What rights and protections are there for workers on zero hours contracts in the UK?

In the UK, a zero hours worker is a casual worker engaged on a zero hours contract. A zero hours contract is defined in UK legislation as a contract of employment or other worker’s contract under which a worker undertakes to perform work conditionally on the employer making such work available, but there is no certainty of such work being made available. In essence it is a contract under which the worker is required to be available to work when requested but no minimum amount of work is guaranteed.

Ban on exclusivity clauses in zero hours contracts

Following significant media coverage on the use of zero hours contracts and allegations of their abuse by employers, recent legislation (which came into force in May 2015) has banned the use of “exclusivity” clauses in zero hours contracts which do not guarantee a minimum number of hours. This means that any clause in the contract which prohibits the worker from either:

  • doing work or performing services under another contract or under any other arrangement; or
  • doing work or performing services under another contract or under any other arrangement without the employer’s consent,

will be void and unenforceable.

Protection for zero hours workers

In order to tackle avoidance by employers of the ban on exclusivity clauses, regulations came into force in January this year which provide zero hours workers with a remedy where the contract includes a banned “exclusivity” clause.

The Regulations provide:

  • A right for employees working under zero hours contracts not to be unfairly dismissed if the reason, or principal reason, is that the employee has failed to comply with an exclusivity clause.
  • A right for workers working under zero hours contracts not to be subjected to any detriment by, or as a result of any act, or deliberate failure to act, done by an employer for the reason that the worker has failed to comply with an exclusivity clause.

The right not to be unfairly dismissed is not subject to the usual two-year qualifying period of employment applicable to most other unfair dismissal claims. Where an employer breaches these rights, the employee may issue a claim in the tribunal and seek a declaration and/or compensation.

The Duty to Mitigate and its Impact on Damages

Employer clients often ask during a wrongful or constructive dismissal lawsuit what damages may be awarded.  One relevant consideration  is the common law duty to mitigate.  A wrongfully dismissed employee has a duty to mitigate his or her damages by attempting to find alternate employment.  The question of whether an employee has met his or her duty to mitigate becomes especially relevant in times of economic downturn when employment prospects are sparse.  In light of the current Alberta economy now is a good time to remind employers what obligations an employee has following a dismissal without notice.

The most recent Canadian authority on the duty to mitigate remains the Supreme Court of Canada’s decision in Evans v. Teamsters, Local 31, 2008 SCC 20 (“Evans”).  The Supreme Court reaffirmed in Evans an employee’s duty to mitigate his or her losses resulting from a wrongful dismissal.  There are four important takeaways for employers following Evans:

  1. Employers who give sufficient working notice of termination aren’t required to pay the employee above and beyond that notice.
  2. Damages in wrongful dismissal cases are meant to compensate for lack of notice and not to penalize the employer. The employer’s obligation to pay damages in lieu of notice is subject to the employee making a reasonable effort to mitigate his or her losses by seeking an alternate source of income.
  3. Provided that the employee won’t be subject to hostility, embarrassment, or humiliation, an employer can satisfy its notice obligation by making the employee an offer to return to work for the balance of the notice period. The objective test to determine whether reemployment is an appropriate option is – would a reasonable person consider the offer as a legitimate opportunity; and,
  4. Damages awarded because the employer acted in bad faith in the manner of dismissal are not subject to mitigation.

The duty to mitigate is especially relevant  in a couple of ways.  First, if an employer is able to establish that the terminated employee did not make reasonable efforts to mitigate his or her damages during the reasonable notice period, the court may decrease the amount of damages that it would have otherwise awarded.  Second, a court will reduce any monetary award made to the former employee by the amount of employment income the employee earned from other sources during the reasonable notice period.

What constitutes reasonable notice depends on a number of factors relating to the circumstances of the individual employee, the nature of his/her job and the availability of similar employment.  The Ontario Court of Appeal in Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801, and recently adopted in Alberta in Eggers v. Rocky Mountain Soap Co, 2015 ABPC 202, clarifies that an employer’s financial struggles will not necessarily justify a reduction in the reasonable notice period.

However, the issue of how an economic downturn will affect the length of the reasonable notice period is not well settled in law.  In a recent Alberta decision, Lederhouse v. Vermilion Energy Inc., 2015 ABQB 387 (“Vermilion Energy”), the Court took judicial notice of the fact that oil prices had fallen dramatically.  The Court states “the employer cannot help that the economy is faltering and should not be ‘punished’ therefore.” Following Vermilion Energy economic factors are a consideration in determining the length of the reasonable notice period.  If an employee is terminated during an economic downturn, the notice period may, in fact, be reduced.

What does this mean for employers in Alberta?  In the past, employers could expect most employees to find new employment shortly after their termination.  Now, however, employers face a reality where laid off employees remain out of work, through no fault of his or her own, for the entirety of the reasonable notice period.  Thus, employers are becoming liable for a greater overall damages.

Regardless of the current job market, the duty to mitigate continues, and will continue, to play an important role in wrongful or constructive dismissal litigation.  It is important for both employers and employees to understand a dismissed employee’s post-termination obligations.

Written with the assistance of Rebecca Silverberg, articling student.

What rights and protections are there for workers on zero hours contracts in Germany?

Unlike in the U.K. and other EU member states, zero hours contracts are not (yet) common practice in Germany. To date, other arrangements aimed at achieving “flexible working” such as fixed-term or part-time contracts, secondment of personnel and – more recently – contracts to provide services have been more widespread. However, as German case law and legislation are gradually restricting the flexibility once offered by these arrangements, zero hours contracts are increasingly being used in Germany (in particular with regard to care workers, teachers, and paramedics).

Typical provisions which can be found in employment contracts read for example:

“The working time is variable. An assignment of the employee shall occur on the instruction of the employer. The employee has no entitlement to a monthly average working time in order to obtain remuneration of a certain amount”

By way of such provisions, many employers – in particular those operating in highly competitive markets – seek to circumvent their obligation to assign the employee a fixed working time and a fixed amount of remuneration, therefore intending to achieve a high level of flexibility and reduced personnel costs.

However, unlike in other countries, it is not possible to enter into a valid zero hours contract in Germany. German law follows the inherent principle that the economic and employment risk of the employer should not rest with the employee. The parties must either always designate the specific working time in the employment contract or conclude a “work on demand” relationship as part of an employment limited in time pursuant to Sec. 12 of the German Act on Part-Time Work and Fixed-Term Employment (TzBfG). A “work on demand” relationship is only valid on complying with strict requirements to protect the employee, which in certain cases may be varied by way of a collective agreement. The work on demand agreement must include a specified duration of weekly as well as daily working time. The law merely permits the employer flexibility with regard to the allocation of each work assignment, not the overall working time. Where weekly working time is not provided for, the agreement will be deemed to provide for ten hours. Where the contract is silent as to the daily working time, the employer must always provide the employee with a minimum of three successive hours where engaged to provide work. Furthermore, the employee is only under an obligation to provide work where the employer has made the request at least four days prior to the intended assignment. Where the parties agree a flexible work on demand component in addition to a fixed minimum working time, the Federal Labor Court has held that the weekly amount of flexible work on demand may not amount to more than 25 per cent of the weekly minimum working time. Notwithstanding this, the employer is in any case obliged to set out a fixed weekly or monthly working time and pay a certain monthly remuneration.

Furthermore, even if the parties do enter into a zero hours contract, disregarding the rules set out above, this will be considered to amount to an employment relationship therefore granting the employee all applicable rights and protections guaranteed under German law. In particular the employee would be entitled to:

  • Minimum wage;
  • Protection against unfair dismissal pursuant to the German Protection Against Dismissal Act (KSchG);
  • Special protection against dismissal (pregnant women, employees on parenting leave, severely disabled persons);
  • Continued payment of salary in case of illness and on public holidays;
  • Minimum amount of holidays as statutory;
  • Working hours as restricted by the German Act on Working Time (ArbZG);
  • Statutory notice periods; and
  • Adherence to occupational safety regulations.

How to Successfully Include a Restrictive Covenant in a Current Employment Contract

In order to best protect the employer’s commercial interests and competitiveness, it is often crucial to include restrictive covenants in employment contracts. It is of equal importance to ensure that these covenants respect the limits established in the case law for them to be enforceable by the courts. Indeed, they may be deemed null and void if they are proven to be ambiguous or too broad.

The question then becomes: what happens if an employer omits to include a restrictive covenant in an employment contract? Is it possible to insert such a provision during the employment relationship? It appears that case law has not expressly forbidden such additions, but has determined the conditions under which the insertion of a restrictive covenant can take place in a current employment contract.

Since the addition of a non-competition provision appears to constitute a substantial modification to the employment contract, such a modification cannot be unilaterally imposed on an employee (see Jean v. Omegachem inc.). In this specific case, the Québec Court of Appeal decided that an employee’s refusal to adhere to a non-competition agreement during his employment cannot be considered a good and sufficient cause for dismissal. This principle has been reiterated more recently, again by the Québec Court of Appeal (see Parquets Dubeau ltée v. Lambert).

It will be necessary to obtain the employee’s consent before an employer can legitimately incorporate a non-competition clause in an existing employment contract. Such a provision will have to be reasonable with respect to both its duration and territorial application. An important factor in analyzing the reasonability of a restrictive covenant implemented during employment is the compensation offered by the employer in exchange. Case law has not yet illustrated what exactly constitutes appropriate compensation, but acknowledges that renouncing to the freedom to work does not come for free. Imposing a non-competition covenant without providing sufficient compensation is considered contrary to public order. For example, an employer could be tempted to subject a promotion to a restrictive covenant. However, if he does so, the employer must ensure that the new position held by the employee justifies the imposition of a non-competition clause. Otherwise, it can be considered null and void (see TQS inc. v Pelletier).

Finally, it is important to note that at the employment offer stage, including a commitment to agree to a future non-competition clause cannot bind an employee as one cannot legally commit himself to a restrictive covenant while ignoring the content of its obligation.

Written with the assistance of Maude Larochelle-Samson, articling student.

Ontario Court of Appeal rules on the Duty to Mitigate in Howard v. Benson Group

The Ontario Court of Appeal recently considered the common law principles of reasonable notice and the duty to mitigate in the context of fixed-term employment contracts in Howard v Benson Group Inc. Howard, the plaintiff, was employed at an automotive service centre pursuant to a five-year fixed term contract. He was terminated without cause around two years into his contract. Howard brought an action for wrongful dismissal and breach of contract, seeking damages equal to the salary he would have received for the remainder of the fixed term of his contract. On a motion for summary judgment, the judge concluded that Howard was entitled only to common law “reasonable notice”, rather than the higher damages he sought.  Moreover, the judge concluded that Howard had a duty to mitigate his damages by making reasonable efforts to find alternative employment.

Howard appealed to the Ontario Court of Appeal.  Finding that the motions judge had erred, the Court ruled that Howard was indeed entitled to contractual damages for the unexpired portion of his fixed-term contract. It reasoned that where no early termination clause is specified in the contract, the parties have bargained for a specific termination date, thus negating the rationale underlying the common law duty to provide reasonable notice. More significantly, the Court applied the same reasoning to find that the common law duty to mitigate does not apply in the case of fixed-term contracts that do not contain a mitigation clause.

The Court of Appeal’s ruling goes beyond reinforcing the importance of  including carefully drafted termination provisions in employment contracts. It also clearly establishes how important it is to include early termination and mitigation clauses in fixed-term employment contracts.

The Employer has filed leave to appeal to the Supreme Court.

Written with the assistance of Melanie Simon, articling student.

High Court clarifies meaning of Victorian manual handling regulations

The High Court has recently clarified the operation of the manual handling provisions in the Victorian Occupational Health and Safety Regulations 2007 (Vic) (the Regulations) in Deal v Kodakkathanath [2016] HCA 31 and held that a jury should have been allowed to hear and consider an injured employee’s claim that her employer breached the Regulations.

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The Foreign Nationals Employment Act

Financial risks when using foreign workers in the Netherlands

Hiring contractors or temporary employment agencies that employ foreign workers in the Netherlands, can create financial risks of which you should be aware. If foreign workers carry out activities for the benefit of your business, you should comply with legal obligations under the Foreign Nationals Employment Act (Wet arbeid vreemdelingen) (the Act). Non-compliance with the Act can result in significant fines.

The European Union has been very active in implementing regulations in order to prevent exploitation of foreign workers. In this regard, amongst others, the Posting of Workers Directive (96/71/EC) has been implemented and more recently the Enforcement Directive (2014/67/EU), which have a significant influence on Dutch legislation with respect to the protection of (foreign) workers. More obligations and liabilities are created for companies that employ foreign employees and parties that use the services of these companies. The Act has similar objectives and effects. We note that most companies are not aware of their legal obligations under the Act and the related (financial) risks. Therefore, the main obligations and risks are set out below.

“Employer” under the Act

The Act requires that the employer obtains a valid work permit for all foreign workers. Such work permit is not required for employees with a nationality of one of the countries within the European Economic Area (EEA) (with the exception of Croatia) or Switzerland.

The term “employer” under the Act is interpreted very broadly. Therefore, not only the party that entered into an employment contract with the employee has responsibilities. In addition, any other party for whose benefit the services are provided (whether directly or indirectly) can qualify as an employer under the Act. For example, in the construction industry, it is very common for the main client to work with contractors and subcontractors or temporary employment agencies. It is not unusual for there to be a large chain of contracting parties involved in a project. Due to the broad interpretation of the term “employer”, all parties in “the chain” may fall under this definition. The party that enters into the employment contract with the employee has the primary responsibility to make sure that the required permits are in place. In addition, any other party that uses the services of this party, directly or indirectly, needs to ensure that all legal requirements have been met. Consequently, in principle, all parties will be fined separately, if somewhere in the chain foreign workers are performing labour without a valid work permit being in place.

Possible fine in case of breach

Where there is a breach of the requirements of the Act, the Ministry of Social Affairs and Employment can impose a fine of up to EUR 8,000 per employee. The fine can be increased to up to EUR 12,000 per employee if there are any aggravating circumstances, such as: i) a repeated offence within five years; ii) the foreign worker has no right of residence in the Netherlands; iii) the employer has consciously circumvented the law; and/or iv) the offence involved three or more foreign workers. As the fine is calculated per employee, the imposed fines can be significant.

Possible defence

Case law has established that it is very difficult for an “employer” to defend himself once a fine has been imposed. As already mentioned, every “employer” has a responsibility to comply with the Act. It is not possible to contractually exclude this responsibility.

In order to avoid the fine, the “employer” must prove that it did everything within its abilities to avoid any breach of the Act. The fact that the employer had no knowledge of the breach of the Act is no ground for defence. Therefore, a company should not rely on the other contracting parties to comply with the Act. In order to fulfil their own responsibilities as an employer, the parties should make clear contractual arrangements regarding compliance with the Act, before commencement of the work. The contractual arrangements should amongst other things include arrangements in respect of identity checks, monitoring presence and validity checks of the work permits. Furthermore, parties should make efforts to verify that all the requirements under the Act are met, while the work is being performed.

Moreover, we would advise employers to include an indemnity in agreements with other contracting parties against any fine imposed on them for breach of the Act by the other contracting parties or any of their contractors or subcontractors.

Should you have any further questions in respect of the above, please feel free to contact Thomas Timmermans or Saskia de Schutter.

Insurance premiums can push an employee over the high income threshold and exclude them from the Federal unfair dismissal regime

Subject to limited exclusions, employees will have access to the unfair dismissal regime under the Fair Work Act 2009 (Cth) (FW Act) if their annual rate of earnings is less than the high income threshold. Currently the high income threshold is $138,900.

For the purpose of assessing whether the high income threshold applies in relation to the dismissal of an employee at a particular time, certain payments applied or dealt with on behalf of the employee are included.

A recent full bench decision of the Fair Work Commission in Savannah Nickel Mines Pty Ltd v Crowley [2016] FWCFB 2630 held that an employer’s payment of a death cover insurance premium was included for the purpose of assessing whether the high income threshold applied to the employee involved.

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Reasonable Notice Claims – Update

It is generally accepted that the common law will imply a term of “reasonable notice” into a contract of employment which makes no provision for termination notice.  However, this general rule was displaced by the case of Brennan v Kangaroo Island Council [2013] SASCFC 151 which found that reasonable notice may not be implied in circumstances where an employee is covered by a modern award which prescribes a period of termination notice.  Recent cases have considered whether s 117 of the Fair Work Act 2009, which prescribes a minimum period of termination notice, should also displace the general rule.  Whilst this was supported by the South Australian District Court in Kuczmarski v Ascot Administration P/L [2016] SADC 65, in the more recent case of McGowan v Direct Mail and Marketing Pty Ltd [2016] FCCA 2227 Judge McNab of the Federal Circuit Court of Australia (FCCA) confirmed that s 117 provides minimum periods of termination notice only, and consequently does not displace a right to implied reasonable notice.

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Quebec Labour Tribunal rules on decision to terminate a high paid employee

The Tribunal administratif du travail recently released Major c. Nova DM Média Canada inc., 2016 QCTAT 4423, which clarified an employer’s burden of proof to demonstrate that an employee was laid off as part of an administrative reorganization rather than dismissed not for good and sufficient cause.

In this decision, administrative judge François Caron relied on Selianov c. ABPTS inc., 2010 QCCRT 0138, in order to explain the burden of proof in the context of redundancy dismissals. Selianov established that in case of dismissal, the employer must prove, on a balance of probabilities, that the economic or organizational reasons are real and that the termination of employment is a result of those reasons. Therefore, these reasons cannot be used as a pretext to conceal a constructive dismissal and the employer must establish that the criteria used to select the employee are objective, impartial and not based on the employee’s subjective characteristics. Once this has been demonstrated, the employee must then show that the economic or organizational reasons are not well-founded or that the selection criteria used by the employer are unfair, unlawful or unreasonable.

On the merits of the case, administrative judge Caron concluded that the employer’s reasons supporting the administrative reorganization were real and that there was a causal link between those reasons and the termination of the laid-off employee’s employment. The administrative judge specified that the employer was not required to file its financial statements or other documents of this nature to establish that the reasons supporting its administrative reorganization were real. Rather, the employer can establish its reasons by way of testimony. The administrative judge also held out that lay-offs can occur even in the absence of economic difficulties.

In this case, the employer had selected the laid-off employee based on the fact that his salary was higher than the other employee working in the same department who took over some of the laid-off employee’s duties. Thus, while this second employee subsequently performed 70% of the laid-off employee’s tasks, this was not sufficient to conclude that the laid-off employee had been dismissed rather than made redundant. Therefore, when a position is abolished, it does not necessarily mean that the tasks that were attached to it cannot be accomplished anymore within the company. The employer may choose to internally redistribute a significant portion of the tasks while dropping others as part of a genuine administrative reorganization.

Finally, administrative judge Caron concluded that the decision to dismiss the employee in favor of a less qualified and less expensive one was reasonable. The remedy under section 124 of the Act Respecting Labour Standards was not allowed.

We believe that this case is of interest to non-unionized employers who wish to conduct an administrative reorganization. However, such employers should bear in mind that they may have to fulfill additional obligations under any applicable employment agreements and the civil law.

Written with the assistance of Geneviève Plante, articling student.