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Employment Law Update: The extended prohibition on exclusivity clauses

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By Anthony Wilcox

In 2015, the government introduced regulations which banned exclusivity clauses for workers and employees on zero-hours contracts.  A zero-hours contract is one where the employer is not obliged to guarantee any working hours to the worker or employee, whilst the worker or employee is not obliged to accept work offered by the employer.  Introducing the prohibition meant that those protected by the legislation cannot be prohibited from taking on additional work for other employers while still engaged under their zero-hours contract.  This has become an important feature of zero-hours working relationships since the number of people on zero-hours contracts with a second job has risen, after a brief fall in 2021.

With effect from 5 December 2022, the legislation has been extended and no longer applies only to zero-hours contracts.  It now also applies to any other worker or employee who earns less than the Lower Earnings Limit (LEL), which currently stands at £123 per week. The effect of the legislation is that any exclusivity clause in the contract of a qualifying worker or employee is unenforceable.

The legislation provides the following extra rights for those who qualify:

  • Not to be subjected to a detriment for failing to comply with an exclusivity clause; and
  • To claim compensation.

Qualifying employees (but not workers) are also given additional unfair dismissal protection.

Considerations for employers

In addition to all zero-hours workers, this legislation will now apply to some part-time workers and employees, whether they have regular hours or not. Although there was discussion about whether to introduce an exemption for those on high hourly wages, this was not implemented. Therefore, employers need to ensure that they do not apply exclusivity clauses to any workers or employees whose net income is below the LEL.

One area requiring particular care is with regard to directors and other specialists who may only work for a few hours each week, since they could well be covered by the prohibition, especially if for commercial reasons they receive little income in the form of salary.

All qualifying workers and employees are protected from detriment if they breach an exclusivity term in their contract. Where an Employment Tribunal finds that the worker has suffered detriment, it may make a declaration recording that and may award such compensation as it considers just and equitable.

Employers should also note that in the case of employees (but not workers) earning below the LEL, it is automatically unfair to dismiss the employee if the reason, or principal reason, for the dismissal is that the employee breached an exclusivity term.  There is no qualifying period of employment to bring this claim.

Recommended next steps

In the light of these recent changes, employers should review their existing contracts for all workers and employees who will not exceed the LEL, including for people such as executive directors or others who may receive little income in the form of salary. Any exclusivity provisions within their contracts will no longer be enforceable and employers need to consider the implications that this creates for their businesses.

For further information, or to seek advice about this issue, please contact our Employment Law team, who have the specialist knowledge and experience to advise you.

For further information, please contact anthony.wilcox@twmsolicitors.com

For further details about our expertise in this area, please Click Here

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