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Employers failing to adhere to new legislation banning exclusivity clauses in zero hours contracts could in future face penalties and compensation claims from employees, in addition to being unable to enforce the exclusivity clause.

Exclusivity clauses which prevented casual staff – classed as those without any guaranteed hours – from working for another company without the original employer’s consent, have been prohibited as part of the Small Business, Enterprise and Employment Act 2015.

The development means that employers, who have until now relied upon an easily accessible pool of casual staff, will need to examine how this new legislation will affect them and make appropriate arrangements to cover any labour shortfall which results.

Evidence suggests that many small and medium sized businesses will be affected by the changes, with in excess of 87,000 workers across the UK believed to have been employed via zero hour contracts with exclusivity clauses.

Further ‘anti-avoidance’ regulations, which are currently in draft form, will prevent employers from offering workers minimum guaranteed hours in a bid to avoid the zero hour contracts exclusivity rules. Other proposals under consideration include allowing employment tribunals to determine complaints and order compensation if there is found to be a breach.
In the course of reviewing staff contracts in line with the changes, employers are urged to ensure that their intellectual property, confidentiality and other business interests are protected. If they do not already have them, they may wish to consider introducing confidentiality and competition clauses into their employment contracts, particularly if employees are likely to also be working in competing businesses.

Ultimately the removal of these clauses stands to benefit other employers who will gain access to a previously unavailable ‘tied-in’ workforce. The Department for Business and Skills (BIS) estimates that in excess of 5000 workers who were previously subject to the exclusivity clause will now take a second job.

The act imposes many new obligations for SMEs in a bid to find the right balance between the flexibility of zero hours contracts in order to create new jobs, and safeguarding the interests and needs of both the employer and the worker. Only time will tell if the balance has been addressed following the launch of this new legislation.

For more information contact Barry Warne on 00 44 114 252 1437 or email