Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Dean Russell)
I beg to move,
That the Committee has considered the draft Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022.
It is an honour to serve under your chairmanship, Mr Robertson.
The draft regulations, which were laid before the House on 6 July 2022, will make exclusivity terms unenforceable in contracts that entitle workers to earn net average weekly wages that do not exceed the lower earnings limit—currently £123 a week—ensuring that that such workers are not restricted by exclusivity terms. It will give such workers the right to take on additional employment without being subjected to detriment and—applicable only to employees—unfair dismissal.
The measures we are introducing will increase participation in the labour market and, together with our agenda to boost productivity, will drive higher employment, wages and economic growth. We want to give businesses the confidence to hire and retain workers and to provide their workforce with the skills and experience they need to progress in work. We want to put more power into the hands of individuals and businesses to find and create work that suits their personal circumstances, and we want to enable workers to reskill so they can make the most of the economic opportunities and to best deploy themselves to drive growth and productivity in the economy.
During the cost of living crisis, we will continue to protect vulnerable workers. The measures will help to ensure that low-income workers can boost their incomes with additional work should they so wish. That builds on the support we have given to many workers during the cost of living crisis: in April, we raised the national living wage to £9.50, equivalent to a pay rise of more than £1,000 for a full-time worker; we gave 1.7 million families an extra £1,000 a year on average through our cut to the universal credit taper and increased work allowances; and a new in-work progression offer will mean that 2.1 million low-paid workers on universal credit will be able to access personalised work coach support to help them increase their earnings. The reforms reflect the Government’s ongoing commitment to protect and enhance workers’ rights across the country.
Chris Stephens (Glasgow South West) (SNP)
The Minister is typically generous in giving way. There is some concern that exclusivity terms are unenforceable under the lower earnings limit. Why have the Government chosen that route and not, for example, that of the European Union directive on transparent and predictable working conditions?
Dean Russell
I will come to that point later. I do intend to respond.
I will take a moment to walk through what the draft regulations do. This statutory instrument will extend the protections in the Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015. The existing regulations make exclusivity terms unenforceable in zero-hours contracts where previously they were banned from doing work under any other contract or arrangement, or barred from doing so without the employer’s consent. We are making further revisions to extend the protection to individuals who work under workers’ contracts and earn less than or equal to the lower earnings limit, ensuring that they may take on additional work to boost their income should they wish to do so.
The draft regulations will also extend to those workers the right to redress, so that they have the right not to be subjected to any detriment by a non-compliant employer. If they breach an exclusivity clause in their contract, that will be subject to the regulations. For employees, any dismissal for that reason will be regarded as unfair. All workers subject to any detriment will have the right to bring a claim or a complaint to an employment tribunal.
A second, separate statutory instrument subject to the negative procedure will be laid in Parliament after the draft regulations are approved. That is necessary to make the right to bring a claim under the regulations subject to early conciliation, which is a requirement set out in the Employment Tribunals Act 1996. That separate statutory instrument will mean that a prospective claimant wishing to take a case to the employment tribunal must first contact the Advisory, Conciliation and Arbitration Service about their dispute and consider conciliation before presenting a claim to the employment tribunal. The second SI will also amend the regulations to extend the time limit for making a claim to consider this application of early conciliation.
The provisions of the 2015 regulations make unenforceable exclusivity terms in zero-hours contracts, but they do not cover such contracts where only one hour or limited hours are guaranteed, which leaves some of the most vulnerable workers in our society subject to exclusivity terms while their weekly income is low. Those low-income workers are significantly more likely than the average worker to want to undertake additional work.
In recent years, we have seen a rise in the use of short-term variable hours contracts. That has been very positive for some people, with the flexibility on offer helping those with other commitments stay in work or get back into the labour market. For others, such contracts have resulted in a level of unpredictability that has made it difficult to plan their lives effectively or have the financial security they need. We want to protect those who are most in need and address inequality, so that everyone has the opportunity to participate in a labour market, enjoy a fulfilling working life and make a living, especially during a cost of living crisis.
The Government consulted on the policy in the regulations between December 2020 and February 2021. The consultation generated 30 formal responses from a range of legal organisations and professionals, along with trade unions, academics, local government and equalities groups. Overall, responses showed wide support for our policy proposals to extend the range of contracts in which exclusivity clauses should be made unenforceable.
An estimated 1.5 million workers receive a weekly wage that is below the lower earnings limit in their main job. The reforms will ensure that workers in that group that have exclusivity clauses are able to top up their income with extra work if they choose. Workers will have more flexibility in when and where they work to best suit their personal circumstances and commitments, such as childcare or study, including the option of working multiple short-hours contracts.
Businesses will benefit from a widening of the talent pool of job applicants to include those who would have otherwise been prevented from applying for roles due to exclusivity clauses with another employer. The reforms could also create more opportunities for low-paid workers to reskill as they take on additional work where desired, allowing individuals to make the most of new opportunities in existing sectors with growing labour demand, as well as in emerging sectors and occupations.
The Government want to ensure that businesses and individuals can make the most of the opportunities in our flexible and dynamic UK labour market to generate long-term economic growth and prosperity. The reforms will help us deliver on the ambition to make the UK the best place in the world to work and do business by putting more power into the hands of individuals and businesses to find and create work that suits their personal circumstances. I commend the draft regulations to the Committee.
Dean Russell
I genuinely thank all hon. Members for their valuable contributions to this debate. When I was at university, I worked on what we would now call a zero-hours contract, doing as-and-when work. As such, I totally understand the challenges that people face with this, which is one the reasons for these reforms. People on the lowest incomes being told that they cannot work elsewhere is just wrong, and these regulations go towards rectifying that. I appreciate that there is always a desire to go further and faster, and I hear that, but hopefully we are all in agreement that we are heading in the right direction with these regulations.
I will come to employment Bill later. I brought in a private Member’s Bill that would have been part of that employment Bill—the Employment (Allocation of Tips) Bill—and I am very proud of that. I recently became the Minister with responsibility for this area. There are great things happening, but I will address those later in my speech.
I hope I can cover most of the responses to the excellent questions during the debate. If I do not, I will absolutely write back. I know the hon. Member for Ellesmere Port and Neston is a regular writer of parliamentary questions. I always enjoy reading and responding to them, so I thank him very much.
The points that have been raised demonstrate the need for the regulations and the broad support for introducing them. The Government are intent on driving higher employment, wages and economic growth. The implementation of these regulations will support this aim by building more flexibility into the labour market and putting powers into the hands of individuals and businesses to find and create work that suits them and their personal circumstances. Short-hours contracts can provide a necessary level of flexibility for individuals, allowing them to work around other commitments such as study or childcare. The flexibility provided by short-hours contracts, including as zero-hours contracts, is something we know that the majority of these workers enjoy and, therefore, this should be protected.
This proposal will allow individuals to work multiple short-hours contracts, allowing them to boost their income while maintaining the level of flexibility required for their personal circumstances. A dynamic and flexible labour market will help us retain and attract talent, while fostering a diverse and inclusive workforce. The talent pool of job applicants will widen, as those who have been prevented from applying for jobs by another employer will help businesses to fill vacancies in key sectors and provide employment opportunities in marginalised areas. This more flexible market encourages an upskilling of workers and allows a match to be made between individuals and work which best uses their skills, which will drive higher employment, wages and economic growth. The culmination of these factors will contribute to the commitment we are making to ensure that the UK is the best place in the world to work.
There can be good reasons for employers using exclusivity clauses to protect the interests of their business. Although I am aware of the concerns that have been raised, some employers use exclusivity clauses to ensure that high-level company information remains confidential. However, we believe that employers should equally respect the right of a worker to earn a living, particularly where guaranteed earnings are low.
Returning to the points made in the debate, the hon. Member for Ellesmere Port and Neston voiced about the lack of Government action to deliver on the manifesto commitment to create a right to request a more predictable contract. The Government remain committed to doing this. The right will allow a qualifying worker to make an application to change their existing working pattern if it lacks predictability in the hours that they are required to work, the times that they are required to work, and the duration of the contract. I will gladly follow up with more detail, if that would be helpful.
The hon. Gentleman also mentioned preventing one-sided flexibility and increasing business power over employees. We totally recognise that one-sided flexibility is a problem and that a minority of employers may misuse flexible working arrangements. We held a consultation inviting views on tackling challenges related to non-guaranteed hours; we are currently analysing the results and will respond in due course. Again, I am happy to follow up once that is available.
The hon. Gentleman also raised concerns about the continued absence of an employment Bill. As I said earlier, I have been forging my own way with my private Member’s Bill on tips, and there are many other relevant PMBs. I am afraid this is a very similar answer to the one I gave before, but hopefully he does not mind a repeat—sometimes they are good on TV. The Queen’s Speech set out a packed and ambitious legislative programme, which includes a comprehensive set of Bills that enable us to deliver on priorities such as growing the economy, which will in turn help to address living costs and get people into good jobs.
Chris Stephens
The Minister is being typically generous in giving way. I was on the Bill Committee for his tips Bill, which is a good measure. His predecessor gave a commitment that an employment Bill would be in the last Queen’s Speech, but it was not. Given the strong and stable Government who we have at the moment, can the Minister tell me in which King’s Speech we will see an employment Bill?
Dean Russell
I appreciate the intervention and the diligence with which the hon. Gentleman follows Government process and Conservative manifestos. Of course, there is still a desire to introduce an employment Bill, but a lot of the activity that would have been in such a Bill is coming forward. A neonatal private Member’s Bill is currently in play, and there is some really great work going on in that space. I hear him and will feed back the comments, but we are forging ahead in a positive way. I too was disappointed that the Queen’s Speech did not include an employment Bill, but we remain committed to delivering our as many of our commitments on employment as parliamentary time allows. As I say, numerous private Members’ Bills on employment rights have been introduced as a result of PMB ballots in the Commons. Wherever possible, there is a keenness to support those that are aligned with the goals of the Government..
The hon. Members for Glasgow South West and for Ellesmere Port and Neston both asked why the draft regulations are not being extended further, and I understand their views. Ultimately, the intention is to ensure that low-paid workers who are not able to secure the number of hours they would like from their current employer are able to seek additional work elsewhere. The lower earnings limit is set each tax year by the Government and is an established marker of a low-paid worker. Using the lower earnings limit will also ensure that the threshold remains relevant. Setting the threshold at the level of the lower earnings limit balances the needs of various businesses while protecting the most vulnerable workers and enabling them to boost their income where required.
Justin Madders
I am grateful to the Minister for providing some explanation. Can he say a bit more about why the needs of those businesses mean that the level is set at where it is now?
Dean Russell
Obviously they are wide-ranging, but a good example would be that if someone is working in an company where the information that they are working on is sensitive and there is a major competitor, that would be a challenge for exclusivity. A company would not want that worker to go and work for a competitor.
Justin Madders
I suggest that the general confidentiality duty in contracts of employment ought to cover those sorts of situations. I urge the Minister to look again at that as a reason not to extend the scope.
Dean Russell
I thank the hon. Gentleman for raising that point, but I suppose that in some instances it would be a bit like somebody working in the Conservative party and also in the Labour party. We can see the slight conflict there.
Dean Russell
Well, the news is that the SNP and Labour are going to form a coalition, so perhaps I am wrong to use that example.
Dean Russell
What I would say is that the EU regulations provide for a wholesale exclusivity clause in all contracts, whereas we believe that, in some instances, exclusivity clauses are needed for businesses to protect business interests, allowing them to continue to generate economic growth. If it is helpful, I will come back to Members with some more precise examples for reference.
To move on—I am conscious of time; I know people normally like these Committees to run quickly, but this is an important statutory instrument—concerns were raised about the announcement from His Majesty’s Treasury about additional requirements for the lowest paid universal credit claimants, who would face having their benefits reduced if they did not meet them. With our changes to exclusivity clauses, we want to help people on low incomes to secure more and better paid work, to provide a valuable income boost for vulnerable and low-paid workers. That will help universal credit claimants to meet those new earning requirements and keep their benefits.
There was a question about when we will lay the subsequent legislation. We plan to lay the associated negative statutory instrument as soon as possible, following the successful passage of these regulations.
Dean Russell
I hope the hon. Gentleman will not mind if I do not. I think I have been quite generous and friendly to all sides.
We plan to lay that SI as soon as we can, with a view to the policy coming into force later this year. I can update Members when we have a firm date.
I hope I have covered all the questions, but if I have not, I will gladly follow up in writing. I thank everyone here today. I commend these draft regulations to the House.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022.