Transfer-restriction clause

[evku1973]

Hi all,

I’d appreciate some perspective from anyone who’s handled something like this.

I contract through my Ltd company. Last month, I completed a short three-month engagement for a client via Agency A. That was a one-off; Agency A doesn’t have an ongoing supplier agreement with the client. The client normally sources all contractors through Agency B, which remains on their PSL.

Now the client wants me back for a new phase, but they can only engage me via Agency B. Agency A says I can’t move unless they receive a payment.

My last contract between my Ltd and Agency A had a 12-month non-compete clause; however, Agent A failed to include a non-compete clause between Agency A and the client.

Clause XX of my contract states that my company (or I) must not work “directly or indirectly” for the Customer for 12 months without the prior consent of Agency A. Yet, the Customer isn’t defined anywhere in the document. Every other section, including the Service Schedule, defines and refers to the Client, which is explicitly named.

So I’m wondering:

1. In practice, how enforceable are these one-sided restrictions when the agency no longer has a supplier relationship with the client?
2. Would a clause that refers to an undefined “Customer” while the rest of the contract clearly defines a “Client” likely stand up in court?
3. Has anyone successfully resolved this kind of dispute (e.g. cooling-off period, nominal buy-out, or just moving on)?

I just don't want Agent A to sue me; I want to understand what’s commercially reasonable and what others have experienced.

Thanks,

[malvolio]

They can sue you, but if the judge learns that they have no continuing contractual relationship to the end client and will suffer no loss of income, they won't get very far. It would fail the acid test of "Reasonableness", which lurks behind a lot of such cases.

If your contract contained a clause along the lines of you would continue to cover their margin once you had left their services, they may have a case. But I doubt it did.

[ladymuck]

As Mal says, it's hard for the agency to prove a loss if their customer/client chooses not to put business their way.

Those clauses are there to stop you side tracking an agency who introduced you to a client, not to punish you when the client chooses to place their business with another agency.

I remember one gig I had at Barclays many moons ago where contracts went through four agencies over the course of 18 months because they were chasing the best rates (more likely who gave the best kick backs). Those agencies couldn't claim anything under the non compete clause (which I had removed anyway because it wasn't relevant).

One key tip: get that sort of clause removed from your contract with agency b. They didn't introduce you, so they can't claim dibs on placing you with that client in the future.

[jamesbrown]

Agree with the above, a basic principle here is that the agency must demonstrate a loss and they cannot demonstrate a loss because there is no existing contract with the end client. Not enforceable, although that doesn't mean the won't make shouty noises and try. Rule 1: avoid agents. Rule 2: when you cannot adopt Rule 1, read your contract carefully and have any onerous/lengthy non-compete clauses removed, because they are nonsense and most likely unenforceable

[northernladuk]

What everyone else says but to add two points. The clause has to have a legitimate business interest and if agent A can't make another penny from that client then there is no legitimate interest and the other point is 12 months is tough to enforce. It starts to move in to 'unreasonableness' territory. Why does it need to be 12 months? That's often long than the work itself so the whole clause could be un-enforceable as it's too broad.

They've bluff and bluster for awhile and then give up. It will cost them money to take it any further to sue for the zero income they are due so they will drop it.

Have to ask though, are you absolutely sure Agent A can no longer source contractors for the client? You said agent b 'normally' sources but that obviously isn't all the time because you are there through a different agent. If Agent A is still on the PSL and can' (and/or do) supply contractors it gets a bit more messy. Personally I'd be mentioning it to either the client or agent B and let them sort it out. The client can easily strong arm A to tell them to let it go.

[evku1973]

Cheers everyone, really appreciate all the replies!

It all makes sense that it comes down to whether Agency A can show an actual loss, and that once they’ve got no ongoing link with the Client, it’s basically dead in the water. I’ll definitely be watching out for that kind of clause in future and getting it binned early.

@northernladuk – you’re spot on. Agency A only ever placed me that one time because the work’s pretty niche. The Client’s procurement contact confirmed that everything now has to go through Agency B. I think Agency A might have had a chance of more work in future, but after this bit of drama, they’ve pretty much burned their bridges with the Client.

From what I’m reading here, I’ll go ahead and sign up through Agency B.

If Agency A decides to get legal about it, does anyone know what type of insurance would actually protect me in that situation?

Thanks again, really useful hearing from people who’ve been through this.

[hobnob]

Agency A says I can’t move unless they receive a payment.

Out of interest, did they tell you how much the payment would be? I assume that wasn't part of the original contract, but I'm curious about whether it's a one-off payment of £50 (which might be worth paying just to shut them up) or "the equivalent of their commission for the remainder of the 12 months" (which would be excessive).

[northernladuk]

If Agency A decides to get legal about it, does anyone know what type of insurance would actually protect me in that situation?

1) Absolutely no chance A will go legal on this. It's going to cost them a bomb for not much in return. They know the game and they'll try it on while it costs them nothing. The minute they get the idea you know your stuff and you aren't going down without a fight they'll fold. They've very little to gain so they'll drop it and move on. Agents have a habit of having all the bluster but no balls to follow it up. They'll just try bully the contractor in to something and back down when they are called out.

2) There is no insurance that will cover this.. and nor is it needed.

[evku1973]

Out of interest, did they tell you how much the payment would be? I assume that wasn't part of the original contract, but I'm curious about whether it's a one-off payment of £50 (which might be worth paying just to shut them up) or "the equivalent of their commission for the remainder of the 12 months" (which would be excessive).

Agent A wants 6-month commissions from the Client, but as mentioned, Agent A did not sign a non-compete with the Client. Agent A has only a non-compete clause with me and is therefore trying to pressure me to ask the Client to pay me extra and to pass on his commission to him every month based on the number of days I have billed.

[malvolio]

Agent A wants 6-month commissions from the Client, but as mentioned, Agent A did not sign a non-compete with the Client. Agent A has only a non-compete clause with me and is therefore trying to pressure me to ask the Client to pay me extra and to pass on his commission to him every month based on the number of days I have billed.

And they think your client will sign off a timesheet to that effect...?

I suggest you just ignore them. Completely.