On 4 December, the government launched two consultations – one in relation to a ban on exclusivity clauses for low-paid workers, and another on the reform of the law around non-compete clauses. The proposals are designed to support economic recovery from the impact of COVID-19, but could also mean changes are on the horizon for employees’ rights.
What is an exclusivity clause and what changes are being proposed?
An exclusivity clause prevents a worker from taking on additional work for other employers for the duration of their contract. It allows an employer to benefit from the talent that they recruit, whilst stopping competitors from benefiting from that talent. However, it also means that employees are not able to look for other work in order to boost their income.
The use of such clauses in zero hours contracts was banned in 2015 on the basis that exclusivity clauses cannot be justified when work and pay are not guaranteed. The government considered a wider ban on exclusivity clauses at that time, but decided against it. That decision is being revisited now in light of evidence that the impact of the COVID-19 pandemic means some companies are not in a position to offer their employees as many hours as they would like, and with a view to enabling employees to have the flexibility they need.
The consultation announced this month seeks views on the proposal to ban exclusivity clauses in contracts where a worker’s guaranteed weekly income is less than the Lower Earnings Limit (which is currently £120 a week). This is equivalent to a little under 14 hours a week at the National Living Wage and is clearly a low limit.
Such reform would allow 1.8 million low-paid workers in the UK to take up extra employment if/when needed in order to ease economic hardship, which is likely to be compounded by the ramifications of the pandemic. In addition to allowing greater flexibility for employees, the reform would expand the talent pool for businesses which are reliant on part-time and flexible workers.
What is a non-compete clause and what changes are being proposed?
In this context, a non-compete clause prevents an employee from working for a competitor or establishing their own competing business after they leave. They are used to protect the employer’s confidential information and client relations from competitors for a particular period which will be specified in the clause.
The government is currently seeking views on the following options to reform the law on non-compete clauses:
- Mandatory compensation: non-compete clauses would be enforceable only when the employer provides compensation for the period that the individual is restricted. This would deter employers from imposing non-compete clauses where not necessary or for an unreasonable length of time.
- Additional “complementary measures”: these would include a requirement for employers to disclose the terms of the non-compete clause to the employee before the employment begins, and a statutory cap on the duration of non-compete restrictions.
- A ban on non-compete clauses: the government is also considering a complete ban on the use of non-compete clauses. This proposal is being explored on the basis that it may provide greater certainty for all parties and would potentially increase labour mobility which could, in turn, improve the efficiency of the labour market as skills and knowledge move more freely between companies.
As with the consultation on exclusivity clauses, this consultation is also designed to look into ways to aid the UK’s recovery from the financial impact of the COVID-19 pandemic. The government is looking at ways to “unleash innovation, create conditions for new jobs and increase competition”. A complete ban seems unlikely, but restrictions or conditions on the use of such restrictions could well be introduced. Several countries already require some payment during a post-termination restricted period.
Both consultations are now open for responses until 26 February 2021. The exclusivity consultation can be found here, and the non-compete clause consultation here. Although these changes are aimed at supporting the UK’s economic recovery from the pandemic, the proposals could have a tangible, long-term impact on the rights of employees and their ability to move between employers.