The race to the bottom – zero hour agreements

21 Apr 2015
Author: DTI Lawyers

Unions have been campaigning aggressively against “zero hour” agreements, and appear to be gaining political support to make such contracts illegal, or at least, to limit their use. Zero hour agreements have become common overseas following the global financial crisis. They are commonly used in sectors such as hospitality and retail as businesses attempt to secure a pool of workers, with minimal commitment and obligation to them. There has been an increasing creep in their use in New Zealand.

There are no legislative or common law definitions of zero sum agreements. Generally, the arrangement will involve the employer contracting an employee without any guarantee of work, and therefore no guarantee of payment. In most cases employees agree to be available to work when required. Understandably, unions object to the one-sided nature of the arrangement, and commentators have described the arrangement as a “race to the bottom”.

New Zealand employment law accepts the use casual employment arrangements. With casuals, there is no obligation on the employer to offer work, nor on the casual employee to accept it, and there are no negative consequences for an employee declining work. Each separate period of time the employee works forms a new relationship.

In contrast, a zero hour agreement effectively requires employees to be “on call”, despite no payment being made for that commitment. The employee is expected to be willing and available to work when work is offered. Some agreements also prevent the employee working for other businesses, even when there is no obligation on the employer to offer work.

It is understandable that New Zealanders are objecting to such one sided employment arrangements which exploit those with a lack of traditional employment security. Zero hour agreements often feature in low-paying roles where there is high staff turnover, but where employees are highly reliant on the hours are offered. The untenable commitment for employees who have no guarantee of minimum hours of work per week, but every expectation of availability, will impact on employees’ ability to plan for every aspect of their lives, including basic necessities such as housing, managing child care commitments, and the ability to afford groceries.

Zero hour agreements can enable an unscrupulous employer to dispense with fair employment processes for disciplining and managing performance issues that may arise. Employees can be recruited and rostered at will. Expectations and commitments to training drop.

Fundamentally, employment relationships require a mutuality of obligation. The employer provides work, which the employee accepts. In zero hour agreements, there appears to be an absence of the former, and the question arises whether there is a mutual obligation between the parties sufficient for there to be legal contract. In the past, the Employment Court found that an agreement requiring an employee to accept an offer of work with no corresponding obligation on the employer to offer work, was a one-sided obligation that was insufficient to meet the minimum threshold of mutual obligation required to form an employment agreement. However, in that case, despite the written agreement, the work practices between the parties defined the relationship; the employee worked extensively and consistently and became entitled to expect continuing employment, so the words of the contract were not definitive.

While flexibility in employment relationships, such as those created by casual arrangements, can be valuable to both parties, zero hour agreements go far beyond what most would expect in a relationship founded in “fair dealing” between the parties. The exclusivity aspect of a zero hour employment agreement may be unlawful on public policy grounds. It is also possible to view these agreements as being unjustifiable in nature, as they require employees to give something for nothing. Our collective conscience should tell New Zealanders that we can do better. Business contemplating their use should want to do better. They have other legitimate options available to them to establish and maintain a flexible work force. Legislation to limit the use these of these contracts should be supported.

This article was first published by the Waikato Times, 21 April 2015: