Zero hours employment contracts: exclusivity clause ban avoidance

13 March 2015

The Small Business, Enterprise and Employment Bill is currently undergoing scrutiny by Parliament and includes the measure to ban exclusivity terms in zero hours contracts.

The Government has published their response to the ‘Banning exclusivity clauses: tackling avoidance’ consultation.

The consultation responses overwhelmingly supported tackling avoidance of the exclusivity ban via secondary legislation, and that this was necessary now rather than waiting to see what happened once the ban came into force.

The response details the next steps, which in summary are:

A new section will be inserted into the Employment Rights Act 1996 rendering exclusivity clauses in zero hours contracts unenforceable.

Draft Regulations to tackle avoidance of the exclusivity ban for zero hours contracts, will be considered during the passage of The Small Business, Enterprise and Employment Bill to assist in Parliamentary scrutiny.

The draft Regulations will include the right for zero hours workers to not suffer detriment on the grounds that the worker has done work or performed services under another contract or arrangement. They can complain to an Employment Tribunal if they consider they have suffered such a detriment.

If the complaint is upheld by an Employment Tribunal, they may receive compensation. Employers could also be subject to civil penalties in circumstances where the worker’s rights have been breached.

The draft Regulations will also extend the prohibition on exclusivity clauses beyond zero hours contracts under which the individual is not guaranteed a certain level of weekly income. There will be an exception to this if the rate of pay for each hour worked under the contract is at least £20.

There will be both an hours and income based threshold. If an employer cannot guarantee a certain weekly income, they would not be able to prevent that person from seeking additional work and income if they so wish. This level of weekly income, below which an employer could not demand exclusivity, would be set by multiplying the agreed number of hours by the adult national minimum wage rate - currently £6.50.

An unintended consequence of the income-based approach is that individuals earning higher hourly rates could inadvertently be captured by the exclusivity ban. For example, an individual may earn a very high hourly rate, but only wishes to commit to one or two hours of work a week. Government believes Regulations should exempt those individuals guaranteed a higher hourly rate. Current thinking suggests this should be set at £20 an hour, so exclusivity clauses will be permitted if the rate of pay for each hour worked under the contract is more than £20.

Existing guidance will be reviewed with a view to improving the information available to individuals and employers on using zero hours contracts. Government will continue to encourage business representatives and unions to develop industry-led, industry-owned, sector-specific codes of practice on the fair use of zero hours contracts as the reality of the situation is likely to be different in each sector.

Read the full response for further details.