Government plans crackdown on ‘unfair’ employment clauses

The government is considering a crackdown on what it describes as unfair employment contracts that restrict worker freedom.

Joanne Stronach Head of Employment & HR reports.

The measures could include banning the use of exclusivity clauses, which prevent workers from taking on additional work with other employers. This would apply to workers whose guaranteed weekly income is below the Lower Earnings Limit, currently £120 a week.

The change would put more power into the hands of an estimated 1.8 million low paid workers across the UK to top up their income with additional work.

Ministers say it would also greatly expand the pool of talent available for businesses who rely on part-time and flexible workers, as those already in low-paid part-time employment will no longer be bound by restrictive contracts.

The plans also look to reform the use of non-compete clauses, which can prevent individuals from starting up or joining competing businesses after they leave a position. It is hoped the move would ensure talented individuals have the freedom to apply their skills in another role, unleashing a wave of new start-ups across the country.

Business Secretary Alok Sharma said: “We want to ensure every worker has the freedom and flexibility to work in the way they want, where they want – whether that’s topping up their pay packet by taking on additional work or being able to start their own business with the skills they’ve gained throughout their career.

“Plans involve introducing a mandatory compensation requirement for any employer that wishes to use non-compete clauses, ensuring that workers receive a fair settlement if they are restricted from joining or starting a business within their field of expertise. This aims to discourage the unnecessary and widespread use of non-compete clauses by employers.”

The proposals are being put to public consultation and the government is also seeking views on whether it is necessary to go further and ban non-compete clauses all together.

Exclusivity clauses for workers on zero hours contracts, where employers are not obliged to provide any minimum working hours and the worker is not obliged to accept any work offered, were banned in 2015.

We shall keep clients informed of developments.

If you would like more information about the issues raised in this article or any aspect of employment law please contact Joanne on 01228 585245 or click here to send her an email.