Exclusivity Clause Extension from December 2022

Employment law is a devolved responsibility to Northern Ireland.  Therefore, it is always necessary to consider:

• What applies in Great Britain may or may not apply in Northern Ireland. Likewise, of course,
• Something that applies in Northern Ireland may or may not apply in Great Britain, or
• It may apply in both employment law jurisdictions but may apply differently. Take, for example, the right that exists for workers to be given a payslip that only applies in Great Britain

There are two main pieces of employment law and these are the ones to keep an eye on, as all other employment law modifies these main pieces:

1. The Employment Rights Act 1996 (in Great Britain), and
2. The Employment Rights (Northern Ireland) Order 1996

So, when looking at whether or not something applies or does not apply, it all comes down to whether or not the contract of employment is written under the Great British 1996 legislation or the Northern Irish equivalent.

Which leads me on to talk about the ban on exclusivity clauses in contracts of employment in Great Britain.  There is no such ban where the contract of employment is written under the Northern Irish Order.

 

Exclusivity Clauses?

Essentially, an exclusivity clause is any clause in the contract of employment that prohibits or restricts an individual’s right to take employment with another employer.

Exclusivity clauses are banned in zero-hour contracts with the restrictions imposed by Part 2A of the Employment Rights Act 1996, inserted by the Small Business, Enterprise and Employment Act 2015:

• Section 27A says that these are unenforceable in law if such a clause prohibits a worker from doing work or performing services under another contract or under any other arrangement, or prohibits the worker from doing so without the employer’s consent
• Section 27B allows for further provisions and protections for zero-hour workers.  The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 enforce that the dismissal of a zero-hour contract employee is automatically unfair if 27A is breached by the employer.  27B allows for the employee to make a claim to an Employment Tribunal

 

Extension from 05 December 2022

Employers need to be aware of the Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 that come into force on 05 December 2022.  These further amend the Employment Rights Act 1996 and add further restrictions under 27A (the one that currently says exclusivity clauses are banned for individuals on zero-hour contracts).

Very simply, as well as banning exclusivity clauses for individuals with zero-hour contracts, such clauses will also be banned where the worker has guaranteed net average earnings at or below the Lower Earnings Limit (LEL) for National Insurance Contributions.

 

Brief History of Exclusivity Clauses

It is interesting to know how this legislation came about, at least it is interesting for me to relay the information.  On 09 May 2022, a press release issued by the Department for Business, Enterprise and Industrial Strategy (BEIS) announced UK Government plans to widen the restrictions on zero-hour contracts.

On the same day, the UK Government published its Exclusivity Clauses Responses document outlining the measures to be taken as a result of a 04 December 2020 consultation looking at extending the ban on exclusivity clauses in contracts of employment.

The Responses document details how the UK Government will extend the current zero-hour contract protections to other workers by amending the Employment Rights Act 1996 (where workers have guaranteed earnings at or below the LEL for National Insurance Contributions).  The mention of the word ‘guaranteed’ differentiates this from the ban on exclusivity clauses that is already in place.

 

Summary

In summary, the 2022 legislation will ensure that exclusivity clauses in contracts are banned where the worker is:

• On a zero-hour contract, OR
• Has guaranteed earnings that are equal to or less than the LEL (currently £123 per week)

 

Of course, the issue for employers is the calculation of guaranteed net average earnings:

• Net average weekly earnings means the net amount remaining after all deductions have been made from the worker’s average weekly earnings
• Average weekly earnings are calculated over a 52-week period for workers on a permanent contract of employment. Simply, this is looking at their annual entitlement and dividing by 52 to come to a weekly value
• For workers on fixed contracts, i.e. not permanent, average weekly earnings are calculated by looking at the expected monetary entitlement divided by the expected duration of the contract

 

Ian has been in the payroll profession for over 30 years, processing payrolls from all sectors, large and small. He moved from hands-on exposure in 2011 to become involved in educating the profession. His wide-ranging experience and up-to-date knowledge ensured he was able to impart this information to UK professionals through course material, social media, newsletters and face-to-face presentations.

Today Ian combines both these and is involved with a vital aspect of the payroll environment, that of working with the software that actually does a lot of the hard work for the profession.

Ian approaches education and communication very much from the perspective of how this will impact the software, the employer and the worker. So, whilst the legislation is vital, compliance and effective communication are paramount.

Connect with Ian on LinkedIn. You can read Ian’s other guest article by visiting our news centre.