UK: Plans to outlaw exclusivity clauses for zero hours contracts

A bill banning exclusivity clauses in zero hours contracts was introduced to parliament in July 2014 (although the government has resisted calls for an outright ban on such contracts). Exclusivity clauses stop workers from seeking work with other employers, even when no amount of work is set out in the employment contract.

Background

The use of zero hours contracts by employers was widely reported in the UK media throughout the second quarter of 2014. A zero hours contract is not formally defined by legislation but, according to arbitration body Acas, is ‘generally understood to be an employment contract between an employer and a worker, which means the employer is not obliged to provide the worker with any minimum working hours, and the worker is not obliged to accept any of the hours offered’.

This practice has been the subject of much discussion by the social partners, the media and researchers since June 2013, according to a Eurofound report. In December 2013, the government announced that there would be a review, and consultation on the use of zero hours contracts began.

Research published throughout 2013 had shown steep increases in the use of zero-hours contracts. The trade unions and the Labour Party strongly opposed this, as can be seen in the Eurofound report Zero hours contracts in the spotlight. Part of the concern was the spread of these contracts in both volume and sectors covered. Staff who are on zero hours contracts are more likely to be ‘workers’ rather than ‘employees’ and, as such, have fewer employment rights, including lack of access to annual leave or sick pay. Acas research, published in May 2014, highlighted workers’ concerns over the:

  • reliability of their income;
  • security of employment;
  • employment status;
  • balance of power between employer and worker.

Opponents have attacked zero hours contracts for resulting in poorer quality service and for being a cost-cutting device, in addition to the effects experienced by the workers themselves. However, business groups say this type of contract promotes flexibility and has led to jobs being saved during the recession. The importance which employers attach to using zero hours contracts has been reported by Eurofound in ‘Employers want low pay rises and flexible employment’. Exclusivity clauses in these contracts have become extremely controversial because they effectively ban workers from seeking work with other employers, even when no amount of work is set out in the employment contract.

Outcome of consultation

The clauses received particular attention during the consultation period, which closed in March 2014 and, in June 2014, Business Secretary Vince Cable announced plans to ban them. The ban is covered in the Small Business, Enterprise and Employment Bill, which was introduced to parliament on 25 June. It is estimated that a ban on the use of exclusivity clauses will affect 125,000 workers. Mr Cable also announced:

  • further consultation on preventing employers evading the ban;
  • the development of a code of practice on the fair use of zero hours contracts by the end of 2014;
  • plans to work with stakeholders to improve information available to both employees and employers.

In August 2014, the government outlined terms of the consultation to determine how likely employers would be to try to avoid the ban and to develop a code of practice.

Announcing the ban, Mr Cable stated:

Zero hours contracts have a place in today’s labour market. They offer valuable flexible working opportunities for students, older people and other people looking to top up their income and find work that suits their personal circumstances.

Reaction of the social partners

The General Secretary of the Trades Union Congress (TUC), Frances O’Grady, said:

The ban is welcome news but it’s not nearly enough to really tackle the problem. A lack of certainty is the real issue. Far too many employees have no idea from one week to the next just how many hours they’ll be working or, more importantly, how much money they’ll earn. This makes managing household budgets stressful and organising childcare very difficult indeed. The one change that would really make a difference would be for employers to have to guarantee their staff a minimum number of paid hours each week. And, as the economy continues to grow, that would give many zero-hours workers struggling to get by a much-needed pay rise.

Speaking before the announcement had been confirmed, the Deputy Director-General of the Confederation of British Industry (CBI), Katja Hall, commented:

A ban on exclusivity clauses in zero hours contracts would be a proportionate response to some of the issues that have been highlighted, as it focuses on poor practice rather than demonising flexible work in general.

Commentary

That the government stopped some way short of an outright ban on zero hours contracts was not a surprise, despite the calls to do so from the trade union movement. The coalition government’s policy of promoting flexibility in the labour market and employment precluded such a ban.

In common with other recent legislation, the interests of employers have been given precedence over those of workers. The opposition to such a ban by employer groups was key to this. Practical concerns may also have influenced the decision, such as how any ban could have operated and whether jobs would have been lost.

With the announcement of further consultation, it remains to be seen how a ban will be enforced and what suggestions are made on best practice. It is clear that the operation and number of zero hours contracts will continue to be monitored closely, and will remain an important issue in contemporary employment relations.

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