Further to our previous article on the Government's consultations in relation to restrictive covenants, the Government has now introduced a ban on exclusivity clauses in relation to low paid workers with effect from the 5th December 2022.
Exclusivity Clauses
The Government launched consultations on the 4th December 2020 as to whether their needs to be reform / abolition of non-compete clauses, exclusivity clauses, and other restrictive covenants. Those consultations closed on the 26th February 2021. As of yet, there has been no Government response to the consultation on non-compete clauses. Instead, the Government simply states that they are analysing responses and feedback.
Nevertheless, one area that the Government has legislated upon has been to ban the use of exclusivity clauses in relation to low paid workers, defined as those workers earning on or below the Lower Earnings Limit of £123 per week. The Government published its response to the consultation on this issue back on the 9th May 2022. The ban took effect from the 5th December 2022, and will benefit around 1.5 million workers who are now free to work two or more jobs.
In a statement released back at the time of the Government's response to the consultation last May, the then business minister, Paul Scully, stated: "We are creating a high skilled, high productivity labour market that supports workers by removing unnecessary red tape, helping the British people boost their incomes and keep more of what they earn. By extending the ban on exclusivity clauses, we are putting more control into the hands of the lowest paid, giving them the freedom to decide who they work for and how often, including the option to top up their pay packet if they wish."
Also commenting upon the exclusivity clauses ban in relation to low earners, the Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), Andy Chamberlain, added: "The extension of the ban on exclusivity clauses is welcome. By cutting back on these restrictive clauses, the opportunity to find more flexible work will be open to more people."
Non-Compete Clauses
In contrast to the position on exclusivity clauses, the Government is still reviewing the responses received in relation to its consultation on non-compete clauses, before issuing a response.
The then business minister, Paul Scully, stated back on the 2nd March 2022 that: "The Government is in the process of analysing responses to the consultation and the available data, which will help inform decisions on detailed policy questions. Any decisions to progress with reforms to non-compete clauses require consideration of the benefits and risks before implementation and we are not able to provide further comment on future plans at this stage. A response to the consultation will be published on the GOV.UK website in due course."
As well as the option of a complete ban on non-compete clauses, one of the measures under consideration as part of the consultation is a requirement to pay the employee for the duration of the non-compete restriction. Another option that has been mooted is to impose a statutory limit on how long the restrictions imposed by any non-compete clauses can last for.
An added benefit of such reforms, the Government suggest, is that it will deter employers from including “unnecessary” non-compete clauses in employment contracts in the first place.
Compensating employees, whether voluntarily or as a result of a legal obligation to do so, would help to remove any financial incentives the employee may have to breach the non-compete clauses, thereby removing the need for the employer to pursue expensive court action to enforce the restrictive covenants.
Nevertheless, another option employers could consider in terms of reducing the risks of a breach of contract by former employees is to simply place the employee on garden leave as an alternative to requiring adherence to the non-compete clauses. This could potentially enable the employer to either jettison the non-complete clauses altogether, or to reduce the period of the restriction
Nevertheless, compensating employees can be extremely expensive for employers, expecially in relation to senior employees / high earners. It can make a redundancy / cost cutting situation a lot more difficult, and could potentially make the difference between the survival of a business and bankruptcy in certain situations
