Exclusivity clauses banned in contracts for low earners

In response to the impact of the COVID-19 pandemic on low-income workers, the Government has revisited whether the ban on the use of exclusivity clauses in zero hours contracts should be extended to the contracts of other low-income workers. The Government has now decided to extend the ban on exclusivity clauses to contracts where the worker’s guaranteed weekly income is below or equivalent to the lower earnings limit. Exclusivity clauses are already banned in zero-hours contracts.

The Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 were made on 7 November 2022 and will apply to England, Scotland and Wales. These Regulations will come into force on 5 December 2022.

For workers and employees who are earning more than the lower earnings limit, an exclusivity clause can remain within their contract.

What is an exclusivity clause?

Exclusivity clauses in employment contracts restrict employees and/or workers from taking on additional work with other employers.

What is the lower earnings limit?

From the 3 April 2022, the Lower Earnings Limit is £123 a week. This equates to almost 13 hours work per week for somebody who is being paid the National Living Wage.

Next steps for employers

Employers need to carry out a thorough review of its employee and worker contracts to assess where they are paying less than the lower earnings limit. If the contract prevents the worker or employee from working or providing services to another employer or requires the worker or employee to obtain the employer’s consent prior to working for another employer, then the clause should be removed.

Employers who try to enforce exclusivity clauses for employees or workers earning below or equivalent to the lower earnings limit will expose themselves to the risk of claims for unfair dismissal. If an employer tries to enforce the clause and subjects the employee or worker to detrimental treatment because they do not comply with it, this leaves the employer at risk of being subject to detriment claims in an employment tribunal.

If you would like to discuss the above or require contract reviews, please contact one of our Employment experts on 0161 832 3434.