Exclusivity Clauses in Employment Contracts

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Katrina Smiles, CEO & Solicitor | 1st June 2022

Employers are rightly concerned to ensure that their employees are available to undertake their employment duties when the employer needs them to do so.

Some contracts go beyond considering the employee’s commitment during the contracted working hours and attempt to control whether the employee is able work for another employer outside of their working hours. There are circumstances where this might be reasonable, depending on the nature and hours of the work.

However, such clauses can also be unduly restrictive.

Zero Hour Contracts

This was a particular problem for employees working under so-called “zero hours” contracts – ones where the employer made no commitment to provide any work for the employee, although keeping them available to work on the books. This could have the effect of preventing the employee from working for anyone else, whilst still not working, and therefore not earning, anything from the current employer either.

In 2015, the government recognised this problem with exclusivity clauses in zero-hours contracts and legislated to prevent any such clauses from being enforceable.

At the time of this change, consideration was given to extending the ban to exclusivity clauses in contracts with low-income workers but it was not proceeded with. The matter was revisited in 2020 as a result of the Covid pandemic and a decision has now been taken to extend the protection.

Any such clause in a contract with a worker whose guaranteed weekly income is below or equivalent to the lower earnings limit (LEL) for national insurance contributions (currently £123 per week) will be unenforceable. The LEL is updated annually, so the protection threshold will move in line with such annual changes.

As well as providing protection against unfair dismissal in such cases, there will also be protection against “suffering a detriment” for failing to comply with an exclusivity clause. This would cover any actions of the employer that fall short of dismissal, for example cutting a worker’s hours or withholding opportunities to take part in training or promotion.

The aim is to ensure lower-paid workers are free to top up their incomes from alternative employment if they either can’t or don’t want to increase their earnings with their main employer.

This extended protection will only be available once legislation is passed and at the current time no date has been provided.

To find out more, please contact our Commercial Department.