A legal update on exclusivity clauses

12th May 2022 Employment

This week the Government has proposed to introduce new legislation relating to exclusivity clauses contained within contracts of employment.

What are exclusivity clauses?

Currently, employers can negotiate contractual clauses with their workers, including the requirement for exclusivity. This effectively means that under the contract, the worker cannot be employed by or conduct work for another employer whilst employed by the original employer.

Zero-hour workers

In 2015, the Government made an exception to this for those on zero-hours contracts. The ban on exclusivity clauses for zero-hours contract workers protected individuals who previously could not be guaranteed minimum hours of work, but also were expected not to seek other opportunities. Since the introduction of this legislation, zero-hours workers cannot be limited to any number of employers or businesses that they engage with, which in turn has increased their access to the job market.

What has been proposed now in relation to exclusivity clauses?

On 9th May 2022, the Government set out plans to ban exclusivity clauses for workers who have a guaranteed weekly income of £123 or less per week, pertaining to the Lower Earnings Limit. They estimated that presently 1.5 million workers in the UK will be affected by these new reforms.

A consultation into this reform was initially commenced by the Government in December 2020, and it is expected that legislation will be placed before Parliament in or around late 2022.

Why have these reforms been proposed and what impact could this have on the UK workforce?

Similarly to the ban on exclusivity clauses for zero-hours workers, the reforms are expected to improve access to job opportunities for those receiving a low income. Specifically since COVID-19, there has been an emphasis on workers being afforded flexibility to choose how and when they work, and these plans will permit lower earners to increase their income through additional employment. Therefore, from this perspective, the proposed reforms are worker-centric.

However, the proposals may also benefit employers. One of the intended aims of the legislation is to help businesses fill vacancies. For example, the retail and hospitality industries require workers on part-time or zero-hours contracts, and these sectors are currently struggling to find available individuals. Perhaps this difficulty will be alleviated by such reforms.

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Emma Salkin is a Paralegal located in Manchesterin our Employment department

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Paul Chamberlain is a Partner and Head of Department located in Manchesterin our Employment department

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