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Zero hours contracts and the exclusivity ban

In May 2015, the Employment Rights Act 1996 was amended to make exclusivity clauses in zero hours contracts unenforceable. This meant that any provision in a zero hours contract which prohibited the worker from doing work or performing services under another contract or under any other arrangement was unenforceable and could be ignored. Further, an employer could not circumvent the exclusivity ban by stating that the worker must only work for another company with the employer’s consent.

The Government thought that a ban was insufficient because some employers may try and avoid it by offering contracts that guaranteed just one hour of work, or by providing no work to individuals who choose to work for other employers. To address such behaviour, the Government is looking to introduce secondary legislation shortly and the department for Business Innovation and Skills (BIS) has also published guidance on zero hours contracts. The new regulations provide:

• a right for employees working under zero hours contracts not to be unfairly dismissed if the reason, or principal reason, is that the employee has failed to comply with an exclusivity clause; and

• a right for workers working under zero hours contracts not to be subjected to any detriment by, or as a result of, any act, or deliberate failure to act, done by an employer for the reason that the worker has failed to comply with an exclusivity clause.

When the regulations come into force (not yet known), they will apply to zero hours contracts that are already in place and to those which are entered into in the future. The right not to be unfairly dismissed is a right from day one of the relationship and the employee does not need to wait to qualify for the right.

An employee may complain to the employment tribunal about a breach of the new regulations and seek a declaration and/or compensation. Therefore, employers should review what processes they have in place for using and recruiting workers on zero hours contracts to check that they are compliant.

Whilst zero hours contracts can be effective to deal with work demands that are irregular, they may not be appropriate to run a core business. Employers tend to use zero hours contracts sparingly, e.g. to cover seasonal peaks, unexpected sickness cover, special events or for new start up businesses where work flow is uncertain.

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further