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Does the ban on exclusivity clauses affect the enforceability of restrictive covenants?
The term casual worker is usually used to describe a worker who is engaged in a flexible, ad hoc way. They are normally used in circumstances where there is a sporadic requirement for additional resource to aid perhaps with a busy period or where it is impossible to predict demand.
The most common forms of casual workers fall within two categories; “Bank” Workers and “Zero-hours” workers. The dividing line between the two is minor and there are elements that are common to both. An employer is under no obligation to offer work to either category of casual worker.
However minimal the difference, the distinction between the two categories is important. Bank workers are those which are in a pool of workers, which an employer can then call on when work becomes available. A bank worker has a choice of whether or not to accept the offer of work.
Zero-hours contracts have a statutory definition under s27A(1) of Employment Rights Act 1996 which states they are, “a contract of employment or other worker's contract under which
- The undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and
- There is no certainty that any such work or services will be made available to the worker”.
The important distinction therefore is that zero-hours workers are generally obliged to accept any work they are offered by an employer, whereas bank workers are entitled to turn it down.
There has been considerable controversy in recent years regarding the increased use of zero-hours contracts. Some employers were also including exclusivity clauses within their zero hours contracts which prevented the worker from working for any other employer whilst engaged by them. This meant that, in effect, an employer could choose not to offer any work to a zero-hours worker or may not have any work to offer but, if the worker then sought work elsewhere, the worker would be in breach of the exclusivity clause and therefore in breach of contract with the employer.
The government took steps to prevent this practice with the introduction of s27A ERA 1996 on 26th May 2015. In effect this introduced a ban on exclusivity clauses in zero-hours contracts under s27A(3) as it rendered the clauses unenforceable by an employer. The actual wording of S27A(3) ERA is as follows:
(3) Any provision of a zero hours contract which—
- Prohibits the worker from doing work or performing services under another contract or under any other arrangement, or
- Prohibits the worker from doing so without the employer's consent,
- Is unenforceable against the worker.
The introduction of s27A ERA 1996 was broadly welcomed at the time, as it was seen as an attack on poor practices by unscrupulous employers. However, the effect of s27A(3) may actually go much further than was intended by Parliament.
Despite their general use for workers who are required to perform basic duties, there may be certain circumstances where an employer wishes to include restrictive covenants in the zero-hours contracts to protect their legitimate business interests. It is very arguable that the effect of s27(3) ERA 1996 acts to make these restrictive covenants automatically unenforceable by the employer. This is an area which is yet to come before any of the higher courts, but is certainly an area which is ripe for clarification as to whether it can have been Parliament’s intention for this section to have such a far-reaching effect.