Extension to the ban on exclusivity clauses comes into force on 5 December 2022

Ban will extend protection to workers on low incomes.

As reported in our May article (Extension on the ban on exclusivity clauses announced) the government consulted on extending the prevention of the use of exclusivity clauses in zero-hours workers’ contracts and agreed to apply the ban to those workers earning less that the Lower Earnings Limit (‘LEL’). In the current financial year 2022-2023, the LEL is £123 a week.

The ban extension reflects an acceptance from the government that employers should not be able to restrict the earning potential of those workers who have few guaranteed working hours and thus only low guaranteed earnings from seeking employment elsewhere whilst they are not working.

The Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 (the Regulations) shall come into force on 5 December 2022. The Regulations define ‘exclusivity terms’ as any contractual term which prohibits a worker from doing work or performing services under another contract or arrangement, or which prohibits a worker from doing so without their employer’s consent.

The Regulations make it automatically unfair to dismiss an employee if the reason or principal reason for the dismissal is they breached an exclusivity term. This is a ‘day one’ protection, meaning no qualifying period of employment is required to benefit from it. Employees are also protected from any detrimental treatment by their employer if they breach an exclusivity term, meaning employers cannot surreptitiously enforce exclusivity clauses by taking action other than dismissal. If a tribunal finds that a detriment occurred, it may award as much compensation as it considers ‘just and equitable’, up to an amount equal to the basic and compensatory awards available for unfair dismissal.

Unlike employees, workers do not benefit from protection against unfair dismissal. However where an employment tribunal finds that a zero hours or low earning worker was subjected to a detriment (which could include termination of the contract) because they breached an exclusivity term in their contract, it can award compensation up to an amount equal to the unfair dismissal basic and compensatory awards.

Comment

Many employers in the third sector have moved away from zero hours contracts in recent years due the reputational and retention risks of using a form of contract which does not offer a predictable income. Employers should seek legal advice to review their guaranteed hours contracts and working arrangements to ensure that provisions which prevent or limit staff from carrying out work for other employers do not fall foul of the Regulations.

As noted in our article in May, the extension of the ban will be welcomed by workers seeking to boost their incomes who may otherwise have been prevented from doing so by an exclusivity clause in their contract.

However, it should be noted that the LEL threshold, which is as far as the ban extension goes, does not represent a significant income and there may be workers who remain frustrated by their employers who demand their workforce cannot work for other employers despite offering comparatively little in terms of guaranteed hours and pay.

It is also debateable to what extent the workers and employees who will benefit from this protection will be aware of it and how they can access the legal support they might require to enforce these protections.