Ban on exclusivity clauses extended

The Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations came into force from 5 December 2022. These regulations make exclusivity clauses unenforceable in employment contracts where the average net guaranteed weekly income is below, or equivalent to, the Lower Earnings Limit (LEL). The LEL is currently £123 per week. It is hoped that by introducing this change, the lowest paid workers will be given the choice to work multiple jobs if they wish, to give them more flexibility over when and where they work.

What are exclusivity clauses?
“Exclusivity terms” are any contractual term which stops a worker (or employee) from doing work elsewhere, or which stops a worker from getting work elsewhere without getting the first employer’s permission. This includes stopping someone from working elsewhere because of a conflict of interest. Employers can still require that the worker tells them that they have got work elsewhere, but cannot stop someone getting work elsewhere.

These clauses were banned from being included in zero-hours contracts in 2015, with the same aim of maximising opportunities for individuals to find additional work and apply their skills to drive economic recovery. The legislation also gives employees the right not to be unfairly dismissed, and workers the right not to be subjected to a detriment, for failing to comply with an exclusivity clause and to claim compensation.

Which contracts are affected?
All contract of service types are within the scope of these regulations; it impacts workers and employees alike. The legislation prescribes the calculation of average weekly wages in the following way:

Permanent contracts of employment or other worker’s contracts
- Where the contract of employment or other worker’s contract is permanent, the average weekly wages are calculated by dividing by 52 the total remuneration to which the worker is entitled under that contract in respect of a period of 52 weeks.
All other contracts of employment or other worker’s contracts
- The average weekly wages are calculated by dividing the total remuneration to which the worker is entitled under their contract by the number of weeks during which their contract is expected to continue.
Net average weekly wages
- The net average weekly wages are calculated by subtracting all deductions of whatever nature from the average weekly wages.

How will businesses benefit?
As well as supporting almost 1.5 million workers to increase their income, the new legislation will also positively impact businesses by widening the talent pool of applicants to those who may have previously been prevented from applying for roles due to an exclusivity clause with another employer. It will also help to attract more people in key industries, such as retail and hospitality and encourage employers to create jobs with contracts which suit them and their needs, for example, offering few weekly hours.

What do employers need to do?
Employers now need to review their contracts, as exclusivity clauses will need to be amended to ensure they only apply to those earning above the LEL. Employers may also have to update policies and procedures; whilst exclusivity clauses can’t be enforced for those earning £123 per week or less, employers can still require staff to tell them if they are working elsewhere.

Similarly, employers should work out the average weekly earnings of all employees, so they know who the new rules apply to. Employers should also check employees’ total working hours; an opt-out agreement will need to be signed if the employee is working / is likely to work more than 48 hours per week across all employers, otherwise they might find they are in breach of the Working Time Regulations (1998).

Finally, in some cases, it may be necessary to assess the role and industry the employee works in. Employers might want to introduce a restrictive covenant for employees who may want to work for a competitor or where there are concerns about the sharing of confidential or sensitive information.

As ever, if you have any questions about this update or any other queries, please get in touch.

Have a good week!

Jo

Ban on exclusivity clauses extended to lower income workers