Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015
Guidance
Future developments


In May 2015 the government introduced a ban on the use of exclusivity clauses in zero-hours contracts. The ban renders unenforceable any contractual provision which prohibits an individual working under a zero-hours contract from working elsewhere. The government recently introduced new legislation designed to strengthen the ban, giving employees and workers the right to bring a tribunal claim if they are penalised for working elsewhere.

Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015

Under the new regulations, individuals employed under zero-hours contracts will have the right not to be unfairly dismissed or suffer a detriment for their failure to comply with an exclusivity clause. Any dismissal will be automatically unfair and there will be no two-year qualifying period of service. Individuals engaged as zero-hours workers who suffer a detriment for failing to comply with an exclusivity clause will also be able to bring a claim in an employment tribunal. Where the detriment is the termination of a worker's contract, any compensation awarded will be subject to the usual unfair dismissal compensatory award limits.

These regulations will be an important step in preventing employers from penalising workers on zero-hours contracts who also work elsewhere. However, the definition of what amounts to a zero-hours contract is ambiguous and open to dispute (for further details please see "Zero-hours contracts: proposed legislation unveiled"). In addition, many workers may be penalised for working elsewhere (eg, in terms of work allocation), even where there is no express contractual provision prohibiting them from doing so. Taken together with the expense and uncertainty associated with bringing a claim, many individuals may face significant hurdles in terms of enforcing their rights.

Guidance

For some time there have been calls for better guidance on the rights and obligations of those working under zero-hours contracts. In 2013 the Chartered Institute of Personnel and Development produced detailed practical guidance designed to help employers understand the legal issues surrounding the use of zero-hours contracts.

The government has now published its own guidance on zero-hours contracts. This includes information for employers on employment status and associated rights, examples of appropriate and inappropriate use of zero-hours contracts, potential alternative arrangements to consider, best practice and exclusivity clauses.

While recognising the benefits of using zero-hours contracts in certain circumstances, the guidance notes that zero-hours contracts should not be considered as an alternative to proper business planning, are rarely appropriate to run the core business and should not be permanent unless justifiable. It is unclear precisely what would be considered 'justifiable', but it is suggested that fixed or permanent contracts (instead of zero-hours contracts) would be appropriate for many organisations which provide a regular service or product and have a broadly predictable timetable or output.

Future developments

The risk remains that some employers will try to side-step the legislation – for example, by offering a minimal number of hours of guaranteed work (which would mean that the individual falls outside the definition of a zero-hours worker). Even when the government implemented the ban on exclusivity clauses, it recognised that there were a number of ways in which organisations could try to avoid it; the government thus consulted on ways to prevent potential anti-avoidance. Proposals included extending the exclusivity ban to include low-income contracts as well as zero-hours contracts, and specifically exempting individuals earning £20 or more per hour. As yet, these proposals have not been implemented.

It remains to be seen whether the government will extend the reach of the current exclusivity ban to a wider category of individuals. However, further anti-avoidance measures are expected to be introduced in due course.

For further information on this topic please contact Rhian Hall at Lewis Silkin by telephone (+44 20 7074 8000?) or email (rhian.hall@lewissilkin.com). The Lewis Silkin website can be accessed at www.lewissilkinemployment.com/en-gb/.