15 December 2022

On 5 December 2022, the Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 came into force in England, Wales, and Scotland. Employers should be aware that this legislation extends the existing prohibition on exclusivity clauses in zero-hours contracts to a wider group of employees and workers. It is likely that many employers will need to revise their existing employment and workers’ contracts to remain compliant.

Exclusivity terms in UK law: a recap

Since 2015, it has been illegal to subject any workers (including employees) to exclusivity terms if they work on a zero-hours contract (i.e., a contract in which there is no obligation on the employer to offer any work). Exclusivity terms seek to restrict the worker’s right to work for other employers, either via a total prohibition or else via the condition that permission from the existing employer must be sought. Although exclusivity terms are a standard feature of traditional employment contracts, their use in zero-hours contracts was widely perceived to be unfair to workers; they were also argued to be economically damaging, arbitrarily restricting both individual incomes and the ultimate viability of businesses which relied on a flexible workforce.

The new regulations

The new 2022 Regulations protect a wider pool of workers. Exclusivity terms are now unenforceable against any employee or worker whose net weekly wage is below the Class 1 NI Lower Earnings Limit (LEL). This currently stands at £123 per week.

Calculating weekly wages

If the contract of employment/engagement does not include a salary, calculating net weekly wages will not always be straightforward. The legislation states that wages should be calculated as a mean weekly average of the total remuneration in the expected period of work. However, in practice it may often be difficult to make this calculation for a worker at the commencement of a contract. Employers are advised to take a cautious approach to the required calculations in considering whether their employee/worker contracts are compliant.

Worker protections under the new regulations

Employees are protected from unfair dismissal under the new regulations. This means that an employee will be regarded as automatically unfairly dismissed if the reason (or the main reason) for their dismissal is breaching an exclusivity term. Further, workers are protected from detriment if they breach an exclusivity term. Complaints can be brought before employment tribunals, who can order payment of compensation for unfair dismissal to employees and equivalent sums to workers.

One final, crucial consideration is that the unfair dismissal protection introduced by the new legislation is exempt from the qualifying period of 2 years which applies to ordinary unfair dismissal claims.

For further information, please contact the team at Synchrony Law.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.