Banning exclusivity clauses in zero-hours contracts

The Government has released its response to the consultation on zero-hours contracts, and in particular, banning exclusivity clauses and tackling avoidance.

16 March 2015

Zero-hours contracts have their place and can be used fairly. However, the Government is keen to address concerns about employers misusing them. The problem arises where employers engage individuals on zero-hours contracts (which do not guarantee a regular income) but include an exclusivity clause preventing that person from working for anyone else. The individual is then unable to top-up their income in weeks when little or no work is offered under their contract.

In its response to the Banning Exclusivity Clauses: Tackling Avoidance consultation, the Government has proposed the draft Zero Hours Workers (Exclusivity Terms) Regulations 2015 which provide that:

  • Any term in a zero-hours contract which prevents a worker from doing work or performing services for another party is unenforceable.
  • Terms which require zero-hours workers to ask for consent before working for someone else are also unenforceable.
  • Workers on zero-hours contracts are protected from suffering a detriment as a result of working or performing services for another party.
  • Workers who suffer a detriment in such circumstances can claim compensation at the employment tribunal. The tribunal may also make a declaration as to the contractual rights of the worker and employer. If there are aggravating factors the employer could also be given a fine.

As part of the consultation, there was a concern that if any new restrictions applied to zero-hours contracts only, certain employers may exploit loopholes to avoid being covered by the new regime.  For example, they might start offering one-hour contracts. To get around this problem, all of the Government’s proposals will also cover ‘prescribed contracts’. These are contracts where the worker is entitled to less than a set amount of pay per week (still to be determined), unless the hourly rate of pay in the contract is £20 or above.

As currently drafted, the proposals seem to prevent the employer from imposing any restriction on where else a zero-hours or prescribed contract worker can work. This would mean that employers will not even be able to restrict such workers from working for direct competitors.

In the current landscape of tribunal fees, one concern that remains is whether workers on zero-hours contracts will take steps to enforce their rights if they are infringed. It will be interesting to see whether the proposals lead to an overall reduction in the use of zero-hours contracts.

The response to the consultation is available here