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28 January 2016

Legislation update

In this month's legislation update, we review two important pieces of legislation affecting employers and which will come into force in early 2016.

Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 (“Zero Hours Regulations”)

The Zero Hours Regulations are part of the government’s package to outlaw exclusivity clauses in Zero Hours Contracts.

Zero Hours Contracts can be a highly flexible way of working for both employers and workers. In short, under a Zero Hours Contract, an employer is not obliged to offer a worker any regular work but may choose to do so when it suits their business needs. As such, an employee cannot be certain of receiving any regular pattern of work.

However, there have been concerns about exclusivity clauses which tie Zero Hours workers to a particular employer but without any guarantee of work. Exclusivity clauses might take the form of an outright prohibition on working for another employer or require workers to seek their employer’s permission before working elsewhere.

These concerns led to exclusivity clauses in Zero Hours Contracts being made unenforceable since 26 May 2015. The new Zero Hours Regulations add clout.

From 11 January 2016, Zero Hours workers must not be unfairly dismissed or subjected to a detriment for failing to comply with an exclusivity clause. Therefore, an employer could be vulnerable if it decides not to offer assignments to a worker employed under a Zero Hours Contract because that worker had worked for another employer in breach of an exclusivity clause.

It is important to note, however that the Zero Hours Regulations do not ban Zero Hours Contracts. Neither are exclusivity clauses banned altogether: employers may still insist a worker works for no one else, provided that there is guaranteed work on a regular basis.

Employers must simply take care to avoid mixing Zero Hours Contracts and exclusivity clauses.

National Minimum Wage (Amendment) Regulations 2016

From 1 April 2016 employers must ensure that they pay all those entitled to it the new National Living Wage of £7.20 per hour. Generally, anyone in employment and at least 25 years old, or older, will be entitled to at least this new rate of pay.

Workers who are aged under 25 will not be eligible for the new National Living Wage, but must receive an hourly rate of pay equal to the Minimum Wage. Special rules also apply in the case of apprentices.

In general, the new rates from 1 April 2016 are:

Description and  Minimum hourly pay:
Workers aged 25 or older £7.20 (National Living Wage)
Workers aged 21 or over (but under 25 years old) £6.70
Workers aged 18 or older (but under 21 years old) £5.30
Workers under 18 £3.87

Employers must also exercise great care to ensure that they pay workers the National Living Wage or the correct Minimum Wage, or the consequences can be very expensive.

On top of the compensation payable to employees, employers will also soon face an increased additional financial penalty twice any underpayment (up to a maximum £20,000 per worker). Employers in breach of the rules will also continue to risk being publicly named and shamed.

Now more than ever, it pays employers to get employee pay right first time.

For further information in respect of legislation updates, please contact Steeles Law’s employment team.