Zero Hours Contract - Ban on Exclusivity Clauses

Zero hours contracts have been somewhat of a ‘hot topic’ over the past few months, and have attracted much media coverage. Much of this stemmed from the consultation that was launched in December 2013, and the media’s perception that such contracts don’t offer workers a “fair deal”, at a time when employment opportunities are still often hard to come by.

On 25 June, further developments emerged when Vince Cable, the Secretary of State for Business, Innovation and Skills outlined the Government’s plans to ban exclusivity clauses. Such clauses are often used by employers to prevent workers undertaking work for any other potential employer, despite the fact the worker’s hours are not guaranteed in the first place under the zero hours contract.

The proposal stemmed directly from the response to the Government’s consultation which closed in March 2014, with 83% of responses indicating a preference to ban exclusivity clauses.

The proposals seeks to allow workers employed under such contracts, to find work for more than 1 employer, and if implemented, would address much of the criticism that zero hours contracts have attracted in respect of exclusivity obligations. Many commentators have described such clauses as an ‘abuse of power’ by the employing entity.

It is estimated that the change would benefit in the region of 125,000 workers, allowing them to increase their earnings potential.

Cable said: “It has become clear that some unscrupulous employers abuse the flexibility that these contracts offer to the detriment of their workers…we are legislating to clamp down on abuses to ensure people get a fair deal”.

In addition to this proposal, the Government will be undertaking further consultation on zero hours contracts, with a view to developing a Code of Practice by the end of 2014 and reviewing existing guidance for employers and workers on the use of such contracts. 42% of responses to the consultation had indicated that the existing guidance was not helpful.

The consultation will also seek to establish protections against rogue employers evading the ban on exclusivity clauses. It has been suggested that one way in which rogue employers could seek to avoid the ban, is through the use of fixed 1 hour contracts.

It remains to be seen at this stage whether the Secretary of State will legislate further to impose financial penalties on employers who continue to use exclusivity clauses going forwards, and many will no doubt view the regime as ‘toothless’ if not.

Whilst many workers may see this news as a positive move towards such contracts being used in a much fairer way, businesses will need to consider whether they are able to protect their legitimate business interests by virtue of workers being able to provide their services to a number of employers.

At first sight, it is also far from clear exactly what will fall under the definition of an ‘exclusivity clause’, with disputes and satellite litigation likely to result.