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‘Zero-hour contracts’ is a phrase that has been coined by the media. It is an arrangement where an employee has no guaranteed hours of work. However, they must be available for whatever hours you offer them, whenever you offer them. In 2016 there were changes to New Zealand employment laws, which no longer allow zero-hour contract arrangements. This article will explore: 

  • what zero-hour contract arrangements look like; 
  • the difference between zero-hour contract arrangements and casual arrangements;
  • the current status in NZ; and
  • availability clauses

What Do Zero-Hour Contracts Look Like?

A zero-hour contract involves an employment arrangement where an employee needs to be available but has no guarantee of hours each week. This can include permanent employment. Additionally, employees are not compensated for being on standby, waiting to be needed to work. Zero-hour contracts have been used broadly across businesses such as: 

  • hospitality; 
  • service stations; 
  • convenience stores; and 
  • care and service providing businesses.

Difference Between Zero-Hour and Casual Arrangements

Casual employment in New Zealand has been recognised by the courts to be employment on an ‘as and when required’ basis. Casual employees do not have certainty of hours, but they can decline work. In these circumstances, you are under no obligation to offer the employee work but may not have someone available when needed. Comparatively, in zero-hour arrangements employees are required to be available for work without being given the opportunity to receive guaranteed work or payment for their availability.

Current Status in NZ

The NZ Government decided they wanted to stop unfair employment practices. Therefore, they introduced new laws to make employment practices fairer. The new laws aimed to prohibit zero-hour contracts.

The rules still allow flexibility for employers, by allowing you to have ‘availability clauses’ in employment contracts. Also, the laws require you to include the hours of work which have been agreed between you and the employee. This can include any of the following:

  • guaranteed hours of work;
  • days of the week performing work;
  • start and finish times; and
  • any flexibility in these above factors.

Availability Clause

An ‘availability clause’ provides you with some flexibility.

For example, in instances where you cannot know in advance how many hours the employee will be required.

Further, the availability clause requires the employee to be available to accept work over and above their specified guaranteed hours of work. 

Availability clauses are only enforceable if:

  • you have genuine reasons, based on reasonable grounds, for including the clause in the agreement;
  • the employee gets reasonable compensation for making themself available; and
  • the employee has some guaranteed hours.

Genuine Reasons

What is considered as ‘genuine reasons, based on reasonable grounds’ depends on:

  • whether it is practical for you to meet business demands for the performance of work by the employee without the availability clause;
  • the number of hours you require an employee to be available; and
  • the number of hours you require an employee to be available, in comparison to the agreed work hours.

Reasonable Compensation

In addition, what is considered as ‘reasonable compensation’ depends on:

  • the number of hours you require the employee to be available;
  • the number of hours you required the employee to be available, in comparison to the agreed hours of work;
  • the nature of restrictions on the employe, for example, if the employee cannot drink while they are on call or if they have to stay in the local area; and
  • the remuneration for availability.

If an employment agreement does not contain an availability clause, the employee can refuse any additional hours you offer them. Further, if the employee does refuse to perform work, you cannot treat the employee differently because of it. For example, by not giving the employee a promotion because they have refused additional hours.

Note: Casual employees have no obligation to be available, unlike employees subject to an availability clause. So you need to ensure you do not confuse permanent employees subject to an availability clause with casual employees. 

Key Takeaways

Updated New Zealand employment laws prohibit contracts with zero hours. However, there are other ways for you to allow for a more flexible arrangement with your employees. You should ensure all your employment agreements (except for casuals) specify the hours of work. Furthermore, availability clauses should be considered if you are not able to predict in advance the exact hours an employee will work. Additionally, you should ensure you have updated your employment agreements so that they comply with these new employment laws. 

For assistance with your employment contracts, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What are zero-hour contracts?

A zero-hour contract is an arrangement where an employee must be available for whatever hours of work you offer them, whenever you offer them and there is no guaranteed hours of work. Zero-hour contracts are no longer allowed under New Zealand employment law.

What is the difference between zero-hour and casual arrangements?

Casual employees do not have a guarantee of hours, but they are able to decline work. On the other hand, zero-hour contracts require employees to be available without giving them the opportunity to decline work, or to receive payment for their availability.

What is an availability clause?

An availability clause requires an employee to be available to accept work outside their specified guaranteed hours of work. This flexible arrangement is useful in circumstances where you do not now how many hours an employee will be needed for.

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