December 2022
Exclusivity clauses in employment contracts restrict workers from taking on additional work with other employers. In May 2015, their use was banned in zero hours contracts in Great Britain, which are contracts under which work is not guaranteed to the worker.
This ban on exclusivity clauses will be extended to low-income workers effective in England, Scotland and Wales from 5 December 2022. From this date, contractual exclusivity clauses are unenforceable against workers whose guaranteed net average weekly wages do not exceed the Lower Earnings Limit (which is currently £123 a week).
To calculate this net average, where the contract of employment or other worker’s contract is permanent, the average weekly wages are calculated by dividing by 52 the total remuneration to which the worker is entitled under that contract in respect of a period of 52 weeks. For temporary contracts, the average weekly wages under the regulations are calculated by dividing the total remuneration to which the worker is entitled under their contract by the number of weeks during which their contract is expected to continue.
In the same way, as for the earlier regulations in respect of zero hours contracts, exclusivity terms are defined in the new regulations as any contractual term which prohibits a worker from doing work or performing services under another contract or arrangement, or which prohibits a worker from doing so without their employer’s consent or consent of the business.
This means that any contractual clause that prohibits these workers taking on additional employment will be void and unenforceable.
To avoid a breach of the new regulations and the risk of tribunal claims, employers in Great Britain should ensure that they do not take steps to enforce any exclusivity clauses in existing contracts for low-income workers to whom the regulations apply, such as dismissal or taking disciplinary action for taking on additional employment without authorization, from 5 December 2022 onwards. This is the case regardless of how long they have been employed or engaged by the business.
New contracts issued from 5 December 2022 onwards should avoid the use of exclusivity clauses for low-income workers to which these new regulations apply, as well as zero hour and causal hour workers, as these clauses are void and unenforceable.
For further information please contact me.