On 5 December 2022, new regulations came into force rendering exclusivity terms in employment and worker contracts unenforceable in situations where the earnings of workers do not exceed the lower earnings limit. The lower earnings limit is the amount specified for the purpose of section 5(1)(a) of the Social Security Contributions and Benefits Act 1992(3). It is currently set at £123 per week.
How are weekly wages calculated?
Where the contract of employment is permanent, the average weekly wages are calculated by dividing by 52, the total remuneration to which the worker is entitled under that contract in respect of a period of 52 weeks.
Where other employment contracts are in place, the average weekly wages are calculated by dividing the total remuneration to which the worker is entitled under the contract by the number of weeks during which the contract is expected to continue. The net average weekly wages are calculated by subtracting all deductions of whatever nature from the average weekly wages.
What does the new regulation mean for low-paid workers?
The new regulation means that employers are no longer able to prohibit low-paid workers from working for someone else. The employers also cannot enforce a term that requires employees or workers to obtain their consent to work elsewhere.
It is believed that this ruling will bring 1.5 million workers within the scope of these protections which already cover zero-hours workers. Dismissing employees if the reason or principal reason for dismissal is that employees breached exclusivity terms in employment contracts is automatically unfair. No qualifying period of employment is needed for employees to bring this claim.
Workers and employees who breach an exclusivity term are also protected from detrimental treatment. An employment tribunal may make a declaration and award such compensation as it considers just and equitable. Where the detriment in question is the dismissal of a worker, compensation is limited to an amount not exceeding the unfair dismissal basic and compensatory award. This means that the compensation for employees and workers who are dismissed is capped at the same amount.
Feel free to contact us if you need further advice on employment contracts and the enforceability of exclusivity terms.
