Ban on exclusivity clauses for low-income workers

What are exclusivity clauses?

An exclusivity clause in an employment contract is a clause which restricts employees and workers from taking on additional work with other employers or under any other arrangement for work.

What is the current position?

In 2015 The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 were introduced which banned the use of exclusivity clauses in zero hours employment contracts.

This provided employees who were engaged on a zero hours contract with the ability to obtain alternative employment so as to supplement their earnings without prohibition from their employer who may have wanted them to be available to accept work at any time.

What is the proposed new position?

In May 2022 an announcement was made that the current rules relating to the restrictions on exclusivity clauses would be extended to cover a wider range of situations, thereby covering more individuals.

Recently, a set of draft regulations were laid before Parliament setting out the extended prohibitions.

The draft regulations have extended the restriction on exclusivity clauses in zero hours contracts to also cover employees/workers whose earnings are equal to, or less than, the current lower earnings limit (LEL) (this is presently £123 per week).

What does this mean?

The contents of the draft regulations are close in nature to the 2015 regulations, in that any exclusivity clauses are rendered unenforceable in contracts for workers who receive the LEL.

Also set out in the draft regulations are protections from unfair dismissal for those employees who are dismissed as a result of a breach of a pre-existing exclusivity clause in their contract.

Dismissals which occur in these situations will be classified as an automatically unfair dismissal.

This means that employees do not need to have 2 years’ continuous service in order to qualify to bring a claim if they have been dismissed as a result of a pre-existing exclusivity clause.

In addition, as only employees can rely on the protection against automatic unfair dismissals for breaches of exclusivity clauses, the draft regulations give workers protection against the right to not be subjected to a detriment as a result of a breach.

Remedies which are available under the draft regulations include the Employment Tribunal’s ability to make a declaration of the employee/worker’s rights and to award compensation to employees claiming unfair dismissal.

In the event of a worker being subject to detriment as a result of their breach of an exclusivity clause, the Employment Tribunal may award compensation it considers just and equitable up to an amount equal to the unfair dismissal basic and compensatory award.

What are the next steps?

The draft regulations will come into force on 3 August 2022 as The Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022.

Companies will need to be aware of these changes so that they do not inadvertently seek to include a void exclusivity clause or impose an existing one in circumstances which are now banned by the regulations.

Any employers which are looking to update their employment contracts, or need general advice with regards to the same, can contact Nick Smith and Laura Liddle of our employment team on 0191 281 6151.