claimants were not employees, they would not be covered by the provisions of TUPE.

The employment tribunal disagreed that this reflected the reality of the situation, highlighting the fact that the claimants had worked fixed hours on a regular basis over a number of years.  The contract made repeated references to “employment”, and included many of the usual provisions of an employment contract including annual leave, sickness, termination and pension.  The individuals were provided with a uniform and were paid on a PAYE basis.  The employment tribunal therefore concluded that the individuals were employees, with continuity of employment.  Pulse appealed the tribunal’s decision.

The EAT has upheld the tribunal’s decision on the employment status of the claimants.  The judge highlighted the evidence demonstrating the critical nature of the care package provided by the claimants and the importance of maintaining an established team of carers for the client.  In the judge’s view, it was fanciful to suppose that Carewatch relied on ad hoc arrangements in the provision of such a package.  The EAT considered that the tribunal had been justified in its conclusion that the “Zero Hours Contract Agreement” did not reflect the true agreement between the parties.

Comment

This decision reflects the willingness of the courts and tribunals, particularly since the decision of the Supreme Court in Autoclenz v Belcher, to look beyond the terms of the written agreement to assess the true nature of the relationship between the parties.

It seems clear from the evidence in this case that the contract was not drafted in terms properly consistent with a genuine zero-hours arrangement, and that the reality of the arrangement was consistent with an employment relationship.

The case will now return to the employment tribunal to determine whether the claimants’ employment transferred to Pulse under TUPE.

In practice, the majority of zero-hours contracts will establish an employment relationship.  With careful drafting, and depending on the frequency an individual is engaged under such a contract, it might be possible to prevent continuity of employment arising in between each assignment under the contract.  However, employers should be very cautious in relying on such contracts if they do not reflect the reality of the arrangement between the parties.

A copy of the EAT judgment is available here