What the ban on exclusivity clauses means for workers and employers

Nick Martindale

The debate over the use of zero-hours contracts by some employers as a means of managing staffing demand has polarised opinion, both among political parties and those in the business community.

One of the biggest gripes for unions has been the practice of including “exclusivity” clauses in such contracts, meaning that while the employer is not obliged to provide any work, individuals are unable to work anywhere else either. It is this specific issue that has now been made illegal in the Small Business, Enterprise and Employment Act 2015, which came into force at the end of May.

In reality, this will have little impact in the majority of cases, says Andrew Crudge, an associate at Thomas Eggar. “The only change is that any exclusivity clause in such a contract would no longer be enforceable,” he says. “Most employers do not have a problem with zero-hours workers carrying out work for other employers in between or outside of their assignments.”

Yet there could be knock-on effects for employers. Lee Biggins, founder and managing director of CV-Library, believes businesses will have to make themselves more attractive to those who are willing to operate on zero-hours contracts as a result of the new rules. “Employers should realise that with the new exclusivity ban, staff have the freedom to look for work elsewhere,” he points out. “Businesses must consider the ways to address any potential staff retention problems, in order to keep the very best talent.”

This could even be a positive for businesses, suggests Enrique Garcia, employment law consultant at ELAS, particularly if they can offer more attractive roles or salaries. “This may create a greater pool of prospective workers for businesses to choose from, giving employers more freedom in terms of who they can recruit,” he says. “This freedom could also serve to ensure better working standards, as employing staff with experience of working for other companies and competitors can transfer this experience to your business.”

At the very least, warns Julia Kermode, CEO of the Freelancer and Contractor Services Association, employers will need to improve their communication with workers. “The key potential implication of a ban on exclusivity clauses is that employers will, hopefully, be far more communicative with workers – and far less last-minute in their requests – as they will not be able to tie workers into being on-call solely for their benefit,” she says. “Half an hour’s notice of shifts had become commonplace within certain industries, which may be bearable if there is work, but unpalatable and unfair if someone has been prevented from working elsewhere when there is no work.”

Organisations which do require workers to be always available, however, may need to look at alternative employment models, which move away from zero-hours contracts altogether. “Certain employers do still require certainty over when an individual will be able to work for them, so they’ll have to consider engaging their zero-hours workers as employees if they want to avoid them being unavailable to work because they’re at another job,” says Adam Wightman, a solicitor at Slater Heelis. “This could reduce the desire of some businesses to use zero-hours workers.”

“The impact of the new law could be far-reaching for businesses whose need for staff fluctuates, or where the work flow is variable,” adds Zee Hussain, partner and head of the employment department at law firm Colemans-ctts. “Forcing employers to guarantee a minimum weekly income in order to enforce exclusivity clauses may even deter them from recruiting.”

But there is a flaw in the legislation, believes Hussain, in the ability to guarantee just a small amount of work each week, which could enable employers to avoid the ban. “There is also nothing to stop employers from penalising workers who also have jobs elsewhere, for example, by offering them less work as a result or even dismissing them,” he adds.

In reality, too, genuine zero-hours contracts may become increasingly hard to operate anyway. “It is likely that many individuals who are engaged on zero-hours contracts would prefer the certainty of fixed and regular hours,” says Crudge. “As the jobs market picks up it could be the case that employers will find it increasingly difficult to find sufficient numbers of staff who are willing to remain on zero-hours contracts without a guarantee of work.”

This guarantee of at least some work is something Kermode also believes will become increasingly essential if such flexible arrangements are to be viable for both employers and workers, meaning such contracts may be zero-hours in name only.

“For many people, zero-hours contracts are ideal,” she says. “But the most recent data from the Office for National Statistics shows that 41% people on zero-hours contracts want more hours, compared to 12% of people in other forms of employment. This isn’t sustainable, largely because it is an unacceptable way of working for the individual. It’s an issue that needs to be addressed if this form of flexible working is to have a constructive future within the UK employment landscape.”