Zero hours contracts: banning the use of "exclusivity clauses"

Author: Darren Newman

Consultant editor Darren Newman questions what the Government's proposed ban on the use of "exclusivity clauses" in zero hours contracts will achieve.

What should be done about zero hours contracts? Everyone seems to agree that abuses must be curbed, but there is less agreement about where the balance between abuse and flexibility lies. The Government's solution, set out in the Small Business, Enterprise and Employment Bill, is to impose one very specific limitation on the use of zero hours contracts - a ban on exclusivity clauses. To be precise, it provides that any provision in a zero hours contract that prohibits the worker from doing any work under another contract or under "any other arrangement" is unenforceable. The Government can claim some support for this measure, as 83% of those responding to a December 2013 consultation agreed that such clauses should be banned.

However, as the proposal stands, this measure is practically meaningless. In the first place, it is far from clear that there is a real problem with employers objecting to workers on zero hours contracts doing work for other employers. They are far more likely to be concerned simply with whether or not a worker is available when work is offered. However, even employers that do want to ensure that workers do not work for anyone else will not be inconvenienced by the fact that exclusivity clauses are rendered unenforceable by this law. There is no need for an employer to enforce such a clause by suing the worker or taking out an injunction. The employer can simply withhold further work - and it can do that whether or not there is a formal exclusivity clause in the contract.

Usually provisions of this sort are introduced along with various protections for individuals who try to take advantage of them. One would therefore expect the Bill to provide for an automatically unfair dismissal if an employee is dismissed because he or she has relied on the provision, together with a right not to suffer a detriment. Instead, there is a Regulation-making power that provides for rights of this sort to be introduced later, along with "anti-avoidance measures" allowing for the redefinition of zero hours contracts if it turns out that employers are simply guaranteeing one or two hours' work a week in order to avoid being caught by the new law.

The Government is now consulting on if and how it should make use of these Regulation-making powers (see Consultation on exclusivity clauses in zero hours contracts). We are invited to give our views on whether or not employers are likely to seek to avoid the ban on exclusivity clauses and whether or not workers and employees need the additional protection that we would usually find in legislation of this kind as a matter of course. Rather oddly, the Government is asking about the necessity of closing the loopholes in a piece of legislation that has not even been passed yet.

It seems obvious to me that, if this ban on exclusivity is to have any meaning at all, workers must be given a right not to suffer any detriment as a result of working for another employer - irrespective of whether or not there is a formal exclusivity clause in their contract. I see no need for this to be set out in Regulations at some later stage. It is a right that should be on the face of the Bill itself, because, without it, the ban on exclusivity clauses is purely a symbolic measure. Even with such additional protection it seems unlikely that the ban will have much practical effect.

The Government is nevertheless concerned about the potential problem of employers redefining contracts so that they are not quite zero hours. The consultation raises the possibility of banning exclusivity clauses where less than a certain number of hours are guaranteed, where less than a certain level of income is guaranteed or where the worker receives less than a specified hourly rate. Personally I doubt that the ban on exclusivity clauses will inconvenience employers enough to tempt many of them to try such avoidance measures. However, the fact that the Government is consulting on the issue does illustrate the problem with any more serious measure that may be proposed to curb the abuse of zero hours contracts.

Ultimately the problem is not the number of guaranteed hours provided by a contract, but the extent to which workers are vulnerable to exploitation. That exploitation can take many forms and fixating on the phenomenon of the zero hours contract is to mistake a symptom of a disease for the disease itself. That is not to say that specific measures aimed at zero hours contracts are not a good idea. However, to be worthwhile, they have to be part of a series of rights aimed at protecting the most vulnerable workers. Rules on the minimum wage, rest breaks, holiday pay and the right not to suffer unlawful deductions from wages are all a central part of enforcing decent standards in the workplace.

These rights are of no use, however, unless they can be enforced. Interestingly, the Government's consultation asks if any new rights should be backed up by criminal penalties, civil penalties or the right to make an employment tribunal claim. In the past I would have said that the answer was obvious. A worker who is subjected to any detriment for choosing to work for another employer should have a right to claim compensation from the employment tribunal. Unfortunately, that is no longer an effective route for the law to take. The amount of compensation available for such an individual is likely to be small and an employment tribunal claim is now an expensive and complicated claim to bring. The fee to be paid for bringing this sort of case would probably be out of all proportion to the amount of compensation likely to be awarded. The fact is that a claim in the county court would be cheaper and easier to enforce.

It is ironic that the Government is consulting on introducing new employment rights for low-paid and vulnerable workers when it is precisely those workers who are most affected by the introduction of employment tribunal fees. Rather than introducing new, largely symbolic rights, the Government would do better ensuring that low-paid and vulnerable workers are in a position to enforce the rights that they already have.

perspective@xperthr.co.uk