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Government consultation on exclusivity provisions

December 08, 2020

The Department for Business, Energy and Industrial Strategy (BEIS) are seeking views on a proposal to extend the ban on exclusivity clauses to contracts where the workers’ guaranteed weekly income is less than the Lower Earnings Limit (LEL), currently £120 per week.

Exclusivity clauses were banned for zero hours contracts in 2015 under the rationale that using exclusivity clauses when work is not guaranteed is wrong and prevents workers from looking for work elsewhere to boost their income. The mechanism of the ban is to make exclusivity clauses unenforceable in any zero hours contracts meaning employers cannot force their workers to comply with such clauses.

The existing ban on exclusivity clauses gives zero hours employees the right not to be unfairly dismissed and workers the right not to be subjected to a detriment for failing to comply with an exclusivity clause, and to claim compensation. The Government is proposing that these existing rights would also be extended to employees/workers where their guaranteed weekly income is below the Lower Earnings Limit, currently £120 a week.

To allow business to protect their interests where they employ well paid individuals who only work a few hours a week, the Government is proposing including an exemption to the ban which avoids capturing these individuals. An exemption would be provided by setting an hourly wage cap at an appropriate level. The level of cap would be reviewed regularly to ensure the level remains relevant. The proposal is to set an hourly wage cap above which the ban would not apply – the consultation paper asks for comments on a wage cap of £20 (top 25% of earners), £22 (top 20% of earners) or £29 (top 10% of earners) per hour, and seeks responses on other rates.

The Government estimates that 1.8 million workers are employed in one job and receive a weekly wage below the Lower Earning Limit. These low-income workers are significantly more likely to want to undertake additional work. The Government estimates that 9% of workers with one job would like to undertake additional work and this increases to 26% for those under the Lower Earnings Limit.

The intention behind the new consultation is to allow low-income workers who are not able to secure the number of hours they would like from their current employer to seek additional work elsewhere.

The intention of the Government is to seek to ensure that we build back better from the impacts of the Covid-19 pandemic, and to maximise opportunities for individuals to find new work and apply their skills to drive the economic recovery.

The Lower Earnings Limit, currently £120 per week, is equal to 13.76 hours a week for someone on the National Living Wage. The Lower Earnings Limit is set each tax year by the Government and is an established marker of a low-income worker. Using the Lower Earnings Limit will also ensure the threshold remains relevant.

For further information and advice, please contact our employment team.

The consultation remains open until 26 February 2021. Further details on the consultation can be found here.

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice specific to your situation, and should not be relied upon. Appropriate legal advice should be sought for your specific circumstances and before any action is taken.

© Miller Rosenfalck LLP, December 2020

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