By Dave Palmer, employment solicitor, CMS Cameron McKenna
On 25 June 2014, Business Secretary Vince Cable announced that the Government intends to ban ‘exclusivity clauses’ in zero hours contracts. The crackdown is designed to prevent the perceived abuse by employers whereby their zero hours contracts do not guarantee work but at the same time prevent workers from working for other employers. Whilst this announcement was not a surprise, there are difficult issues for the Government to resolve regarding how the ban will be enforced.
A zero hours contract is a contract where the employer is not required to offer a minimum amount of work. The Office for National Statistics estimates that around 1.4 million zero hours contracts are used in the UK, and the Government states that 125,000 zero hours contracts have an exclusivity clause. Exclusivity clauses prevent a worker from doing work for another employer. The Government has now aligned itself with popular consensus that these clauses are unfair on workers and should be banned.
The detail of the ban is found in the Small Business, Enterprise and Employment Bill. The Bill states that exclusivity clauses will be unenforceable and that employers could be sanctioned for the use of these clauses. However, the Government has not yet confirmed how enforcement of the ban will work.
There appear to be only two ways in which the Government could choose to enforce these provisions. There could be a state-funded ‘zero hours task force’ which would police zero hours arrangements and levy fines on employers. This would be expensive and intrusive, and appears unlikely in the current political climate.
The alternative is that Employment Tribunals will be given powers to order employers to pay compensation to workers, if the employer tried to enforce an exclusivity clause. This second option appears far more likely to be chosen. If this is the option the Government chooses, zero hours workers would have to bring a claim against their employer to an Employment Tribunal to complain about their employer trying to enforce an exclusivity clause.
A genuine problem with this option is that it currently costs workers around £1,200 in Employment Tribunal fees to bring the most common types of claim. The fees are payable to the Treasury and don’t include the cost of legal advice. If this is how the ban will be enforced, it does not appear likely that workers will be rushing to the nearest Tribunal to complain about their exclusivity clause. This is particularly so when many zero hours workers receive relatively low pay. It is unlikely that workers will try to enforce their rights, if the cost of bringing a Tribunal claim outweighs the benefits.
Therefore, for a ban to be effective, the Government will have to ensure that any compensation that can be awarded by an Employment Tribunal is of a sufficient level to avoid workers being disincentivised from trying to enforce their rights.