Exclusivity clause ban will apply to high-pay consultancy arrangements, as well as 'zero hour' contracts, says expert

Legislation banning the practice came into force on 26 May, following the publication of the first commencement order made under the Small Business, Enterprise and Employment Act. However, not only those companies entering into 'traditional' zero-hours contracts with lower paid workers would be affected by the changes, said employment law expert Stuart Neilson of Pinsent Masons, the law firm behind Out-Law.com.

"Whilst the focus has, rightly, been on lower-paid employees under 'zero hours contracts', the new law will also have an impact on higher paid workers who contract under such arrangements," he said.

"Where a highly-paid consultant, for example, is engaged on such a basis the employer will no longer be able to rely upon any non-compete provisions that may be built into the contact - since such a restriction on working for another would be unenforceable, unless the consultant is genuinely operating their own business. Accordingly, careful thought needs to be given to the contractual arrangements that higher-paid consultants enter into with businesses to make sure the parties do not inadvertently fall foul of this new law," he said.

The term 'zero hours' is not defined in UK employment law, but generally refers to a flexible employment arrangement without guaranteed hours. Under a zero hours contract an employer does not guarantee the worker any work and pays only for hours actually worked. Similarly, individuals that are party to the contracts are not obliged to accept any work that is offered. According to the Office of National Statistics (ONS), the number of zero hours contracts issued by UK employers reached 1.8 million last summer, although this figure reflected seasonal demand as well as increased recognition of the terminology, it said.

The previous UK government ruled out banning the use of zero hours contracts outright after a consultation exercise in 2013, but instead proposed a ban on exclusivity clauses to prevent abuse of the contracts and prevent vulnerable workers. Exclusivity clauses are used to stop a contracted worker who is not guaranteed a minimum number of hours from seeking additional work elsewhere. Anti-avoidance measures to prevent employers from circumventing the ban will be enacted through additional regulations at a later date.

"There was much discussion about zero hours contracts during the recent general election campaign, with calls from some parties for such contracts to be outlawed entirely," said Neilson. "However, it is now clear that these contracts will remain lawful with the only change being the banning of exclusivity. What this will mean is that it will not be possible for an employer to insist that a worker engaged under a zero hours contract must work for them and only them."

"The number of workers engaged under zero hours contracts with exclusivity provisions is believed to be quite small. Such individuals will now be free to pursue work from other sources. The exact details of how the government will enforce this new provision are yet to be published," he said.