Restrictive covenant

[flyingshoe]

Hello,

I have a restrictive covenant in my contract, which prohibits me from working for any other agency/employer with my current end-client for 6 months after the end my current engagement. Standard stuff but my case is a bit unique in that I was recommended for the role by an old colleague of mine and because I could not work for the end-client direct, I had to go through an agency for payroll. No investment from the agency side at all.

I would ideally like to move to another agency, one which doesn’t take 25% of my day rate. Would this covenant hold up in court given there is no investment to protect from their side? I didn’t apply for a job they were advertising for, it was all done for them.

I know I should have had this covenant removed before I started, I accept that I messed up there, so if there is nothing that can be done, then it is what I is.

[WTFH]

Hello,

I have a restrictive covenant in my contract, which prohibits me from working for any other agency/employer with my current end-client for 6 months after the end my current engagement. Standard stuff but my case is a bit unique in that I was recommended for the role by an old colleague of mine and because I could not work for the end-client direct, I had to go through an agency for payroll. No investment from the agency side at all.

I would ideally like to move to another agency, one which doesn’t take 25% of my day rate. Would this covenant hold up in court given there is no investment to protect from their side? I didn’t apply for a job they were advertising for, it was all done for them.

I know I should have had this covenant removed before I started, I accept that I messed up there, so if there is nothing that can be done, then it is what I is.

Welcome, flyingshoe.

A couple of things...
1. You're not going through an agency for payroll. You'll either be using an umbrella or your own Ltd for it. Agencies don't do payrolls
2. Unfortunately you (or the client) chose the agency, and you should have negotiated with them before signing up. Now that you've signed up, you would have to re-negotiate.
3. How long is the contract for, and how long do you expect the gig to last?
4. Is it inside or outside IR35?

[northernladuk]

No chance you are going to get a restrictive covenant removed. It's there to protect the agency's workstream, nothing more so they aren't going to take that out. You are saying you should have removed the restriction that this agent now relies on to stop you leaving and them losing money. You can guess their answer to that request.

Because it's there to protect their revenue and you are wanting to leave them so cutting their money off it's going to be bullet proof. You've no chance getting out of this one. Doesn't matter all the in's and out's and who got the gig, you are contracted to an agency and they make commission from you. If you leave that commission ends and they can claim loss as you breached the handcuff.

If they are taking 25% just go in and tell them the score. That's a ridiculous amount and you are going to walk unless they correct it. Best time to do this is at renewal though not mid contract. It was up to you to negotiate the rate and you signed at that rate so you are going to have to suffer it until next renewal.

You'll have to take a guesstimate at what a decent rate is for your negotiation. The larger the client and the more contractors they have then the agency margins are reduced. If it's a small client with only a few contractors the agency is going to have to charge more to cover their costs. You are looking at something like up to 10% for large clients, 15-20 for a small setup so if you are just one of a few there then 25% isn't a million miles off.

[eek]

Welcome, flyingshoe.

A couple of things...
1. You're not going through an agency for payroll. You'll either be using an umbrella or your own Ltd for it. Agencies don't do payrolls
2. Unfortunately you (or the client) chose the agency, and you should have negotiated with them before signing up. Now that you've signed up, you would have to re-negotiate.
3. How long is the contract for, and how long do you expect the gig to last?
4. Is it inside or outside IR35?

It's perfectly possible that the agency is doing payroll* - were I an end client I would be insisting on it (because adding umbrellas simply adds supply chain risk).
* it may also explain why the margin is 25% (it's employer NI)

As for the rest - yep that clause should been removed before you signed it - it's going to be very hard to remove it now...

[WTFH]

It's perfectly possible that the agency is doing payroll* - were I an end client I would be insisting on it (because adding umbrellas simply adds supply chain risk).
* it may also explain why the margin is 25% (it's employer NI)

Good point, my mistake.

[SueEllen]

As for the rest - yep that clause should been removed before you signed it - it's going to be very hard to remove it now...

Agree with this even though the clauses tend to be generic.

For the current role no chance.

For a client of the end-client or a different role within the same client it depends mainly on how large the client is.

[Lance]

the only time I've switched agencies for a client is when the client insisted.
That made it way easier.

[Fred Bloggs]

the only time I've switched agencies for a client is when the client insisted.
That made it way easier.

I was about to say the exact same thing. I think the OP will most likely only be able to do what he/she wants if they ask the client to move them to another agency. But the client may only use the one agent etc..... So there's details here we don't know about.

[ladymuck]

It's a bit late now, but a learning point for the future.

When starting work with a client where you've not been introduced by the agency, tell the agency to remove those handcuff clauses from the contract.

Every time I've asked for this, it's been accepted as the agency can't really handcuff someone they didn't find.

[flyingshoe]

Thank you for all the responses, to answer some of the questions:

• Yes, the agency is doing the payroll, no brolly.
• Contract ends early next year and could last a good number of years as there is plenty of work.
• It’s an inside ir35 gig and employers NIC comes out of my day rate, so their 25% cut comes out before that.
• The client is more than happy for me to move to another agency but how would that get around the covenant?