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Out-Law News 2 min. read

Retailers warned to check zero-hour contract terms as Sports Direct faces 'multi-million pound' bonus claim


Retailers that offer different benefits to workers on 'zero-hour' contracts than are offered to permanent employees should beware of rules equalising the treatment of part-time and comparative full-time workers, an expert has said.

According to press reports, almost 300 Sports Direct workers on zero-hour contracts are bringing claims against the retailer for excluding them from a bonus scheme for "permanent" staff. According to the law firm representing the workers, those claiming have a minimum of five and a half years of continuous service with the retailer.

The term 'zero hours' is not defined in UK employment law but generally refers to a flexible employment arrangement without guaranteed hours. Employment law expert Paul Gillen of Pinsent Masons, the law firm behind Out-Law.com, said that although most of these contracts gave staff 'worker' status for employment law purposes, an 'employee' relationship with equivalent rights could develop over time in some circumstances.

"Employers are aware of the furore over the use of zero-hours contracts, but this is a wake-up call to retailers to again review the operation of such contracts and the nature of employment status which may or may not subsist throughout these contracts during periods where no work is provided," he said. "They should also be aware of the application of protections offered to part-time workers whereby they must not be treated less favourably than comparative full-time workers, albeit that the pro-rata principle can apply."

Around 2,000 Sports Direct employees on permanent contracts received a combined £160 million worth of shares in 2013 through the company's bonus scheme according to the Guardian, which first published the story. The law firm representing the workers on zero-hours contracts has said that its first batch of 30 claims could be worth over £1m in compensation for missed bonuses, with many more claims to follow.

Zero hours contracts are contracts under which an employer does not guarantee the worker any work and pays only for hours actually worked. Individuals that are party to a zero hours contract are not obliged to accept any work that is offered. Critics of the contracts say that businesses use them to avoid giving workers the status of 'employee' and eligibility for the full range of employment rights; however, business groups claim that the contracts give firms the flexibility to cope with fluctuations in demand.

The UK government intends to ban the use of 'exclusivity clauses' in zero-hours contracts, which are used to prevent a contracted worker who is not guaranteed a minimum number of hours from taking on another job. However, it does not intend to ban the practice outright due to the flexibility it gives both businesses and individual workers.

According to guidance on the use of zero hours contracts by the government-backed conciliation service Acas, in most cases an employer will recruit a 'worker' on a zero-hours contract. A worker will have more limited employment rights, including rights to sick pay and paid annual leave. However, zero hours contracts have to "stand up on paper ... as well as in practice", according to the guidance. Factors that could lead to an employment tribunal finding that an 'employee' relationship exists include an obligation on the worker to accept work that is offered, or subjecting a worker to disciplinary procedures.

Sports Direct currently employs nearly 90% of its staff on zero-hours contracts, according to the Guardian. It was forced to settle a tribunal claim by an employee last year, as part of which it was forced to make holiday and sick pay rights clearer to these employees. The law firm representing the workers challenging the bonus arrangements is currently seeking confirmation that Sports Direct will not unlawfully penalise those that still work for the company for making the claims, the Guardian said.

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