Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022

Baroness Bloomfield of Hinton Waldrist Excerpts

Tuesday 25th October 2022 Grand Committee

Moved by

[Baroness Bloomfield of Hinton Waldrist]

That the Grand Committee do consider the Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022.

Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, these regulations, which were laid before the House on 6 July 2022, will make exclusivity terms unenforceable in contracts which entitle workers to earn net average weekly wages that do not exceed the lower earnings limit—currently £123 per week. The statutory instrument will ensure that such workers are not restricted by exclusivity terms. It will give them the right to take on additional employment without being subject to detriment and—applicable only to employees—unfair dismissal.

The measures we are introducing will increase participation in the labour market, which, 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 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. We want to enable workers to reskill to make the most of economic opportunities and best apply themselves to drive growth and productivity in the economy.

During this cost of living crisis, we will continue to protect vulnerable workers. These measures will help ensure that low-income workers can boost their income with additional work, should they wish to. This builds on support we have already given to many workers during the cost of living crisis. In April, we raised the national living wage to £9.50, equivalent to an annual pay rise of over £1,000 for a full-time worker. We are giving 1.7 million families an extra £1,000 a year, on average, through our cut to the universal credit taper and increase to work allowances. A new in-work progression offer will also 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. These reforms reflect the Government’s ongoing commitment to protecting and enhancing workers’ rights across the country.

I should like to take a moment to talk through what the regulations will do. The statutory instrument will extend the protections in the Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015. These existing regulations make exclusivity terms unenforceable in zero-hours contracts, where previously workers 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 provisions to extend this protection to individuals who work under workers’ contracts earning less than or equal to the lower earnings limit, ensuring that they can take on additional work to boost their income should they wish to do so. The regulations will also extend the right to redress to these workers, so that they have the right not to be subjected to any detriment from a non-compliant employer if they breach an exclusivity clause in their contract that is subject to these regulations. For employees, any dismissal for this reason would 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 these regulations are approved. This is necessary to make the right to bring a claim under these regulations subject to early conciliation, a requirement set out in the Employment Tribunals Act 1996. This 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 an employment tribunal. This second SI will also amend these regulations to extend the time limit for making a claim to take into account this application of early conciliation.

The current provisions of the 2015 regulations make unenforceable exclusivity terms in zero-hours contracts. However, this does not cover such contracts where only one hour or limited hours are guaranteed, which leaves a number of some of the most vulnerable workers in our society subject to exclusivity terms while their weekly income is low. These low-income workers are significantly more likely than the average worker to want to take on additional work.

We have seen a rise in recent years in the use of short-term, variable-hours contracts. For some people this has been very positive, with the flexibility on offer helping those with other commitments to stay in work or get back into the labour market. For others, this has 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 most in need and address inequalities so that everyone has the opportunity to participate in the labour market and enjoy fulfilling working lives, and to make a living, especially during this cost of living crisis.

The Government consulted on the policy in these 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.

On impacts, an estimated 1.5 million workers receive a weekly wage below the lower earnings limit in their main job, and the new reforms will ensure that workers in this group that have exclusivity clauses are able to top up their income with extra work if they choose.

Workers will have more flexibility over when and where they work to best suit their personal circumstances 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 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.

To conclude, 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. These reforms will help us deliver on our 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 these draft regulations to the House.

[Baroness Janke (LD)]

I thank the noble Baroness for her presentation. As she said, exclusivity terms were banned for zero-hours contracts in 2015 through the Small Business, Enterprise and Employment Act. It enabled workers unable to work enough hours for one employer to work for another. It seems outrageous that employers were able to impose exclusivity terms on an employee who was not receiving enough pay to live on and to dismiss them for doing so. However, this protection was not extended at the time to contracts with employees on very low pay. This statutory instrument extends the protection to employees earning as little as £123 a week, meaning that if they are not given sufficient hours by one employer, they are able to seek additional work elsewhere, and if they are in any way discriminated against or any kind of action is taken against them, as the noble Baroness explained, they have legal redress.

In supporting this long-overdue change, we should remember the nearly 2 million people who are on in-work benefit because they are not paid enough to live on, many of whom are on zero-hours contracts. While the flexibility of zero-hours contracts is welcome to some who are not dependent on them for main income, such as students, many on zero-hours contracts are dependent on unreliable and often short-term work without the employment rights of permanent contracts such as sick pay, holiday entitlement, pension contributions or security of employment. Employers using these contracts can dismiss workers for sickness or even pregnancy.

Although we welcome this change, which will be of great importance to the very lowest-paid workers, we should appreciate that the low pay, poor conditions and lack of employment rights of zero-hours workers are not acceptable, and that for the 2 million low-paid workers on benefits, low pay and unreliable employment lead to deep insecurity and anxiety for the poorest families. The current economic crisis hits these people hardest, and I hope the Government will take the needs of this group of people, many of whom have families and children, very seriously indeed.

--- Later in debate ---

There is regret that it has taken time for this to come forward, given that it is seven years since the original regulations and that the review was started 18 months ago. However, as I say, it is welcome, but there is more to be done, and I hope we will all put all our efforts into tackling the scourge of in-work poverty. The number of children living in poverty today with at least one adult in their household in work is something that we should not countenance.

[Baroness Bloomfield of Hinton Waldrist (Con)]

May I say at the outset and to reassure all noble Lords, particularly the noble Baroness, Lady Janke, that we take the needs of the lower paid seriously? This SI is an attempt to address some of those issues, and I, too, regret that it has taken this long to come to the statute book after the end of the consultation period.

I thank noble Lords for their valuable contributions. The points that have been raised demonstrate the need for these regulations and the broad support for introducing them. The Government are intent on driving higher employment, wages and economic growth to impact on all families, particularly the lower paid. The implementation of the regulations will support that aim by building much more flexibility into the labour market and putting more power into the hands of individuals and businesses. As we all know, short-hours contracts can provide a necessary level of flexibility for individuals, which allows them to work around other commitments such as study or childcare. Many people welcome zero-hours contracts. However, in some cases we know that they have been abused by certain employers and we have tried to introduce legislation to put that right.

This proposal will allow individuals to work multiple short-hours contracts, boosting income while maintaining the level of flexibility required for their personal circumstances. A dynamic and flexible labour market helps us retain and attract talent, while fostering a diverse and inclusive workforce. A widening of the talent pool of job applicants, who may have been prevented applying for jobs by another employer, helps businesses to fulfil vacancies in key sectors and provide employment opportunities in marginalised areas. This more flexible market encourages an upskilling of workers, allowing a match to be made between individuals and work that best uses their skills and which will drive higher employment, higher wages and economic growth. The culmination of those factors will contribute to the commitment that we are making to ensure that the UK is the best place in the world to work.

I was asked a number of questions by the noble Lord, Lord Jones, specifically on the statistics on the annual number of tribunals and the promptness of payments. I do not have those statistics with me but I shall endeavour to write with a full response, and I shall make that available to all Members of the Committee. The noble Baroness, Lady Blake, asked why we use this particular income threshold. It was a difficult balancing act, but it was felt that using this threshold balanced the needs of the employers as well as those of the employees—the workers employed under these types of contracts.

With those few words, I commend the draft regulations to the House.

Motion agreed.