Clarification of clause in my contract

[nobody123]

I have the following clause in my contract which at the time didn't realise the implications.

Now as far as I understand I cannot leave my existing client then return to work for them for at least 6 months after via another agency as I will incur penalties. But this clause should not have any bearing should I wish to work for a separate client in similar sector?

Good faith
(a) The Consultant Company shall not during and for a period of 6 months following termination of this Contract (the “Relevant Period”) for whatever reason that termination is effected perform services which are of the same kind as or of a materially similar kind to or competitive with the services provided under this Contract within the Relevant Period other than via <Agency name> either directly or indirectly or alone or jointly with Another person full time or part time by contract or otherwise for:-

(i) the Client; or
(ii) any person on whose site the Consultant Company has
performed services under this Contract.

(b) The Consultant Company shall procure that the Personnel shall not during the Relevant Period for whatever reason that termination is effected perform services which are of the same kind as or of a materially similar kind to or competitive with the services provided under this Contract within the Relevant Period other than via <Agency Name> either directly or indirectly or alone or jointly with another person full time or part time by contract or otherwise for:-

(i) the Client; or
(ii) any person on whose site the Consultant Company has
performed services under this Contract

(c) In the event of breach of clauses (a) or (b) the Consultant Company shall pay to <Agency name> as agreed liquidated damages a sum equal to <agency name> profit per week multiplied by the number of weeks the Consultant Company or the Personnel works in breach of clauses (a) or (b)

[WTFH]

It doesn't mention working for clients in the same sector, it is talking about working for the client or any sub-clients that you work for as part of this contract.

[nobody123]

That is what I assumed. Thanks for your reply WTFH

[mike67]

Parts a and b are pretty straighforward, and say that neither your company nor you personally can work for the client where you were placed or any other client based at that location. It is quite well tied down so it stops you setting up a new company to work through, working indirectly through a different agency or through a consultancy or working directly for them. The "any other client" provision will be designed to deal with cases either where there are two related organisations based at the same place or where a client closes down and a new one pops up in the same place (quite common within, say, the NHS where they are always having organisational changes).

The last part c about liquidated damages is a bit nasty. Normally if you breach a contract the court would have to decide what an appropriate amount of damages is. In liquidated damages you essentially agree up front what you would have to pay for a breach, meaning that they just have to demonstrate that you breached the contract rather than prove the loss to them.

The LD clause is not worded very cleverly. Just referring to "the agency's profit multipled by the number of weeks" is not a clearly defined amount, as it was not clear when you signed this how much this would amount to as you (probably) have no sight of the rate the agency is charging you out at or its internal cost structure. Also for LDs to be valid they have to be agreed between you and them as a genuine pre-estimate of the loss that will be suffered. If they are included to threaten you to performance rather than as a reasonable compensation for any loss that will be incurred, they are probably not enforceable (Dunlop Pneumatic Tyre Co. Ltd. v New Garage & Motor Co. Ltd. (1915)).

As a general rule, LDs are a really bad idea and if you spot them in a contract you should try to get them removed.

[northernladuk]

We'd be f**ked if we weren't allowed to work for other clients in the same sector really wouldn't we.

[mike67]

We'd be f**ked if we weren't allowed to work for other clients in the same sector really wouldn't we.

Also the clause would just be thrown out of court as an unfair restriction on trade. Even a blanket six month restriction could be thrown out if the original contract was, say, only for a month.

[northernladuk]

Also the clause would just be thrown out of court as an unfair restriction on trade. Even a blanket six month restriction could be thrown out if the original contract was, say, only for a month.

'Would' is a bit strong.. 'Could' is a better word. Some handcuffs will stand particularly when you are skipping people in a chain to the end client. They can be unfair if they are too wooly or restrictive but when it comes to cutting an agent out its pretty black and white.

That said what is much more likely is you'll just get canned as no one wants to get involved.