Small Business, Enterprise and Employment Bill, which includes measures aimed at banning exclusivity clauses in zero-hours contracts."/>
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8 July 2014

Proposed restriction on zero-hours contracts

The Government has published the Small Business, Enterprise and Employment Bill, which includes measures aimed at banning exclusivity clauses in zero-hours contracts.

The Government launched a consultation on 19 December 2013 in response to the apparent increase in the use of zero-hours contracts by employers and widespread concerns about perceived abuses of them.

The consultation received a record number of 36,000 responses and the overwhelming majority (83%) of respondents supported the proposal to ban exclusivity clauses in contracts that do not guarantee hours of work.

Under the proposed Bill, any term in a zero-hours contract that prohibits an individual from working for another employer, or from doing so without their employer’s consent, will be unenforceable.  This would apply to all existing and future zero-hours contracts from the date the Bill is enacted.

In addition, the Bill allows for further regulations to be made if necessary in order to ensure that zero-hours workers are not prevented from working for another employer, including financial penalties for employers who flout the rules.  The Government has also announced that it will work with business representatives and unions to develop a code of practice by the end of 2014 on the fair use of zero-hours contracts and to improve the information available to employers and employees.

Further measures introduced under the new Bill include:

  • The introduction of a financial penalty for employers who fail to pay sums awarded to claimants by employment tribunals or due under settlement agreements. An enforcement officer will issue a warning notice that if the sum due is not paid within 28 days, a penalty notice will be issued requiring the employer to pay a penalty of 50% of the amount outstanding to the secretary of state.  The penalty is reduced to 25% if the full sum due together with the penalty is paid within 14 days.
  • An increase to the maximum financial payable for failure to pay the national minimum wage, from £5,000 to £20,000 per worker.
  • A power to amend the employment tribunal rules of procedure to introduce a limit to the number of postponements a party can apply for, and a new obligation for the tribunal to consider making a costs award if the postponement application is made late.
  • A power for the Treasury to require public sector employees to repay ‘exit payments’ (eg redundancy payments) if they are re-employed in the public sector.
  • A power for the secretary of state to require ‘prescribed persons’ under whistleblowing legislation to publish details of disclosures made to them annually.

Several of these new measures will require secondary legislation in the form of regulations, which are not yet published.

Comment

The provision in the Bill preventing the use of exclusivity clauses in zero-hours contracts is likely to have a limited impact in practice and the Government’s proposals have been criticised by unions in particular for not going far enough to prevent abuses of zero hours contracts.

The proposed restriction will only apply where there is an express exclusivity clause in a zero-hours contract, and the available statistics show that only a minority of contracts include such a clause.  It will not, for example, extend to prohibit clauses that require a worker to be available to work and/or to accept work that’s offered to them.

As currently drafted, the restriction will not prevent an employer from simply no longer offering any work to an individual under a zero-hours contract who chooses to do work for another employer.  However, the Government has indicated that it will keep the use of zero-hours contracts under review and will be consulting further on whether more can be done to prevent ‘bad employers’ from circumventing the rules.

Further information is available from the BIS press release