The government has recently published the response to its December 2020 consultation on the use of ‘exclusivity clauses’ – pledging to ban their use for low earners.
Exclusivity clauses are a type of restrictive covenant that prevent workers from undertaking additional work with another employer. There is general agreement that, when well-drafted and enforceable, they can protect legitimate business interests. However, they can be unfair when they prevent low-income workers from attaining additional work to increase their income.
Ultimately, the strength of the UK labour market lies in flexibility and fairness in law and practice for both parties.
What do employers think of the proposals?
The CBI agrees with the proposal to ban them from employment contracts with a guaranteed weekly income below or equivalent to the Lower Earnings Limit - currently £123 a week.
In practice, the current use of exclusivity clauses is low – where restrictive clauses do exist, this is typically for practical reasons, such as to ensure adequate rest time and compliance with Working Time Regulations (WTR) obligations.
Unless an employee has opted out of the WTR, the 48-hour weekly average is the limit, even if the employee has more than one job. Where an employee has more than one job, the employer must make sure their employee is not working more than an average of 48 hours a week in total across both jobs.
The CBI has been clear that, as long as employers know how to comply with their WTR obligations to ensure adequate rest and how to comply with this new ban, then employers support it.
Where workers do not provide information on the hours they are working elsewhere, the government believes that employers simply asking their employees to provide this information would be enough for them to comply with their requirement to take ‘all reasonable steps’ to fulfil WTR obligations.
The CBI will continue to work with government and ACAS as the new legislation and guidance is drafted to ensure the key asks from employers are taken into account.
How exactly will the ban work?
This is not the government’s first ban on exclusivity clauses. In 2015, exclusivity clauses were banned for workers on zero-hours contracts via legislation that made such clauses unenforceable for employers. Employees were also given the right not to be unfairly dismissed for taking work elsewhere, while those deemed ‘workers’ were given the right not to be ‘subjected to a detriment’ for failing to comply with an exclusivity clause. Where these conditions were breached, the legislation also gave the ability to claim compensation.
Rather than bringing forward a new mechanism, the government will extend the current legislation to those earning below the Lower Earnings Limit. This will be relatively simple, as the government has the ability to implement secondary legislation (which requires far less parliamentary time for approval) – this is set to happen before the end of the year.
If you would like to discuss the government’s plan to ban exclusivity clauses or are interested in our work on employment law issues, reach out to Laurence.