Agency Regulations and conflicting contract clauses

[JoJoGabor]

OK so I find myself in an awkward scenario:
I originally contracted direct to a consultancy who I had payment issues with. In order to minimise my risk I arranged to go through an agency to ensure I got paid, ensuring the contract stated that I was opted in to the agency worker regulations 2003. My understanding of these are that the agency must pay me regardless of whether they get paid and that there are no handcuff clauses about working for the end client after the end of the contract.

Eventually the inevitable happened and the consultancy went into administration and was bought by another consultancy. The agency got half of what was owed to them but still lost a substantial amount of money. Anyway I met with them and they agreed to pay what was outstanding to me and I got the money. I was then offered a contract direct with the consultancy's client I was working for and accepted that. They had no ties to the consultancy as it no longer existed and at that point had not signed new contracts with the new consultancy.

My accountant several months later then picked up that the agency had in fact underpaid by a few thousand. I contacted the agency to ask for this who are now threatening to counter claim for their loss which far exceeds my debt and are further claiming for losses as I have gone to work with what they deem the client direct.

In the contract it states I am opted in to the agency regulations but there is also a clause saying my Ltd agrees to indemnify the agency against any loss incurred [paraphrased]. It also states that I cannot work with the consultancy direct but makes no mention of the consultancy's clients.

My assumption was the optin will over-rule the clause regarding indemnification of losses. Is that correct? Of course I will be getting legal advice from PCG but currently abroad on holiday.

I really don't think there is anything stopping me working for the end client either in this case.

I assume that as an absolute last resort I could just close my ltdco then there is no company to claim against

[TheFaQQer]

If you are opted into the agency regulations, then they MUST pay you what they owe you - if they have any counter claim, then they need to take a separate legal action against you to recover their losses.

How long was there between leaving the consultancy and going to the client? If it was more than eight weeks, then you are in the clear anyway, since you opted into the agency regulations and they cannot make a charge for your services any more.

Send them a letter pointing this out, or get a solicitor to do it for you, and then chase for late payment and penalties.

[tractor]

.....

If you are opted into the agency regulations, then they MUST pay you what they owe you - if they have any counter claim, then they need to take a separate legal action against you to recover their losses.

How long was there between leaving the consultancy and going to the client? If it was more than eight weeks, then you are in the clear anyway, since you opted into the agency regulations and they cannot make a charge for your services any more.

Send them a letter pointing this out, or get a solicitor to do it for you, and then chase for late payment and penalties.

It's 14 weeks from the start of the contract or 8 weeks from the end, whichever is the later. I think it's Regulation 10 of the Conduct Regs.

[malvolio]

If you are opted into the agency regulations, then they MUST pay you what they owe you -

They mustn't, actually, if you've signed a contract saying they don't have to...

if they have any counter claim, then they need to take a separate legal action against you to recover their losses.

Yes, I agree. The two arguments are entirely separate.

How long was there between leaving the consultancy and going to the client? If it was more than eight weeks, then you are in the clear anyway, since you opted into the agency regulations and they cannot make a charge for your services any more.

Send them a letter pointing this out, or get a solicitor to do it for you, and then chase for late payment and penalties.

...having first read your contract carefully!

[JoJoGabor]

Thanks for your replies, after reviewing the contract, I am definitely opted-in to the Agency Conduct Regulations 2003
The one clause I need confirmation with is:

The Consultancy shall indemnify and keep indemnified the Employment Business against any Losses suffered or incurred by the Employment Business by reason of any proceedings, claims or demands by any third party (including specifically, but without limitation, Her Majesty’s Revenue and Customs and any successor, equivalent or related body pursuant to the IR35 Legislation and/or any of the provisions of Chapter 9 and/or section 688A of the Income Tax (Earnings and Pensions) Act 2003 and/or any supporting or consequential secondary legislation relating thereto).

My translation of this is: I am indemnifying the agency against any loss with regards to IR35, Chapter 9 Bankruptcy (which is US public organisations only only) and Income Tax Liabilities. However does this also include the client going in administration?

I also have the clause:
Subject to the Consultancy complying with the provisions of this clause x the Employment Business shall pay the Consultancy for all hours worked regardless of whether the Employment Business has received payment from the Client for those hours.

I think that's pretty clear cut. What are your thoughts?

[malvolio]

Thanks for your replies, after reviewing the contract, I am definitely opted-in to the Agency Conduct Regulations 2003
The one clause I need confirmation with is:

The Consultancy shall indemnify and keep indemnified the Employment Business against any Losses suffered or incurred by the Employment Business by reason of any proceedings, claims or demands by any third party (including specifically, but without limitation, Her Majesty’s Revenue and Customs and any successor, equivalent or related body pursuant to the IR35 Legislation and/or any of the provisions of Chapter 9 and/or section 688A of the Income Tax (Earnings and Pensions) Act 2003 and/or any supporting or consequential secondary legislation relating thereto).

My translation of this is: I am indemnifying the agency against any loss with regards to IR35, Chapter 9 Bankruptcy (which is US public organisations only only) and Income Tax Liabilities. However does this also include the client going in administration?

I also have the clause:
Subject to the Consultancy complying with the provisions of this clause x the Employment Business shall pay the Consultancy for all hours worked regardless of whether the Employment Business has received payment from the Client for those hours.

I think that's pretty clear cut. What are your thoughts?

Since any IR35 charges are down to you personally, not the client and not the agency, perhaps ask them just what they think they are asking you to pay them for, since they will not have any liabilities in respect of IR35 and income taxes. But you ain't going to protect them from bankruptcy costs, that's their risk.

[TheFaQQer]

Thanks for your replies, after reviewing the contract, I am definitely opted-in to the Agency Conduct Regulations 2003
The one clause I need confirmation with is:

The Consultancy shall indemnify and keep indemnified the Employment Business against any Losses suffered or incurred by the Employment Business by reason of any proceedings, claims or demands by any third party (including specifically, but without limitation, Her Majesty’s Revenue and Customs and any successor, equivalent or related body pursuant to the IR35 Legislation and/or any of the provisions of Chapter 9 and/or section 688A of the Income Tax (Earnings and Pensions) Act 2003 and/or any supporting or consequential secondary legislation relating thereto).

My translation of this is: I am indemnifying the agency against any loss with regards to IR35, Chapter 9 Bankruptcy (which is US public organisations only only) and Income Tax Liabilities. However does this also include the client going in administration?

That looks like a very badly-worded clause that I'd be trying to take out. It says that you are indemnifying them against any losses incurred by a third party. I'd guess that they meant HMRC (or any such body) for any taxes, but it's so badly worded that it says "including specifically, but without limitation..." which opens you up to anything and everything.

Probably wouldn't stand up in court because of that, but it's gibberish that opens you up to significant liabilities.

[JoJoGabor]

That looks like a very badly-worded clause that I'd be trying to take out. It says that you are indemnifying them against any losses incurred by a third party. I'd guess that they meant HMRC (or any such body) for any taxes, but it's so badly worded that it says "including specifically, but without limitation..." which opens you up to anything and everything.

Probably wouldn't stand up in court because of that, but it's gibberish that opens you up to significant liabilities.

Well that's my issue, this is an old contract and the agency is now claiming against losses by using this clause, but see my post above, I am interpretting this as meaning IR35 and employment related losses, but it can be read as you stated. Also it states "Losses incurred by any proceedings by any third party. Does the client going into administration count in this statement?

However backed up with the optin to Agency Conduct Regs and the clause stating they must pay even if the client doesn't pay, I am hoping it fairly clear.

[tractor]

...

Since any IR35 charges are down to you personally, not the client and not the agency, perhaps ask them just what they think they are asking you to pay them for, since they will not have any liabilities in respect of IR35 and income taxes. But you ain't going to protect them from bankruptcy costs, that's their risk.

I suspect the clause alludes to the 'False Self Employment' issue that HMRC has created and although of course it has yet to be tested, it is quite conceivable that they would try to transfer liability in the case where someone is retrospectively assessed and cannot come up with the loot.

Given the usual agency inability or reticence to draft proper contracts, the 'one size' fits all contract that they try to use would give rise to these peculiar ambiguities.

[northernladuk]

If you had stayed with the consultancy wouldn't the new one be obliged to pay you as they take on their business inc liabilities?