Election Talking Points: How Is Labour Proposing To Rebalance "One-Sided Flexibility"?

Recent polls still suggest the Labour Party is likely to win the general election on 4 July 2024 – see here for our detailed analysis of manifesto pledges.

Among the Labour party's lengthy shopping list of reforms to employment law is an ambition to end what it terms "one sided flexibility". Labour links these proposals to its commitment to "Securonomics", focusing on economic strength and stability. Slogans aside, the aim here is to shift the balance of power in relation to the flexibility and predictability of working patterns to give workers greater security.

This objective underpins more than just the party's flagship policies relating to zero hours contracts. In its recent Plan to make work pay, the banner of "one sided flexibility" encompasses a suite of proposals, all of which aim to bring about a baseline level of security and predictability. Relevant proposals include not only those relating to shift security but also plans relating to fire and rehire, day one unfair dismissal rights and the single status of worker, all of which we considered in detail here.

In this article, we focus on the proposals relating to zero hours contracts and restrictions to shift scheduling. But will this come at the expense of employers' ability to flex their labour to meet fluctuating business needs?

What is Labour proposing?

In Labour's Green Paper in 2021, it stated that it was intending to ban zero hours contracts and contracts without a minimum number of guaranteed hours, something we considered in detail here. An outright ban would be controversial, and Labour's proposals came under the spotlight in February 2024 when union leaders warned Keir Starmer not to dilute his plans in this area. Reports of disagreements over the manifesto suggest that this is still a point of dispute.

Labour's current position, however, appears to have pulled back from the bold initial plan. They are now proposing to:

• ban "exploitative" zero hours contracts;
• give workers a right to a contract that reflects the number of hours they regularly work, based on a 12-week reference period; and
• give workers a right to reasonable notice of any change in shifts or working time, with compensation proportionate to the notice given for any cancelled shift.

Although Labour has indicated that it will put anti-avoidance measures in place, it also makes clear that the intention is not to prevent employers from hiring on fixed-term contracts (including for seasonal work) and employees won't be prevented from earning overtime pay. Surges in work could therefore potentially be managed through hiring temporary fixed term staff or offering overtime to regular employees.

As we have written here, the promise of making changes within the first 100 days is likely to be nuanced. That said, the indications are that these reforms will be propelled by significant political weight.

What's the problem with zero hours contracts?

As a reminder, a zero hours contract is type of casual worker contract under which someone is engaged without there being a minimum level of guaranteed work or pay. In some situations, the individual worker is obliged to accept any work offered, but this is not always the case. In 2015, the Conservative government banned exclusivity clauses in these types of contracts, meaning zero hours workers were free to work for other organisations.

This type of contract provides significant flexibility for both parties, enabling employers to manage fluctuating demand and individuals to fit work around other commitments (something research has previously indicated makes this arrangement popular with many workers). However, in recent years they have been the subject of scrutiny and debate. As we explore here, the reasons for this are wide ranging but largely boil down to the potential for uncertainty and insecurity for the individual worker.

Labour's Plan refers to the Taylor Review of 2016. This looked at modern working practices, examining potentially exploitative arrangements, such as zero hour contracts and low wages. In Labour's recent comments on zero hours contracts, we see echoes of the Taylor Review's reference to flexibility "not being reciprocated" and a need for "genuine flexibility". These echoes extend to the substance of their proposals, with Labour looking to take forward some of the more ambitious reforms which did not materialise under the Conservatives.

Are all zero hours contracts exploitative?

The reference to prohibiting "exploitative" zero hours contracts is unclear. Are Labour suggesting that all zero-hours contracts, by their very nature, are exploitative? Zero hours contracts can be advantageous for both parties and media reports suggest Labour have stepped away from an outright ban.

What seems more likely is that this type of working arrangement will only be prohibited if it has certain characteristics which make it "exploitative". It is unclear how an "exploitative" contract would be identified but it would presumably include those which leave the individual exposed to unacceptable levels of insecurity and uncertainty, whether that's through the written terms of the contract, or how the arrangement operates in practice.

And in terms of scope, will the ban be limited to contracts with zero guaranteed hours, or would contracts which include a minimum number of guaranteed hours also be prohibited? For example, would a contract which guaranteed 1 hour of paid work a week be considered an exploitative zero hours contract? It's common for businesses in, for example, hospitality to provide employees with a low number of minimum hours which allows them to increase hours to meet fluctuating seasonal and other demands.

Other parties have also claimed they will address zero hours contracts. For example, the Liberal Democrats have announced that they will set a 20% higher minimum wage for zero-hours workers at times of "normal demand" to compensate them for uncertain fluctuating hours.

So, while employers look unlikely to face a blanket prohibition on these contracts, it certainly seems likely that they will need to adjust how these kinds of working arrangements operate or the terms on which they are offered, but how exactly remains unknown.

What about predictable contracts?

Looking at the right to have a contract that reflects the hours worked in a 12-week reference period, again, details are sparse. How often will requests be permitted? Will an individual be able to capitalise on, say, a Christmas rush with a tactically timed request? Or will employers be able to offer an alternative working pattern on the grounds that the business need for the shift pattern has now passed?

In a similar vein, the Liberal Democrats have proposed a right to request a fixed-hours contract after 12 months, which could not be unreasonably refused.

This, of course, is not the first attempt at legislating for predictability. The Predictable Terms and Conditions Act, which was due to come into force under the current Conservative government in September of this year, would go some way towards achieving Labour's plans. To recap, this Act would give workers and agency workers the right to request a predictable working pattern if any part of their work pattern lacks predictability. Crucially, however, this was only a right to request, with broad grounds of refusal available to employers, akin to the flexible working regime. Labour's proposals are more than a right to request; they have proposed a right to have such a contract.

As we have written here, time will tell as to whether a Labour government would use the Predictable Terms and Conditions Act as a stepping stone to achieve their more robust proposal. That Act has now stalled at the final hurdle, requiring enabling regulations to bring it into force. Whilst the substance of the secondary legislation could strengthen this right to a certain extent, it seems unlikely to be able to bring a fundamental shift from a right to request to an entitlement to predictability.

Shift scheduling

The third proposal relates to shift scheduling. Labour is proposing that workers get a right to "reasonable notice" of any change in shifts and that, if a shift is cancelled or curtailed, compensation paid is proportionate to the notice given.

Currently, any rights that workers have in relation to shift scheduling will depend on the contractual terms in place or the shift policy in operation. For employees, unreasonable shift curtailment or cancellation may potentially undermine the duty of trust and confidence which does provide at least a theoretical level of protection. What Labour is proposing, however, would be a more straightforward way of giving workers stronger redress in relation to these practices.

It remains to be seen how Labour will suggest compensation is calculated and what would be deemed "reasonable" notice. What if a shift is not cancelled but the hours are altered? What if an employee is able to secure alternative work from a different employer within the notice given?

Shift scheduling is a prime example of an area in which fairness and emerging technology may – or already are – coming into conflict. Many industries are now using AI to undertake the labour-intensive practice of shift scheduling. Last year's House of Commons research paper on Artificial Intelligence and Employment Law noted that automatic shift allocation algorithms are now common in the retail and hospitality sectors, but also flagged that these algorithms might result in short notice shift allocation or the division of shifts into micro shifts.

Labour's policy may introduce the concept of reasonableness into shift allocation, which is arguably increasingly important as technology allows for human judgment to be taken out of the process.

What will this all mean for employers?

Current indications are that the Labour government would not take the drastic step of prohibiting zero hours contracts, which would have impacted significantly on sectors like agriculture, healthcare, retail and hospitality. That said, it remains possible that removing the level of flexibility around this form of engagement will:

• Increase labour costs: zero-hour contracts can be a cheaper alternative to average hours contracts and other arrangements such as agency workers, permanent part-time contracts or annualised hours.
• Present resourcing challenges: the combination of placing further restrictions on the use of zero-hours contracts and requiring employers to offer an average hours contract after only 12 weeks, will potentially reduce employers' ability to flex resourcing to meet demand. This could have a significant impact on employers whose business demands fluctuate throughout the year.
• Increase admin: the combination of possible incoming rights will result in employers having to review and respond to similar requests to work flexibly, have predictable terms and/or a contract that reflects the previous 12 weeks of work.
• Increase employment mis-classification: certain businesses may look to engage people on a self-employed basis even though that may not reflect the reality of the working arrangement in practice, exposing them to employment and tax liabilities.

What steps should employers take to prepare?

With most manifestos yet to be released, and of course the ballot boxes yet to be filled, drastic pre-emptive steps like changing existing contracts are most likely premature. And even if the polls are proved right and Labour does take power, it may be ambitious to expect to see these reforms within the first two years.

There are, however, useful preparations that could be made. These include:

• Auditing the current workforce to identify the proportion engaged on zero-hour contracts, and in which areas of the business.
• Reviewing how the 12-week average calculation would impact those workers.
• Reviewing processes for managing requests for work and cancelling shifts (including the use of any AI systems) and consider how these need to be changed.
• Training managers in any new work allocation processes as required.