Banded Hours Contracts

by Deirdre Malone, Partner with Ronan Daly Jermyn

A piece of legislation with a mouthful of a name (Employment (Miscellaneous Provisions) Act, 2018) updated the Organisation of Working Time Act to provide employees with a statutory entitlement to a “banded hours” contract in certain circumstances. We look at how to respond to a request for a banded hours contract, and the formula to calculate the correct band.

What is a banded hours contract?

It is contractual entitlement for employees to work within a set range of hours for the next 12 months, calculated by averaging out the hours worked during the previous 12 months.

There are certain sectors in which experience shows that employees’ contracts do not reflect the hours actually worked. By way of example, the hospitality sector would historically be seasonal in nature with employees potentially working full time during busy summer months, with limited hours during the winter months. Over the years, and prior to Covid, the “season” extended, and regularly employees would work full time on a year-round basis, but hold a contract requiring working hours at a much lower level.

The concept of a banded hours contract was introduced to provide stability and fairness to employees who wanted guaranteed weekly hours.

What are the bands?

There are eight different bands into which an employee’s average hours over the previous 12 months might be placed:

How to manage a request for banded hours

An employee must have one year’s service before they can make an application. The service requirement is necessary because the calculation of the band into which the employee will be placed is decided based on the hours actually worked over the previous 12-month period.

An employer has 4 weeks from the date of request to place the employee on a band. The employer determines which band applies.

The employee is then guaranteed the minimum hours within their band for a 12-month period.

There are certain times when an employer can refuse to place an employee on a banded hours contract.

Case law learnings

The WRC’s authority is limited in complaints about banded hours contracts to directing an employer to place an employee on an appropriate band. There is no scope to award compensation to an employee.

In recent months, the Labour Court reviewed an appeal from the WRC in the case of An Employee -v- Aer Lingus Ireland Limited.

The employee had four years’ service when she applied to be placed on a banded hours contract. Her contract stated 20 hours, but in reality, she claimed that she worked 37.5 hours on average per week. There was no dispute about her entitlement to a banded hours contract. The dispute related to the particular band into which the employee should be placed.

The employer calculated the entitlement on the basis of hours actually worked. Time off for annual leave during the 12-month reference period was excluded. The employer divided the number of hours worked by 52 to determine the average weekly hours worked over the year.

The employee submitted that annual leave should be included when calculating the weekly average.

The Labour Court considered the legislation discussing hours worked, and its plain and simply meaning. It accepted as follows:

1. The reference period to determine the correct band is the 12 months after the employee commences employment or immediately before the employee makes their request.
2. Annual leave is not “hours worked” and should be excluded from the hours used to determine average weekly hours.
3. It is appropriate to deduct the number of weeks where no hours were worked (in this case four weeks of annual leave) and use that remaining number of weeks as the divisor.

For the purpose of this case, the band of hours was calculated by reference to the hours actually worked (no annual leave) in the previous 12-month period, divided by 48 weeks.

What about layoff and short time?

Using the Labour Court’s rationale to determine working hours, employers should be mindful of ensuring that any calculation in response to an employee request to be placed on a banded hours contract should use hours worked over the number of weeks worked to determine the correct band. In such a scenario, any period of lay-off would be deducted from the weekly divisor.