Exclusivity clauses banned in contracts for low-paid workers

Insight

Exclusivity clauses

Exclusivity clauses have already been prohibited for zero hours contracts, but other workers in low pay brackets will soon also be protected from these terms.

What are exclusivity terms?

The Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 (SI 2022/1145), state that an ‘exclusivity term’ means any provision or purported provision of a contract which:

prohibits the worker from doing work or performing services under another contract or under any other arrangement; or
prohibits the worker from doing so without the employer’s consent.

In other words, an exclusivity term includes any clause in a contract that prevents a worker from carrying out work for another employer, or requires the employer’s consent to allow them to seek work elsewhere.

Who does the ban on exclusivity terms apply to?

Exclusivity terms will continue to be enforceable against most workers. However, since May 2015, exclusivity terms have been unenforceable in zero-hours contracts. The new amendment to the regulations extends the protection to low-paid workers, defined as those working under contracts entitling them to net average weekly wages at, or below, the lower earnings limit, which is currently £123 a week.

Under the regulations, it is automatically unfair to dismiss an employee if the reason for the dismissal is that an employee protected by the regulations breached an exclusivity term. In addition, workers are protected from detriment if they breach an exclusivity term in their contract. Where an employment tribunal finds that a worker has suffered a detriment, it may make a declaration and award such compensation as it considers just and equitable. This can be up to an amount equal to the unfair dismissal basic and compensatory award.

Given the new regulations, it is advisable for employers to remove any exclusivity terms from the contracts of employment of any staff currently earning less than £123 per week, and to not include such terms on the contracts of new recruits going forward.

Please note that this information is for general guidance only and should not substitute professional legal advice. If you have specific concerns, we recommend consulting one of our legal experts.

Exclusivity clauses banned in contracts for low-paid workers