Restrictive covenant - tricky situation

[flyingraz]

Hello,

I find myself in a tricky situation and would appreciate your suggestions regarding a recent job offer. During the Covid pandemic, I moved abroad for a year, but upon my return to the UK, I was able to secure a new inside IR35 contract role with my former end client, who advised me to use an agency for payroll. As a result, my contract involves four parties: me, the umbrella company, agency B, and end client A. I signed an opt-out form that agency B sent me and also a contract with restrictive covenant which prevents me from working for 6 months at end client after termination.


Recently, end client A sold part of their business to a new company C, and as part of the TUPE process, all employees are moving to company C. They offered me a new contract, but first, I needed a no-objection letter from agency B. However, the account manager from agency B informed me that there was no clause in my contract preventing me from moving to company C, as they were merely acting as a payroll service.

However, the hiring manager from company A inadvertently informed agency B about the new contract with company C, and agency B has now threatened me with a restrictive covenant clause, stating that I cannot accept the offer from company C and that company C must go through agency B. Company C has informed me that agency B is not on their approved list and that they will provide me with a new contract through agency D instead. Company C has approved all paperwork to start on 3rd April with agency D, but agency B is still threatening me with legal action if I accept the offer. Agency B approached HR of company C who informed them that they willing to do contract only with agency D. Agency B is insisting me that I need to inform agency D to contract with agency B or do not take the offer.

I now have a new contract with the same umbrella company, agency D, and company C, but I am not sure if accepting this offer puts me at any legal or financial risk. If I do not accept the offer, I may need to find a new role, which could mean being out of work for a month or may be longer.

Thank you for your help in advance.

[northernladuk]

Company C has informed me that agency B is not on their approved list and that they will provide me with a new contract through agency D instead

This is the only bit that is relevant. The long winded explaination is..

Company A and Agency B have a relationship. If you went direct with Company A bypassing Agent B they would be within their right to pull the termination clause. They would effectively be losing money by your actions so they have 'dibs' on you.

Company A sold the business to Company C. This means there is no more contract between Company A and Agency B. Everything is dead and buried. There is no more business for Agency B from that portion of the company. Period.

You are now starting with Company C which is effectively a brand new contract with a brand new entity. Forget the A sold to C. It's a completely new entity. Same as if you'd just moved to a new client. Agent B has absolutely no skin in the game and is not losing any revenue by starting with this new company. This is key!!!. Handcuffs will only stand where the agency stands to lose money because of your actions. The handcuff is to protect their revenue stream. But there is no more revenue stream. Company A offloaded it. Work has gone and no more money for Agency B. You could be on the bench, you could be with client C, you could be going to space with NASA. No more money for agency B. No court in the land will rule in favour of Agency B that is effectively restricting your right to work when there is no loss to them. Go with Client C and Agency D as if it any new contract and ignore Agency B.

Shorter explaination;
Agency B is trying it on. They haven't lost money by you switching to C as they have no skin in the game so handcuff is dead. Tell them to F off and get on with it.

[northernladuk]

P.S. I guess you are happy with your Umbrella if you've managed to stay with them but I would have tried to get Agency D to accept Clarity Umbrella and gone with them.. but that's a little off topic to your question.

[flyingraz]

Thanks for the response @northernladuk.

Just to clarify, I apologize for any confusion earlier. The division I work for in Company A has not been sold. Rather, Company A has contracted with Company C for 5 years, and as part of the TUPE process, all employees in division will be moving to Company C.

Below is part snippet of my restrictive covenant
"jointly with another person full time or part time by contract or otherwise for:- (i) the Client; or (ii) any client of the Client for whom services are provided for, or to, under this Contract or in connection with this Contract; or (iii) any person on whose site the Consultant Company has performed services under this Contract".

I am mainly concerned about point (ii) as company C will be a client of company A. The agent from B is constantly emailing and calling at least three times a day, mentioning that I will be breaching the contract, so I just wanted to make sure before signing any contract with Company C.

I was previously content with the current Umbrella monthly margin, but I will check with Clarity Umbrella tomorrow before signing any contracts. Since I have not yet signed any contracts, I can still request that Agency D move the umbrella if necessary.

[NotAllThere]

Shorter explaination;
Agency B is trying it on. They haven't lost money by you switching to C as they have no skin in the game so handcuff is dead. Tell them to F off and get on with it.

E, that made me chuckle.

TThe agent from B is constantly emailing and calling at least three times a day, mentioning that I will be breaching the contract

Block the number and do an auto filing of emails to the bin.

Even though C was a client of A, B still has suffered no loss from your contract moving to C, since C will not use B.

[Snooky]

For any legal action to succeed, Agency B would need to show that your actions have caused them a loss; in other words, they'd need to show that they could have been the intermediary in your work with Company C but, due to your actions, they weren't offered that option.

Since Company C won't deal with Agency B, there's no way you could continue to work through them, so Agency B could never be in the position of benefiting from your work going forward. So their possible best case future income from that relationship is £0. If you declined the new contract and found work elsewhere (presumably not through Agency B), their future income would also be £0.

So there are no circumstances where Agency B can make any more money from your work with Company A/C, therefore your actions haven't caused them a loss. Any legal claim would fail, they know this but are trying it on in the hope that either you or Company A/C will pay them some undeserved compensation.

Disclaimer: I'm not a lawyer and my advice is worth what you paid for it

[northernladuk]

Just to clarify, I apologize for any confusion earlier. The division I work for in Company A has not been sold. Rather, Company A has contracted with Company C for 5 years, and as part of the TUPE process, all employees in division will be moving to Company C.

OK that's very different. Bearing in mind the relationship is absolutely key here this stuff is important. So they've outsourced the operation. In this case it still doesn't matter. Company A is no longer carrying the work out and a new entity that Agent B has zero contact with has taken over. The work between Company A and Agent B has still ended.

Below is part snippet of my restrictive covenant
"jointly with another person full time or part time by contract or otherwise for:- (i) the Client; or (ii) any client of the Client for whom services are provided for, or to, under this Contract or in connection with this Contract; or (iii) any person on whose site the Consultant Company has performed services under this Contract".

I am mainly concerned about point (ii) as company C will be a client of company A. The agent from B is constantly emailing and calling at least three times a day, mentioning that I will be breaching the contract, so I just wanted to make sure before signing any contract with Company C.

No. Company A is the client, Company C is the supplier in that relationship. Client of a client is like a consultancy selling a product to a client and you move from the consultancy to the client. The client is still getting your services but you've chopped the consultancy out which has cut the agencies revenue off so they can argue they've been cut out of the chain unfairly so handcuff could stand.

I can't see for one minute any court will back agency B when there is a brand new supplier in the chain, plus the fact the agency has no ability to place you in Company C so haven't technically lost money here.

For handcuffs to stand there has to be real losses and they can't be too broad. To include absolutely everyone that does any kind of business with Company A could be deemed too broad. How long is the period for as well. 6 months is questionable but 12 months is far too long and won't stand. If it says 6 months and over then again you are in the clear as it's too broad.

IMO you are good to go but I'd welcome some other opinions of people on here.

BTW what do the new agency say about all this?

I was previously content with the current Umbrella monthly margin, but I will check with Clarity Umbrella tomorrow before signing any contracts. Since I have not yet signed any contracts, I can still request that Agency D move the umbrella if necessary.

Most of us on here would go with Clarity. Lucy posts on here a lot and really knows her beans. They won an award at the Contractor Awards last year and are probably going to do the same. Small enough to get a proper service rather than be a nobody with the big guys so much better move for you.

[PerfectStorm]

Find me a case where one of these restrictions has ever been enacted upon.

[northernladuk]

Find me a case where one of these restrictions has ever been enacted upon.

I'm sure there are plenty in industry. I'm sure we've had cases on here where someone wanted to jump agents and couldn't. I remember one particular thread where the guy appeared to be caught. I seem to think he got out by the client or agency 2 paying them off.. but in a black and white case where the agent is losing money I'm sure it sticks and has either made the contractor change tact or has been negotiated out.

Sadly I am sure there are plenty of situations where an agenty throws the teddy out the cot, even though it legally won't stick and just makes such a fuss other parties leave the sitaution alone.

[NotAllThere]

I did have one agent try something similar to me, getting all threatening etc. A few years later I was a hiring manager and got a call from them. "Sorry", I said, "I don't do business with agents who threaten their contractors".