Whilst immoral, such practices are sadly not illegal. There is only one formal exception which prevents blacklisting of workers and that is on grounds of trade union membership. There will also be some protection if someone is treated detrimentally due to a protected characteristic, such as gender, race, religion, disability, however this is not the case here. So it is unfortunately possible for someone to be blacklisted in this way, even if it is completely unfair and morally wrong.
Blacklisting is still something that happens from time to time in different ways. For example it could be due to a personal dislike or due to previous issues. It can happen ‘behind the scenes’ where people in the industry talk to each other, or it can be more open like in this case.
However, it is not illegal for the employer to say that if a contractor employs a person, they would no longer work with that contractor – the employer can decide who they work with and if they do not want to work with a particular person they can in turn decide not to work with a contractor that employs them. As mentioned it is morally wrong, but it is not illegal, unless the reasons for this decision were due to his trade union membership activities or a discriminatory reason as listed above.
I'm sorry if this is not necessarily the answer you were hoping for, however I do have a duty to be honest and explain the law as it actually stands. This does mean delivering bad news from time to time. I hope you understand and would be happy to provide any further clarification if needed. If you are still satisfied with the level of service you have received I would be grateful if you could please take a second to leave a positive rating by selecting 3, 4 or 5 starts at the top of the page. Thank you