Exclusivity Clauses Banned for Low Income Workers

Angela Renwick
Associate
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On 7 November 2022, regulations were made in Parliament that will extend the ban on exclusivity clauses in employment contracts to low-income workers. This will come into force in England, Scotland and Wales from 5 December 2022. A similar ban is already in place for zero hours contracts.

As you may be aware, many contracts of employment contain an exclusivity clause, which prevents workers from carrying out other work without their employer’s prior permission.

Exclusivity clauses are usually included in the employment contract to avoid a breach of the 48-hour maximum working week set out in the Working Time Regulations, as work which the employee does for each employer is counted when calculating working time.

However, following a consultation process, the Government has decided that workers earning below the Lower Earnings Limit for paying National Insurance contributions (currently £123 per week) should be free to carry out work for different employers so that they have the opportunity to maximise their income.

As a result of this, dismissing an employee for breaching an exclusivity clause where they earn below the Lower Earnings Limit will constitute an automatically unfair dismissal. Importantly, employees do not require 2 years’ service before bringing such a claim before the Employment Tribunal. Furthermore, workers will also be protected from detriment if they breach an exclusivity term in their contract.

It is important to note that employers who believe that an employee is also working for a competitor and causing serious harm to their legitimate business interests may still be able to take action against an employee, even where the employee earns below the Lower Earnings Limit. However, given the risks outlined above, advice should always be taken before considering disciplinary action or dismissal in these circumstances.

If you would like to discuss these changes or any other employment law matters further, please do not hesitate to contact a member of the team on 0141 331 5150.

Topics: Exclusivity clauses, Working Time