Hole in enforcing restrictive convenant?

[Camel]

Have recently got hold of my agreement with managed limited co (composite) to find 12 month convenant on working for end client in it. I do not have a contract with the employment agency whose interests this is presumably there to protect, my contract is with the composite. It occurs to me this covenant and any for people in similar circumstances is not worth the paper it is written on, wonder if anyone else has taken advantage of this situtation or can see a flaw in my logic?

I think its worthless because the composite has no business interests to protect in respect of me working for a particular client, directly or not, and for a convenant to work the employer (composite) must show that breaking of the covenant would damage them in some way. The composite is not an employment agency, it has no slot to lose or prospect of putting bodies in. There is no involvement with the client or the nature of the work at all by the composite and no confidentiality or intellectual property involved.

Obivously the agency may well be aggrieved not being able to pimp in perpetuity, but my contract is NOT with the agency, its with the composite. I am not a director of the composite the agency has its own arrangement with. In fact if I leave the composite to set up a limited the composite itself may be closed. I can do this at one months notice. So is this a hole or what?

[VectraMan]

The composite will have signed an agreement with the agent which will prevent you from going direct with the client. If you did it anyway, then the agent could sue the composite for breach of contract, so to protect themselves they have to have the same restriction on you. So they do have an interest.

[Camel]

I had not thought of it in those terms Vectra, but think I still am on to something. My point is I believe it is the composite's problem what their agreement with the agency is, and how they go about protecting that in terms of wording agreements with employees is mine. I am suggesting their agreement with me has no right to contain said convenant as they cannot by proxy argue the reasons for a covenant that agency would if I was their employee. Further they would not lose money here - I pay for their services not the agency. Thats not to say they might not lose some intangibles like a litte goodwill with agency but can't really argue that as supposed to be working for those employees who pay them every week not 3rd parties.

IMHO the tax facade that a composite really is has weaknesses here which would not be the case with a 'real' limited, if I was director of ltd company and had directly entered into this agreement with agency I would take a different tack, e.g, that 12 months is too long or in fact that as I was employee of end client 6 years before returning as contractor the value of agency introduction is not so great and therefore convenant is OTT.

[Mailman]

You will most likely find the clause itself so vaguely written that its not worth the paper its written on. Check to see whether you have a general exclusion (ie. you cant work for company x for 12 months) or a specific exclusion ( you cannot work for company x in London for 12 months).

Only specific exclusions will have any chance of being upheld by a court if you end there. Even then, if it says London you can still argue that this isnt specific enough and that to be enforceable it must mention the exact addresses you cannot work from etc...).

Then there is all the opted in or out or shake it about arguements we could move on to

BUT get a copy of the contract and go seek REAL legal advice (and then come back here and ask us "experts" again what we thinkg ).

Regards

Mailman

[tim123]

Camel,

You are making the mistake for thinking that the law is dumb. It's not. It is quite capable of seeing through the composite company for what it is, a payrolling vehicle.

There is no reason at all why the composite company cannot put a (theoretically enforcable) clause in their contract that protects another party to the contract's legitimate interest.

Though, as mailman says, whether it is actually worded in such a way to do this, is an entirely different matter.

tim

[Camel]

Thanks for replies so far, definitely off to get some real legal advice now as suggested !

[Miss Ellie]

I have spoken to a lawyer and a barrister before about restrictive convenants and like Mailman says they are not normally worth the paper they are written on, they seem to be used to frighten people into doing what the side with more money to pay lawyers wants.

To be upheld in court the clauses have to be reasonable in all aspects including the time period you are not allowed to work for them for- 6 months is normally regarded as reasonable unless you have done a very senior position. 12 months is seen from the start as being unreasonable and can easily be argued away in IT depending on your skillset and who/where your previous clients have been.

Oh I know restrictive convenants that have been enforced but not on IT people. Healthcare workers (GP's, dentists, etc ) in small towns are not allowed to set up within 10 miles of their old practice and in London it's 5 miles. (I have been told of a horrible trick a GP down my road did to get round this to stop it being enforced on him, which involved him signing up his old patients with his new partner before he left the surgery.) Sales people are not allowed to steal clients introduced to them via their old employer however they are allowed to take the contacts they have made via their own outside work network of friends or acquaintances.

[Mailman]

Thanks for replies so far, definitely off to get some real legal advice now as suggested !

Dont forget to come back and ask for our advice too!

When I sued agents who held on to several thousand pounds owed to my company they tried all sorts of tricks...tried the restrictive covenant clause, tried to argue my case was against the payroll company (when the contract between myself and the agent clearly stated the only role the payroll company had in the relationship was to act as exactly that...a payroll company), they even tried to argue that we should be using the older employment legislation (which was fine with me as that made their acts a criminal offence instead of a mere civil offence ).

In the end they threatened to go to the high court and I was all up for it BUT when I told them to f8ck off they then realised that I wasnt going to give up. They ended up paying up through the county court AND also stumping up for my costs...win-win sutation for everyone*

Regards

Mailman

*everyone = me and my lawyers Never underestimate the value of good quality legal advice!

[ASB]

To be upheld in court the clauses have to be reasonable in all aspects including the time period you are not allowed to work for them for- 6 months is normally regarded as reasonable unless you have done a very senior position. 12 months is seen from the start as being unreasonable and can easily be argued away in IT depending on your skillset and who/where your previous clients have been.

As a general point it is always the restrainer who needs to bring action for a breach. All restraints start from a premise of being unreasonable but yes 6 months may well be found reasonable. If unreasonable the clause is struck out, there is not an option to narrow the scope to something considered reasonable.

In the event of termination the chances of any restraint whatsoever being considered valid are very small. One exception is gardening leave, however it is often the case that an employment contract cannot possibly impose gardening leave.