Leave consultant company an join client

[jamborta]

Hi,

I am working for a client through a consultancy as follows:

(a) client - - (b) agency - - (c) consultant company

I'm a contractor from the client prospective and when they became aware that I came thought a consultant company they suggested me to skip the consultant company and join them directly through (b).

I'm wondering whether you think this is (i) ethical (ii) legal? From the legal prospective I have a clause in my contract that I cannot join their clients for 12 months, but in this case there is no direct relationship between (a) and (c).

Thanks a lot.

[Wanderer]

I'm wondering whether you think this is (i) ethical (ii) legal? From the legal prospective I have a clause in my contract that I cannot join their clients for 12 months, but in this case there is no direct relationship between (a) and (c).

Similar questions to this come up quite a bit. A restraint of trade of 12 months is considered excessive and probably not enforceable.

Understand the opt out and if it applies to you. If you didn't properly opt out then they can't touch you though they may make bluff and bluster threats.

For some background reading, do these forum searches using Google:

site:forums.contractoruk.com restraint of trade
site:forums.contractoruk.com restrictive covenant

Your case is slightly unusual in that it appears that there may be no restriction on clients of the client so this may be a loophole. If you are bothered about it then I'd get proper legal advice.

Generally, the consultancy will make legal threats against the client which will put the frighteners on them and prevent you cutting out the middle man. In your case it may be that the client is willing to conspire with you to cut out the middle man then it may be workable.

Also remember that the contract is with your LTD company rather than you personally so they have to sue your company and you could close your company down and start a new one, potentially leaving them with a big legal bill and nothing to show for it.

Bottom line, it's worth a crack but what's in it for you? Find out how much the consultancy is charging you out at (possibly double what you are getting) and make sure you get your piece of the action....

[jamborta]

Thanks for the reply.

It'd certainly worth it money wise as the consultancy charges three times of my wage to the client.

I have not had the option to opt out, as I'm an employee of the company and as far as I know there is no contractual relationship between me and the agency.

I also have another option to replace (b) as well and go thought another agency, would that make any difference?

They tried to threaten me with a number of different legal actions, one of them is to discharge me with gross misconduct which (according to them) would affect my employment record. Is this something they can do (would normally do)?

[eek]

They tried to threaten me with a number of different legal actions, one of them is to discharge me with gross misconduct which (according to them) would affect my employment record. Is this something they can do (would normally do)?

Well it may have an impact on any references you got from the people threatening you but I would lay odds that it wouldn't because most companies don't nowadays provide anything beyond x worked here from day 1 to day z.

And anyway the people you want to work for would probably happily cover that time history for you.

[jmo21]

12 months is excessive and the others are correct about restraint of trade etc.

However, while the client co might think it is fine, the agency/consultancy contract will likely have a clause about the agency "hiring" you without the consultancy.

And the client/agency contract might have a clause about the client hiring you through another agent (should they try that route).

Neither of these contracts may be as restrictive as your 12 month restriction.

[Wanderer]

I also have another option to replace (b) as well and go thought another agency, would that make any difference?

You should definitely do this - the agency will be creaming off a margin too. If you take the business to another agency then they should be able to do it for a minimal margin - they will take 5% or less. But understand that this will start a tulip fight with the agency as well as your ex-employer.

They tried to threaten me with a number of different legal actions, one of them is to discharge me with gross misconduct which (according to them) would affect my employment record. Is this something they can do (would normally do)?

To my mind it sounds like this is all bluff and bluster.

I would remind them doing anything to damage your reputation would be extremely serious indeed and legal action would be taken if this happened. You can also threaten them with an employment tribunal.

You have to go into this with your eyes wide open though. Consider a few facts:

1. When you go contracting, you will not have any of your permie benefits. Say goodbye to the holiday/sick/maternity/paternity/bereavement leave along with your company pension and all the other nice benefits. They could potentially dismiss you with no redundancy payment and minimal notice. You will have no "rights" other than what is written in your contract so read it carefully.

2. Figure out your contracting daily rate then calculate how much you would make working 45 weeks at this rate. This should be at least double what you earn as a wage in a permanent job. If it's not then it's NOT worth it because of al the loss of employment benefits and the burning of bridges with your current employer.

3. Going from a permie to contract with the same client WILL almost certainly make you caught by IR35 and you will pay a lot of tax. Do the calculations and understand what you are getting in for.

If you do go ahead with this then you probably should start out with an Umbrella company because they are the simplest to use and you are IR35 caught anyway.

Also, see the disclaimer below. This could easily go all wrong and the client will drop you like a hot potato putting you out on your arse with no job and no references.

Get proper legal advice from an employment lawyer.

[jamborta]

Thanks for the replies.

I am aware of the disadvantages of doing contracting (I have been reading this forum for a while). As long as my old company won't come after me, I'm happy. (I wanted to leave them anyway) I'm pretty sure that the agency won't cause any problem (as this is one of their biggest client), and client would support this move.

[d000hg]

To clarify, you are full-time employed by the consultancy who provides your services as a contractor to the client through the agency?

Is the client suggesting you leave employment to become a contractor through the agency? If so that's a big step, to suddenly become a contractor. Or does the client want to employ you directly as an employee?

[jamborta]

Yes, I'm a full-time employee now.

The client is suggesting me to leave the employment and become a contractor.

[jamborta]

3. Going from a permie to contract with the same client WILL almost certainly make you caught by IR35 and you will pay a lot of tax. Do the calculations and understand what you are getting in for.

I was a contractor at the client not a permie. In effect I would just change the limited company and contract through mine, not the consultancy. Why would I get caught by IR35?