In the second part of our series on contract management pitfalls, we look at the risks and opportunities presented by payment mechanisms in construction contracts.
The EAT held in OBI v Rice Shack Ltd that an employee on a zero-hours contract was entitled to be paid at her average weekly earnings rate while suspended pending disciplinary proceedings. She was also entitled to accept alternative employment during the disciplinary suspension.
Unless an employer has a clear contractual right to suspend without pay, it should pay an employee during a disciplinary suspension. If an employer does not pay during such suspension, the employee may bring a claim for unauthorised deduction from wages.
A zero-hours contract is where an employee carries out such work as might be available, without any commitment from the employer or employee to particular hours. Some employers may assume that there is no right to be paid whilst suspended where there has been no agreement by the employee to work particular hours. An employee on a zero-hours contract cannot be prevented from obtaining other work whilst working under this type of contract.
Miss O worked for her employer (“RS”) as a front of house assistant in a food outlet. She was a college student and had a zero-hours contract. On average she worked 15.5 hours per week for RS and fitted this in around her college commitments.
On 6 March 2016, Miss O was suspended pending a disciplinary investigation following an altercation at work. The disciplinary matters were not progressed.
On 23 May 2016, Miss O submitted a written grievance raising various complaints, including that she had been suspended without pay and had not been offered work, even though she remained willing to work.
On 22 August 2016, Miss O started full-time work with a call centre company, and she did not inform RS of this work.
Neither the grievance nor the disciplinary matter appear to have been resolved (although Miss O did attend a grievance meeting) and Miss O was eventually offered further hours on 13 December 2016, which she declined. Miss O did not receive any pay from RS during the period from 7 March 2016 to 13 December 2016.
The Employment Tribunal concluded that Miss O was entitled to pay during her suspension period (40 weeks). It held that her suspension had continued because RS had failed to contact her regarding this outstanding disciplinary process.
RS appealed against the Employment Tribunal’s decision on the basis that Miss O had started full-time employment elsewhere on 22 August 2016 and had not disclosed this to RS. RS argued it should only be liable for wages up to this point.
The Employment Appeal Tribunal (“EAT”) dismissed RS’s appeal. The EAT noted that RS was not able to point to some misconduct on Miss O’s part that would have entitled it to terminate the employment contract immediately. Miss O had no obligation to decline other employment and no obligation to disclose to RS what employment she had taken on.
We have advised for some time that it is appropriate to pay an employee on a zero-hours contract during a suspension pending disciplinary proceedings. This is confirmation from the EAT that this is the correct approach. The decision also confirms that an employee on a zero-hours contract is entitled to seek other employment. It cannot be a breach of contract for them to seek alternative work during a disciplinary suspension period.
If, however, this case had related to a full-time employee, the employer may well have been entitled to expect them not to work elsewhere when suspended (depending on the terms of the contract).
No doubt, in this case, the employer regretted not following up the disciplinary procedure. It is a useful reminder to employers that any disciplinary process should not be left unfinished, even if the individual is working under a zero-hours contract and there is no obligation to offer them any work.
Any organisation using zero-hours employees will need to take account of this decision when considering its approach to disciplinary matters. In light of the Taylor review recommendations that zero-hours contracts should be paid at a higher rate than permanent employees, they will want to consider their future use of zero-hours contracts. We expect further detail will be announced in October 2018 when the Low Pay Commission is due to publish their recommendations on this.
For more information
The decision in this case reflects the advice we have been giving for some time. For more information on zero hours contracts, or unauthorised deductions claims generally, please get in touch with your usual contact in our Employment Team or speak to Hazel Robbins.
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