New regulations will prevent exclusivity terms in low income worker contracts
On 5 December 2022, new regulations will come into force rendering exclusivity terms in employment and worker contracts unenforceable where the worker’s earnings under that contract do not exceed the lower earnings limit (which is currently set at £123 per week).
Many workers will currently be dealing with financial stress due to the cost of living crisis. Some, particularly workers who earn less than the lower earnings limit (“low income workers”), may be considering taking up a second job to supplement their income. However, some employment and worker contracts include exclusivity terms which essentially prohibit the worker from taking up another job or from doing so without the employer’s consent.
The Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 (SI 2022/1145) (“Regulations”) were approved on 7 November 2022 and will come into force on 5 December 2022. The effect of the Regulations will be that employers will not be able to prevent workers who earn less than the lower earnings limit under their contract with the employer from taking up other jobs if they wish. It is estimated that the Regulations will affect around 1.5 million workers.
In 2015, legislation was introduced which renders exclusivity terms void and unenforceable in zero-hours contracts (i.e. a contract where the worker is engaged by a business on an ad hoc basis with no guarantee of work and no obligation to accept work from the business). The reason for the so-called “ban” on exclusivity clauses in zero-hours contracts is pretty clear – it would be highly unfair on the worker not to provide any work but at the same time to prevent that worker from seeking work elsewhere.
In 2020, the government consulted on the possibility of extending the ban on exclusivity clauses beyond zero-hours contracts. In May 2022, the government announced its plan to widen the ban to low income workers’ contracts to give the UK’s lowest paid workers the choice to work multiple jobs to increase their income.
Summary of the new Regulations
The Regulations replicate the rights of zero-hours workers in relation to exclusivity terms. They apply to employment and worker contracts which entitle a worker to be paid “net average weekly wages” that do not exceed the lower earnings limit. The method of calculating a worker’s net average weekly wages is set out in the Regulations and differs depending on whether the contract is permanent or not. From 5 December 2022, exclusivity terms in such contracts will be unenforceable.
The Regulations should not be ignored as they introduce a number of protections for low income workers in relation to exclusivity terms. From 5 December 2022, if an employer dismisses an employee who earns less than the lower earnings limit for breaching an exclusivity term, that employee will be entitled to bring a claim for automatic unfair dismissal. Unlike ordinary unfair dismissal, there is no minimum length of service required to bring such a claim. In addition, workers who earn less than the lower earnings limit will be protected from detrimental treatment by an employer as a result of breaching an exclusivity term. If an Employment Tribunal finds in favour of the worker in such a claim, it may award such compensation as it considers just and equitable up to an amount equal to the unfair dismissal basic and compensatory award.
Employers should review their low income worker contracts and relevant policies to check whether they need updating in the light of the new Regulations.
Employers should consider the impact of the Regulations on a low income worker’s working time. Under the Working Time Regulations 1998, all workers are restricted from working more than an average of 48 hours per week unless they opt out of this restriction. An employer’s failure to take reasonable steps to comply with the limit on working time is a criminal offence. Government guidance requires all working time to be counted towards the weekly average, including time working for other employers where a worker has more than one job. In such cases, it can be difficult for an employer to assess how many hours a worker is working per week where they are working for more than one employer. Employers will need to either keep track of the worker’s working hours or consider asking them to opt out of the working time restriction.