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Government to consult on crackdown on unfair employment clauses in a boost for low paid workers

Makbool Javaid, Partner - Simons Muirhead & Burton

The Government announced that they will consult on reforming the use of exclusivity and non-compete clauses in employment contracts. Among other things, it is predicted that the proposed ‘crackdown’ on such restrictive clauses will ensure that ‘up to 1.8 million low paid workers’ will be able to undertake extra work if they wish and ‘remove unfair barriers’ preventing individuals from becoming involved with competing businesses.

Exclusivity clauses are commonly used in employment contracts to restrict workers from undertaking further work for other employers. There is already a ban on their use in zero-hours contracts, which came into effect in 2015. The Government is now revisiting this issue in the light of the effects that Covid-19 has had, especially on low-income workers. Through this new consultation, the Government is seeking views on proposals to extend the ban (and the redress rights) to contracts where a worker’s guaranteed weekly income is less than the Lower Earnings Limit.

Non-compete clauses are a type of post-termination restriction. The Government is seeking views on non-compete clauses in employment contracts and has proposed the following: mandatory compensation, complimentary measures or rendering non-compete clauses unenforceable suggests that this would provide greater certainty and have a positive impact on ‘innovation and competition’ and points to California as an example of where such non-compete clauses are void and to Israel, which has also significantly reduced their enforceability.

The consultations are due to come to an end on 26 February 2021. In the meantime, employers may wish to consider reviewing how they currently protect their legitimate business interests in employment contracts and ensure that their confidentiality and intellectual property provisions (where applicable) provide adequate protection.

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