Plan to ban zero hour contract ‘exclusivity clauses’ published by UK government

Out-Law News | 01 Jul 2014 | 10:12 am | 2 min. read

‘ Exclusivity clauses ’ , preventing workers on so-called zero hour contracts from working for another employer even when no work is guaranteed, are to be banned in the UK, business secretary Vince Cable has confirmed.

The ban would be introduced by the Small Business, Enterprise and Employment Bill, published last week by the UK government. It follows its decision, following industry consultation, not to prevent the practice entirely to allow for business flexibility but to introduce new protections for the most vulnerable workers.

The government also plans to consult on measures to prevent businesses from evading the ban; for example, by offering contracts which guaranteed an hour’s worth of work and contained an exclusivity clause, Cable said.

“Zero hours contracts have a place in today’s labour market,” he said. “They offer valuable flexible working opportunities for students, older people and other people looking to top up their income and find work that suits their personal circumstances. But it has become clear that some unscrupulous employers abuse the flexibility that these contracts offer to the detriment of their workers.”

“Last December, I launched a consultation into this issue. Following overwhelming evidence we are now banning the use of exclusivity in zero hours contracts and committing to increase the availability of information for employees on these contracts. We will also work with unions and businesses to develop a best practice code of conduct aimed at employers who wish to use zero hours contracts as part of their workforce,” he said.

Zero hours contracts are contracts under which an employer does not guarantee to provide the worker with any work and pays the worker only for work actually carried out. Under these contracts, individuals are under no obligation to accept work that is offered. Critics of zero hour contracts say that businesses use them to avoid giving workers the status of ‘employee’ and eligibility for the full range of employment rights; however, business groups claim that using this type of contract gives firms the flexibility to cope with fluctuations in demand, particularly during challenging economic times.

Exclusivity clauses are used to stop a contracted worker from working for another company, even when the contract does not guarantee them a minimum number of hours. According to government estimates, around 125,000 UK workers are currently tied to these clauses.

The recently-published bill includes a number of employment law initiatives amongst its extensive provisions. These include a new system for enforcing unpaid tribunal awards; new rules in relation to applications for tribunal postponements; legislation allowing the treasury to require repayment of some or all of a public sector termination payment in prescribed circumstances; and a new disclosure regime for prescribed persons under the whistleblowing legislation. The details of some of these initiatives will be set out in secondary legislation.

Non-employment law matters covered by the bill are measures which would make it easier for small businesses to access alternative methods of finance; the introduction of a legal requirement for “frequent reviews” of the regulations affecting small businesses to ensure that these either remain effective or are cut; stronger rules on director disqualifications; and the creation of a new Pubs Code and Adjudicator to regulate the relationship between pub-owning businesses and their tied tenants.