Anyone ever bought out of contract? (trade restriction)

[kryten22uk]

One of my contract terms with a recruitment agent, says that I cant conduct business with the client directly unless I pay 20% of the 6mth contract value to the agency.

I'm considering doing this; i.e. paying the 20%, then keeping the rate the same and so over the contract term I dont lose anything as I receive the agency cut aswell. But the benefit comes in profiting from future renewals at the higher rate.

If confident of the renewal, does this sound sensible?

[northernladuk]

One of my contract terms with a recruitment agent, says that I cant conduct business with the client directly unless I pay 20% of the 6mth contract value to the agency.

I'm considering doing this; i.e. paying the 20%, then keeping the rate the same and so over the contract term I dont lose anything as I receive the agency cut aswell. But the benefit comes in profiting from future renewals at the higher rate.

If confident of the renewal, does this sound sensible?

I had a similar, but not quite as steep demand when I moved from an agent in to the companies current managed service providor. Slightly different maybe as this benefited the client (on a head count chop) so they swallowed it. I think the way they actually sorted it in the end was the agenct billed the MSC for the agreed cut, the MSC then charged client and somewhere along the line someone swalled the increase.

Speak to the client, it maybe in his best interest so they can actually negotiate on your behalf. If they are on your side you could have some bargaining power. The agent may not invoke the clause under threat of lost business from client?

[Wanderer]

One of my contract terms with a recruitment agent, says that I cant conduct business with the client directly unless I pay 20% of the 6mth contract value to the agency.

The thing to remember is that if you don't properly opt out of the Conduct of Employment Agencies and Employment Businesses Regulations then the most they can hold you to is 14 weeks from the start of the contract or 8 weeks from the end (which ever is the longer of the two).

Did you opt-out of the Agency Regulations and if you did, was it done in such a way that it's a legal opt-out?

If you were foolish enough to opt-out then you may still be able to argue that it's a restraint of trade and unenforceable anyway. You should probably get professional legal advice because there is a lot of money involved here.

Another option is to close your company and start a new one trading direct, then the agency can only take action against your old company which has ceased trading so they are flogging a dead horse.

[kryten22uk]

The thing to remember is that if you don't properly opt out of the Conduct of Employment Agencies and Employment Businesses Regulations then the most they can hold you to is 14 weeks from the start of the contract or 8 weeks from the end (which ever is the longer of the two).

Did you opt-out of the Agency Regulations and if you did, was it done in such a way that it's a legal opt-out?

If you were foolish enough to opt-out then you may still be able to argue that it's a restraint of trade and unenforceable anyway. You should probably get professional legal advice because there is a lot of money involved here.

Well well well, so it does! There is a section in the contract that says that if I didn’t opt out of the “Regulations”, then the restriction of trade clause doesn’t apply. Very nice. That said, the client may well have signed a contract stopping them from renewing with me direct.

[Not So Wise]

Very nice. That said, the client may well have signed a contract stopping them from renewing with me direct.

And there is the main problem with that whole section of the agency regulations, it only regulates the contractor/agency side of the agreement, not the agency/client side

It's a reasonably safe bet client did sign such a contract, but then again you could take the view of "their problem, not mine"

[Wanderer]

And there is the main problem with that whole section of the agency regulations, it only regulates the contractor/agency side of the agreement, not the agency/client side

Interesting point but to me it sounds like the law protects the worker from these tie-in clauses so it follows that the client must be protected too. For example, if the agency couldn't charge the worker a contract to perm fee but they could charge the client a contract to perm fee (which is how they would operate anyway) then the client would be dissuaded from engaging the worker direct (against the worker's best interests) so it defeats the intention of the law.

What's the point of protecting the worker if the agency can agree any restrictive terms they like with the client?

I have found that normally, clients take a lot less tulip from agencies than contractors are forced to do.

[Not So Wise]

Interesting point but to me it sounds like the law protects the worker from these tie-in clauses so it follows that the client must be protected too. For example, if the agency couldn't charge the worker a contract to perm fee but they could charge the client a contract to perm fee (which is how they would operate anyway) then the client would be dissuaded from engaging the worker direct (against the worker's best interests) so it defeats the intention of the law.

What's the point of protecting the worker if the agency can agree any restrictive terms they like with the client?

I have found that normally, clients take a lot less tulip from agencies than contractors are forced to do.

That would be logical...but law and logic have nothing to do with each other and rarely meet

And yes clients generally take less tulip from agency’s (and agency’s generally give them less) but if someone from HR takes a look at the contract and see's something like this they generally nix the whole deal due to "not wanting to deal with the hassle"

[thunderlizard]

Yes, I did that once (before those agency regulations came in). And another time, the client did. You benefit from being able to write sensible contract terms.

[kryten22uk]

Well I had a call from the agent today saying that I should resign the contract and opt out. I said nah, as he didn't really know why he was saying it. Then later today I got a call from someone else at the agency who said they were head of contracts and also trying to get me to opt out. Typical scare tactics of IR35 and "the clients prefer it"!

Still I said nah, and he hung up grumpily.

[SueEllen]

What's the point of protecting the worker if the agency can agree any restrictive terms they like with the client?

Business to business contracts are only regulated by contract law so the agency can try and put in what clauses they like