Limited Company Agreement with Agency

[Smithy]

Hi Everyone, Newbie here so hi!

This enquiry is in relation to a Limited Company Agreement between my Limited Company and a well established and large Employment Agency.

The Employment Agency has forwarded it's standard Limited Company agreement for review which on the whole seems reasonable.

There is a clause which I believe is restrictive and is in relation to freedom of movement of my Company or The Representitive (Me personally). It essentially prevents my Company or myself taking work with the end client after the contract has ceased unless it is through the agency.

I can understand the reason for this clause and am happy to be bound by it if I am working through my Company.

I am not comfortable with this clause binding me if I was to later become permanently employed by the end client. There is a possibililty that in months or years to come that I shall wish to cease working for the end client through my Company and wish to take permanent full time employment with the end client.

Some background information, the Employment Agency have a signifcant number of Contractors in the same office, none of who have raised this issue except one Contractor who only reviewed the contract after he signed it! He sought legal advice who deemed the clause in the contract between his Limited Company and the Agency unenforcable.

I would assume that the contract between the Agency and the end client would prevent the end client employing me as a permanent employee. I would hope that this would not apply if I actively seeked emploment with the end Client by approaching them for employment and not the end client approaching me.

Some advise would be appreciated on how I could approach this problem and allow my movement to take a permanent position with the end client without restriction.

Many thanks




Smithy

[SueEllen]

That clause is standard. It's to stop you competing for business whether the agency can enforce it in the way it is written depends on a number of factors.

One of these is if you are opted in or not. Have a google search and read up on the The Conduct of Employment Agencies and Employment Businesses Regulations 2003

(If you don't know what opt-in and opt-out is then do a search on this board agency related websites lie about what it means. )

If you are opted-out then the time limit of the clause may be too restrictive and the wording too vague. Depends on how big the client is and the time-scale etc. However rule of thumb is if the clause is not vaguely written and the time-scale on the clause is not excessive i.e. 1 year then they can get away with it. The only real way they can enforce it though is by taking it before a court but a lawyer would indicate whether the clause is likely to be enforceable.

[Smithy]

Sue,

Firstly, thanks for your help and I am going to conisder what you have said and come back to you tommorow.

However, is it all honesty is the clause an irrelevance if a contract is in place between the end client and the agency that prevents the end client employing me directly (whether I approach the end client - to avoid being 'poached') or not

ie could the end client be hesistant to employe me directly?

[Wanderer]

SueEllen is right, the agency puts this in there to protect their business. Otherwise they could recruit you to the client then you and the client come to a mutual agreement to cut the agency out or go contract to permie and they get nothing for their efforts.

DO NOT opt-out of the "Conduct of Employment Agencies and Employment Businesses Regulations" and the time period of this quite limited (you are opted in by default so just do nothing when they present the option to opt-out).

If the agency puts a crazy amount of exclusive time in the contract (like 1 year) then just sign it. Stupid restrictions like this are of dubious legality and would most likely be struck out under the agency regulations or as a restraint of trade. They just put that there to bluff you, like so much of the other crap they write.

[Smithy]

Guys,

thanks for your help. I am extremely grateful for your assistance which I understand takes time.

The agency have made it clear on the contract that I have the option to opt in or opt out. I would like some guidance to the undeducated on the implications this could have for me or my business.

I would appreciate some thoughts on whether or not the end client would ever be prevented from recruiting me if I was to formally approach them either directly or if this was not possible, whether they would have to pay a finders fee to the agency. I must make it clear that the agency did effectively find me.

[cojak]

Unless you know what you are opting out of, I would opt in.

(I'm actually opted out on my current contract, but that's on the basis of an informed decision).

[cojak]

PS...

The biggest sting since IR35? Employment Agency Regulations - the facts and myths for the IT contractor :: Contractor UK

YouTube - Search.mp4

[SueEllen]

Guys,

thanks for your help. I am extremely grateful for your assistance which I understand takes time.

The agency have made it clear on the contract that I have the option to opt in or opt out. I would like some guidance to the undeducated on the implications this could have for me or my business.

If you have interviewed with the client and you haven't opted-out you are opted-in. (Google for the actual act and read it yourself.)

So don't bother signing any separate paperwork to your contract that says you are opted-out. If it's in your contract ignore it. (The only time not to ignore clauses and get them rewritten is if they have implications for IR35 or any other tax law.)

You need to remember that contracts are only enforceable if they go before a court but people will only push clauses in them if:
1. There is law or they think their is law backing up their arguments.
2. They have money to spend on lawyers - lots agencies are too mean to spend money on a lawyer drafting their contractor contracts in the first place so you get some weird contracts.

I would appreciate some thoughts on whether or not the end client would ever be prevented from recruiting me if I was to formally approach them either directly or if this was not possible, whether they would have to pay a finders fee to the agency. I must make it clear that the agency did effectively find me.

Depends on the contract between the agency and the client. I personally wouldn't mention it until you are on the contract and understand more on how the land lies as some clients aren't interested in how the agencies they use operate and don't want to take on contractors directly, while others are.

[BolshieBastard]

The biggest sting since IR35? Employment Agency Regulations - the facts and myths for the IT contractor :: Contractor UK

YouTube - Search.mp4

Yes. And we have the wonderful folks at PCG to thank for this! Marvellous.

[Smithy]

Just to make this more complicated, I need to clarify sumthing.

I am currently in the clients offices and have been there for almost 2 years. The client pays the agency I am refering to above (who will be the agency I will be working for via my LC) who then pay a small firm that I am working for as a permanent employee (there seems to be two parties skimming off me here!).

The client is not impressesed with the firm that i am a permanent employee of and have said that i can resign from my permanent employer and then go via my LC through the agency and then onto the client. This effectively cuts out the firm i am a permanent employee for.

The agency did 'find' us and place us in the client's offices.

Does the above have any bearing on whether I should opt in or opt out?!?!.

Both the agency and client are happy that there will be no hassle between the agency and my permanent employer as they think they are going under