Is this clause reasonable?

[Cowboy Bob]

No it's not. You can't get insurance to cover you for walking out on a contract. It's your own decision to walk out, the Insurance Company will tell you to take a hike.

tim

Oh yeah

Misread the clause as being a general "loss of profit" to the EB kind of clause, not a walking out early clause.

[tim123]

in response to Tim123,

An Independent Third Party as appointed by the Consultancy and the Employment Business will assess the resulting loss from any fees that may be due to the Consultancy from the Employment Business, and award the relevant amount to the Employment Business.

Would be that be more fitting??

If everyone agrees.

The normal way that this is handled is for them to sue for breach of contract in a court, just like anyone else could. They have this right automatically, without inserting anything into the contract.

But no doubt the agency's problem with this is that they have to sue the company. By the time they win (which they probably will) you will have taken all the money out and left an empty shell which can't pay.

OTOH, if they stick a draconian clause in with an unreasonably high punishment, it will be an unenforcable penalty clause.

There isn't really an easy way to get this right for both parties. OT1H most contractors are insulted by the suggestion that they might walk out and see claues of this type as a means to punish them for lesser things (such as giving due notice, or even as someone suggested, getting sick). And OTOH if a contractor does walk out (and one at my last gig did), it can cost the agency quite a bit.

There is no reasonable clause that keeps everyone happy. I wonder what the PCG line on this would be.

tim

[Denny]

thanks for the feedback guys, I agree that its a good pointer for IR35, I am not worried about doing the job or leaving the contract early for something else....but like mordac says incase of misfortune, they can extort me for silly money....which I don't like....

I am gonna ask them to take it out....or reword it to:

Failure by the Consultancy to adhere to any term of this Agreement shall constitute a breach of contract and shall entitle the Employment Business to claim damages from the Consultancy for any resulting loss suffered by the Employment Business which shall be limited to loss of profit suffered by the Employment Business due to the Consultant not completing the term of this Agreement as specified in the Schedule.

You could change the wording, but in all honesty, an EB wouldn't have a leg to stand on if the money they were extrapolating from you didn't result in genuine loss of profit due to your own negligence or cavalier approach to leaving to take up something better and more highly paid elsewhere. If you were ill or couldn't finalise the contract for a good reason they wouldn't stand a hope in hell. After all, what if the client had terminated early instead of you?

[thunderlizard]

Well I think it still has to be an actual "resulting loss". Meaning that if you merely did a runner then you'd be liable for their lost profits; but if you also torched their building (including the Chicken 'n' Ribs shop that's no doubt beneath them) then you'd be liable for that loss too.

[wantacontract]

good advice guys

yeah i like the phrase - actual resulting losses....yup, think I'll stick that in there and live with it...

Merry Xmas to all that replied and assisted

[Mailman]

Sounds like a penalty clause and I wouldnt be surprised if they trotted this line out if you told them you were going to engage someone else (of course Im assuming you arent a fool and are opted in?).

Mailman

[boredsenseless]

It's slanted heavily in the agencys favour, i.e. if anything goes wrong and they lose money, they can claim it back from you. That could include you becoming seriously ill, which is hardly fair. I'd definitely get B&C to check it out, but it's also potentially a good outside-IR35 pointer (evidence of financial risk).

You seem to be forgetting that B&C offer taxation status advice and not employment advice, I'd guess this question is more related to 'will I get paid?' rather than 'does this make me any less IR35?'.

[tim123]

Sounds like a penalty clause and I wouldnt be surprised if they trotted this line out if you told them you were going to engage someone else (of course Im assuming you arent a fool and are opted in?).

Mailman

It is a penalty clause.

But there's nothing in it to suggest that it is an illegal penalty. Penalty clauase aren't de facto illegal. They are only illegal if the sum that they seek to collect is not a reasonable estimate of the actual loss.

tim

[wantacontract]

opted out

erm..i've opted out verbally, but not yet signed anything yet....i was told that via opting out, its a better indicator for being outside IR35...

???

[Denny]

erm..i've opted out verbally, but not yet signed anything yet....i was told that via opting out, its a better indicator for being outside IR35...

???

Rubbish, it has nothing to do with it. Opting in means you are safer with payment defaults and can go direct without hassles. It's purely an EB benefit and nothing to do with your IR35 status. This is only based on site working practices and your terms of contract.