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Now is a good time to review the contracts being used in your business and ensure that any zero hours contracts don’t contain exclusivity clauses.

Exclusivity terms that seek to prevent individuals from doing work for other people (or doing so without their employer’s consent) have been unenforceable when included in zero-hours contracts since 2015. However, in order to provide protections specifically for low-income workers, from 7 November 2022, the principle has been extended to apply to all workers whose net average weekly wages do not exceed the lower earnings limit for the purposes of National Insurance (currently £123 per week), rather than just those on zero hours contracts.

Under these new regulations, it is automatically unfair to dismiss an employee if the reason or principal reason for doing so is that they breached an exclusivity term. There is no qualifying service requirement for the employees wishing to pursue such claims — it is a protection that they have as soon as employment starts. The regulations also protect workers from suffering any detriment if they breach an exclusivity term, with employment tribunals being entitled to award compensation up to the value of the award made for unfair dismissal claims.

This serves as a good prompt for you to review the contracts being used in your business and ensure that any zero hours contracts or contracts issued to those earning less than the lower earnings limit don’t contain exclusivity clauses. While having the clauses present in the contract is not, of itself, unlawful provided they are not enforced, their presence does create a risk that managers may seek to enforce them, or that staff can use their presence to allege a motive for an employer’s actions.

Vanishing dismissals

Where an employee is dismissed and uses their employer’s internal procedure to successfully appeal against their dismissal, their employment is reinstated with wages paid for the intervening period. The dismissal ‘vanishes’ in legal terms, meaning there is no longer a dismissal for them to pursue any unfair dismissal claim in relation to, even though the original dismissal decision may have been unfair.  The Employment Appeal Tribunal recently confirmed that this was the case even if the employee chose to appeal their dismissal but did not wish to be reinstated to their role.

In Marangakis v Iceland Foods Limited [2022] EAT 161, Ms Marangakis was dismissed in January 2019 for alleged gross misconduct. She appealed, initially indicating that she wished to be reinstated to her role. However, she later changed her mind about wanting to be reinstated, believing that mutual trust and confidence had broken down between her and her employer and said that she wished to receive compensation and an apology instead.

Ms Marangakis’ appeal was successful, and her employment was reinstated. However, she refused to return to work and was then dismissed for that in June 2019. Ms Marangakis brought an unfair dismissal claim in relation to the original January 2019 dismissal. The employment tribunal decided that it could not hear the case as the January 2019 dismissal had vanished, based on Ms Marangakis’ successful appeal and reinstatement to her role.

Ms Marangakis appealed the Tribunal’s decision to the Employment Appeal Tribunal, who agreed with the Tribunal that if an appeal against dismissal is successful, the parties are obliged to treat the dismissal as having not occurred, irrespective of the employee’s own wishes. The only way to prevent that would have been if the employee had withdrawn her appeal before an outcome had been issued. In this case, Ms Marangakis saying that she no longer wanted to be reinstated was not sufficient evidence that the appeal had been withdrawn, particularly as she had stated that she instead wished to receive an apology and compensation indicating an intention to continue the appeal process.

While this case doesn’t move the legal position, it does serve as a timely reminder that reinstatement of employment on appeal can assist employers to avoid unfair dismissals in circumstances where the initial decision to dismiss (or procedure followed) may have been unfair and likely to give rise to an unfair claim. As in this case, employees may well refuse to return to work if their appeal is granted, justifying their fair dismissal on conduct grounds based on their refusal to attend and offering the employer a second chance to achieve a fair dismissal.

National Minimum Wage Increase

The Chancellor of the Exchequer has delivered the 2022 Autumn Statement announcing wide-ranging tax increases and other measures to support the economy. One of the key announcements affecting employers was the increase in National Minimum Wage rates. The move is expected to benefit more than two million of the country’s lowest-paid workers and will see the rates increase from 1 April 2023 as follows:

  • Age 23 or over (National Living Wage rate): £10.42 (up 9.7% from £9.50).
  • Age 21 to 22: £10.18 (up 10.9% from £9.18).
  • Age 18 to 20: £7.49 (up 9.7% from £6.83).
  • Age 16 to 17: £5.28 (up 9.7% from £4.81).
  • Apprentice rate: £5.28 (up 9.7% from £4.81).
  • Accommodation offset amount: £9.10 (up 4.6% from £8.70).

The new rates represent a much more drastic increase than the annual increases we are used to seeing, with the National Living Wage rate applicable to those aged 23 or over increasing by more than we have ever seen before at 9.7 per cent. In the context of steep increases to operating costs generally, this may cause concern to some employers who fear the additional staffing costs could trigger a need to review efficiencies and streamline their workforces through redundancies or restructures.  

If you have any questions or concerns about your zero hours contracts and the extension of the ban on exclusivity clauses, then please contact our expert employment solicitors.