25th March 2015

Government Responds to Consultation on Zero Hours Contracts Exclusivity Ban

The government has published its response to a consultation on the ban of exclusivity clauses in zero hours contracts.

In the Small Business, Enterprise and Employment Bill 2014-2015, the government had previously proposed a prohibition on employers restricting zero hours workers from working for other businesses.  In doing so, the government’s intention is to render unenforceable terms in zero hours contracts which prohibit workers from working for another employer, or from doing so without their employer’s consent.  In addition, the proposals would also give the Secretary of State the power to make regulations which further ensure that “zero hours workers” are not restricted from working for another employer.  For the purpose of the proposed legislation, “zero hours contracts” are defined as a contract of employment or a worker’s contract under which a worker undertakes to perform work when that work is offered by an employer, but there is no certainty of work.

In conjunction with the proposed ban, from 25 August to 3 November 2014, the government conducted its Banning Exclusivity Clauses: Tackling Avoidance consultation on how to prevent employers avoiding the ban and possible penalties and remedies.

The consultation sought views on the proposed ban of exclusivity clauses in zero hours contracts, specifically:

• The likelihood of employers avoiding a ban on exclusivity clauses and how that might be achieved.
• Whether the government should do more to deal with potential avoidance, how that might be best achieved, and whether to do this alongside the ban or wait for evidence of whether such avoidance is taking place.
• How potential avoidance could be dealt with.
• Whether there should be consequences for an employer if they circumvent a ban on exclusivity clauses and, if so, what those consequences should be.
• Whether there are any potentially negative or unintended consequences as a result of the wording of the legislation.

The view conveyed by the majority of those who responded to the consultation was that employers would seek to avoid the ban and that it would be easy for them to do so; either by offering a very low number of guaranteed hours or offering no work or fewer opportunities to individuals who also undertake work elsewhere.

There was also strong support for zero hours workers having a right to redress in the employment tribunal if they were subjected to a detriment as a result of also working for another business.

The response to the consultation indicated that there was support for enabling employment tribunals to issue financial penalties to deter employers from seeking to avoid the ban. Section 12A of the Employment Tribunals Act 1996 already enables tribunals to impose financial penalties where employment rights are breached. The government proposes to enable tribunals to use these powers to enable financial penalties for employers breaching the exclusivity ban.

In the consultation, the government sought views on widening the parameters of the exclusivity ban to include low income contracts as well as zero hours contracts. The majority of responses were supportive of this idea and did not think this would create inflexibilities for employers or discourage them from creating jobs.

As a result of the consultation, the government has issued the draft Zero Hours Workers (Exclusivity Terms) Regulations 2015 for consideration by Parliament.

The draft regulations outline the government proposals for tackling anti-avoidance and follow the principles set out above.

The government also stated that a universal view emerged from the consultation that it is necessary to improve information, advice and guidance in relation to zero hours workers. The government repeated its previous view that business representatives and unions should work together to develop sector-specific codes of practice to help guide the fair use of zero hours contracts. However, it gives no details of how and when these codes of practices will be developed. The government also pledges to review and improve existing guidance available to employers and employees.