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Zero-hours contracts – proposed anti-avoidance measures confirmed

The Government has announced the steps it intends to take to deal with avoidance of the proposed ban on exclusivity clauses in zero-hours contracts. The aim is for secondary legislation to introduce a new protection from detriment for zero-hours contract workers who take jobs under other contracts, and to set out a minimum income level below which exclusivity clauses will not be enforceable.

The planned exclusivity ban will be enacted through the Small Business, Enterprise and Employment Bill, currently progressing through Parliament (due its third reading in the House of Lords next week). This will insert a new section 27A into the Employment Rights Act 1996, making exclusivity clauses in zero-hours contracts unenforceable. A new section 27B will also give power to the Secretary of State to create anti-avoidance measures, and when the draft was published in June 2014 the Government confirmed it would consult on how these measures might look (there was concern that there were obvious potential ways around the proposed new laws).  The consultation ran at the end of last year and sought views on:

  • The probability of avoidance and how it might be circumvented;
  • What (if any) consequences there should be for an employer who sought to get around a ban on exclusivity clauses;
  • Whether there were any potentially negative or unintended consequences arising from the draft wording of the legislation

Following completion of the consultation, the Government’s response has now been published.  It includes draft wording for new anti avoidance regulations.

The intention is to introduce the concept of  a ‘prescribed contract’ - ie, a contract which doesn’t guarantee a worker a specified minimum income. That minimum income would be set by reference to an agreed number of hours multiplied by the minimum wage. An exclusivity clause in a prescribed contract would then be unenforceable in the same way as an exclusivity clause in a zero-hours contract – except where the hourly rate for work under the contract is at least £20. Protection from detriment would apply in the same way to zero-hours contracts and prescribed contracts. It would be unlawful for an employer to subject a worker under either such contract to any detriment on the ground that the worker is working or performing services under another contract or arrangement.

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