Side stepping a consultancy

[-JJ-]

Hi all and thanks in advance for any advice.

I am currently contracting through my limited company direct to a small consultancy and am billed full time to a specific client. My contract is due for renewal but the consultancy has offered a large reduction on the premise that the client will not pay the current rates as they are excessive.

The rate I currently receive is bang in the middle of market rate in what is a fairly niche market. I understand that the consultancy, which effectively adds no more value than an agency, is taking a significant mark-up (30%+) which accounts for the client's predicament.

The consultancy also provides to the client one full-time contractor (who is likely to walk within a month also due to a rate cut) and has previously supplied other contractors who do not, however, possess any niche skills and could be replaced more cheaply by the client directly, something that has been indicated as possible.

I am therefore inclined to approach the client directly [to contract to them direct] unless my current contract prevents this. I am not named in the contract but there is a clause preventing my ltd co working for the client for the next twelve months.

However, assuming the client will play ball, is there likely to be any subtle clause in the contract, or indeed any legal issue, that prevents me setting up a brand new ltd co thus avoiding this restriction?

[ASB]

Read your contract carefully, whilst it may have the exclusion to your company it may well also apply to you personally, they normally do. However 12 months might not be enforceable - which would cause the whole clause to be struck out should it go to cvourt and you win.

If the clauses is as badly drafted as you imply it may well be that just forming MyNewCo is good enough.

However, are you opted in or out of the EA regs - this makes a substantial difference as to how enforeable a handcuff clause might be.

In any event the contract between Colsultancy and ClientCo is likely to be much more of a minefield. Are ClientCo happy to go to court because they have breached their agreement with Consultancy by taking you on "direct" (whether via YourNewCo or YourOldCo").

[-JJ-]

Thanks for the response.

It is possible that the exclusion does apply to me, I will have to check the legal jargon used; as you suggest I suspect it does.

Regarding EA regs, to be honest I'm not sure. There is no agency intermediary between my co and the consultancy and there has never been mention of this, and certainly not in the contract. Does this mean they don't apply or apply by default?

I agree that the main issue will be the relationship and contract between the consultancy and the client, which probably makes this a non-starter. Time to look elsewhere.

[JoJoGabor]

Its a bit snide though isn't it? The consultancy have done a lot of work in securing that contract, sales calls, proposals, procedures etc, just for you to bypass that for the cash for yourself. If I was in the position of the consultancy I would take any legal action I could and warn everyone I could not to give you any work

[Turion]

A real contractor would simply find another contract with another client.

[Peoplesoft bloke]

or split the rate cut with the consultancy and look for a new gig ASAP.

[ASB]

Regarding EA regs, to be honest I'm not sure. There is no agency intermediary between my co and the consultancy and there has never been mention of this, and certainly not in the contract. Does this mean they don't apply or apply by default?

If you haven't explicitly opted out then you are opted in. They may or not apply though. Only you can decide the possible impact to your business.

[TykeMerc]

It sounds like a true B2B contract with no agency involved. If the consultancy that -JJ- is working for isn't an Employment Agency then the EA regs are irrelevant.

-JJ- you need to read your contract carefully, handcuff clauses can be hard to enforce, but if you're effectively ambushing the consultancies client then I'd be surprised if they didn't at least try to enforce it. It wouldn't be hard for them to prove financial loss.

Ignore Turions post, he's always posting that sort of utter rubbish, he's a troll, some idiotic sockpuppet or just an incredibly arrogant moron.

[ASB]

It sounds like a true B2B contract with no agency involved. If the consultancy that -JJ- is working for isn't an Employment Agency then the EA regs are irrelevant.

True, but a business doesn't have to be an Employment Agency to be acting as one. It is possible that the consultancy is acting as one. If they are supplying external "workers" to a client rather than an overall service then they may be acting as an EA (albeit inadvertantly).