Call us on:  0808 172 93 22

Zero Hours Contracts Exclusivity Proposals

FG Solicitors -  Zero Hour ContractSUMMARY: The government has proposed a ban on exclusivity clauses in zero hours contracts supported by draft regulations aimed at preventing employers from circumventing the ban.

Background

The government has decided to ban exclusivity clauses in contracts which do not guarantee hours of work (zero hours contracts). There is a clause in the Small Business, Enterprise and Employment Bill (“SBEEB”) which would render the use of exclusivity clauses in zero hours contracts unenforceable.

The government’s most recent consultation included consideration of how to prevent employers seeking to avoid the ban on exclusivity clauses.  The government will have powers under the SBEEB to make regulations to deal with avoidance of the ban, widen the scope of who should be protected by the ban and provide routes of redress for an affected individual.

The government was concerned that if the ban solely related to exclusivity clauses in zero hours contracts, employers could avoid it relatively easily by guaranteeing workers, for example, 1 hour of work per week.

Although originally there were suggestions that zero hours contracts should be banned entirely, this is no longer proposed.

Proposals

The proposed anti-avoidance regulations deal with the following:

a)    Introducing a right for zero hours workers (or low income workers – see below) not to suffer detriment on the grounds that the worker has done work or performed services under another contract or arrangement.

b)    The prohibition on exclusivity clauses in zero hours contracts would extend to all contracts of employment or worker’s contracts under which the individual is not guaranteed a certain level of weekly income.  This is to address the concern that employers would avoid the ban by offering workers a very low minimum number of hours.

The weekly income threshold would be set in the following way:

[Y] number of hours per week multiplied by the adult national minimum wage (currently £6.50 per hour).  We do not know what “Y”, the number of hours per week, is at this time and therefore do not know what the threshold will be.

If, for example, Y is set at 10 hours per week, the weekly income threshold will be 10 x 6.50 = £65.00.  If a worker earned £10 per hour and was guaranteed work for 6 hours per week, they would fall below this threshold and so the prohibition on exclusivity clauses would apply.  If the same worker was guaranteed 7 hours per week, they would be above the threshold and therefore the employer could require them to work exclusively for them.

By way of another example, if an employee aged 16 was paid £3.79 per hour in accordance with the national minimum wage, they would have protection under the proposals if they worked up to 17 hours per week (based on the example of a £65 weekly income threshold).

c)    If the worker’s hourly rate of pay is at least £20 it would not matter how many hours they worked – the ban on exclusivity clauses would not apply to them.  This means, using the above example, that if a worker earning £20 per hour was guaranteed work for 3 hours per week they would be earning under the amount set out in the threshold above (£65).  However, the employer could still demand that they work exclusively for them because they are being paid £20 per hour.

d)    The affected worker would have 3 months (plus appropriate ACAS early conciliation time) after suffering a detriment for working under another contract/arrangement to bring a claim in the employment tribunal and receive compensation.  The employment tribunal would also be able to impose financial penalties in certain cases.

The government has also indicated it will improve its guidance on zero hours contracts.

Practical steps

Businesses may be concerned about their ability to engage the staff they need and have a flexible workforce if these proposals come into effect.  In particular, if workers fall below the low weekly income threshold, businesses will not be able to prevent them from working for direct competitors. There are a number of practical steps that businesses could take to evaluate and mitigate possible adverse effects from the proposals and ensure future compliance once these proposals are finalised and a date set for them coming into force.

For now, businesses should be aware that if they have exclusivity clauses in their contracts and engage low income workers, these proposals are likely to affect them.  If businesses are not concerned about exclusivity, these proposals should not concern them.

Businesses could also put in place procedures for ensuring that reasons are noted for choosing not to offer work to workers who are not guaranteed work (or only guaranteed a small number of hours of work).  This is because if the reason an employer does not offer a worker (whose guaranteed income falls below the weekly income threshold) work is that they have worked for another business, the worker could bring a claim on the basis they have suffered a detriment, under the proposals.  Such procedures would be useful in any event in relation to defending potential discrimination claims.

Businesses could also be checking whether they are offering the appropriate benefits, including holiday entitlement, to workers with no or few guaranteed hours.

Only proposals

It is important to remember that these are proposals and, particularly given the imminent general election, they may not come into force and/or they may be substantially amended.  No date has been set for this legislation to come into force.  It is also unknown when guidance on zero hours contracts will be reviewed or improved.

There is considerable uncertainty in relation to the level of the weekly income threshold, which is likely to ultimately determine the extent of the impact of these proposals on businesses.

What are the next steps?

We will keep businesses informed as to the likely date legislation will come into force and any amendments to the proposals including the likely level of the weekly income threshold.

Businesses who have exclusivity clauses in contracts are likely to require advice on varying these when and if the proposals come into effect.

If you would like any advice on taking any of the practical steps outlined above, please contact us using the details below.

Contact Details

For more details about the proposals on banning exclusivity in zero hours contracts and advice on practical steps businesses can take please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.

Updated: by FG Solicitors
Call us on:  0808 172 93 22

ZERO HOURS CONTRACTS EXCLUSIVITY PROPOSALS

FG Solicitors -  Zero Hour ContractSUMMARY: The government has proposed a ban on exclusivity clauses in zero hours contracts supported by draft regulations aimed at preventing employers from circumventing the ban.

Background

The government has decided to ban exclusivity clauses in contracts which do not guarantee hours of work (zero hours contracts). There is a clause in the Small Business, Enterprise and Employment Bill (“SBEEB”) which would render the use of exclusivity clauses in zero hours contracts unenforceable.

The government’s most recent consultation included consideration of how to prevent employers seeking to avoid the ban on exclusivity clauses.  The government will have powers under the SBEEB to make regulations to deal with avoidance of the ban, widen the scope of who should be protected by the ban and provide routes of redress for an affected individual.

The government was concerned that if the ban solely related to exclusivity clauses in zero hours contracts, employers could avoid it relatively easily by guaranteeing workers, for example, 1 hour of work per week.

Although originally there were suggestions that zero hours contracts should be banned entirely, this is no longer proposed.

Proposals

The proposed anti-avoidance regulations deal with the following:

a)    Introducing a right for zero hours workers (or low income workers – see below) not to suffer detriment on the grounds that the worker has done work or performed services under another contract or arrangement.

b)    The prohibition on exclusivity clauses in zero hours contracts would extend to all contracts of employment or worker’s contracts under which the individual is not guaranteed a certain level of weekly income.  This is to address the concern that employers would avoid the ban by offering workers a very low minimum number of hours.

The weekly income threshold would be set in the following way:

[Y] number of hours per week multiplied by the adult national minimum wage (currently £6.50 per hour).  We do not know what “Y”, the number of hours per week, is at this time and therefore do not know what the threshold will be.

If, for example, Y is set at 10 hours per week, the weekly income threshold will be 10 x 6.50 = £65.00.  If a worker earned £10 per hour and was guaranteed work for 6 hours per week, they would fall below this threshold and so the prohibition on exclusivity clauses would apply.  If the same worker was guaranteed 7 hours per week, they would be above the threshold and therefore the employer could require them to work exclusively for them.

By way of another example, if an employee aged 16 was paid £3.79 per hour in accordance with the national minimum wage, they would have protection under the proposals if they worked up to 17 hours per week (based on the example of a £65 weekly income threshold).

c)    If the worker’s hourly rate of pay is at least £20 it would not matter how many hours they worked – the ban on exclusivity clauses would not apply to them.  This means, using the above example, that if a worker earning £20 per hour was guaranteed work for 3 hours per week they would be earning under the amount set out in the threshold above (£65).  However, the employer could still demand that they work exclusively for them because they are being paid £20 per hour.

d)    The affected worker would have 3 months (plus appropriate ACAS early conciliation time) after suffering a detriment for working under another contract/arrangement to bring a claim in the employment tribunal and receive compensation.  The employment tribunal would also be able to impose financial penalties in certain cases.

The government has also indicated it will improve its guidance on zero hours contracts.

Practical steps

Businesses may be concerned about their ability to engage the staff they need and have a flexible workforce if these proposals come into effect.  In particular, if workers fall below the low weekly income threshold, businesses will not be able to prevent them from working for direct competitors. There are a number of practical steps that businesses could take to evaluate and mitigate possible adverse effects from the proposals and ensure future compliance once these proposals are finalised and a date set for them coming into force.

For now, businesses should be aware that if they have exclusivity clauses in their contracts and engage low income workers, these proposals are likely to affect them.  If businesses are not concerned about exclusivity, these proposals should not concern them.

Businesses could also put in place procedures for ensuring that reasons are noted for choosing not to offer work to workers who are not guaranteed work (or only guaranteed a small number of hours of work).  This is because if the reason an employer does not offer a worker (whose guaranteed income falls below the weekly income threshold) work is that they have worked for another business, the worker could bring a claim on the basis they have suffered a detriment, under the proposals.  Such procedures would be useful in any event in relation to defending potential discrimination claims.

Businesses could also be checking whether they are offering the appropriate benefits, including holiday entitlement, to workers with no or few guaranteed hours.

Only proposals

It is important to remember that these are proposals and, particularly given the imminent general election, they may not come into force and/or they may be substantially amended.  No date has been set for this legislation to come into force.  It is also unknown when guidance on zero hours contracts will be reviewed or improved.

There is considerable uncertainty in relation to the level of the weekly income threshold, which is likely to ultimately determine the extent of the impact of these proposals on businesses.

What are the next steps?

We will keep businesses informed as to the likely date legislation will come into force and any amendments to the proposals including the likely level of the weekly income threshold.

Businesses who have exclusivity clauses in contracts are likely to require advice on varying these when and if the proposals come into effect.

If you would like any advice on taking any of the practical steps outlined above, please contact us using the details below.

Contact Details

For more details about the proposals on banning exclusivity in zero hours contracts and advice on practical steps businesses can take please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.