Restrictive contract clauses

[VLKS]

Hello,

I [self employed] have a contract with an employment agency and i have been working through this agency for a client from the past 5 years. But now due to some reasons my employment agency and the client company does not want to work with each other. And therefore my employment agency has asked me to serve the notice period.

Now the thing is my Client wants me to carry on the work through some other employment agency as my client and my current employment agency could not agree on a deal and does not want to work with each other.

But the problem is I have got a restriction clause in my contract with the employment agency , which says I can not supply services directly or indirectly to the client during the assignment or for a period of six months from its conclusion.

And my employment agency has reminded me /warned me about this clause and they are not willing to lift the restriction.

So my question is -

1. Are restrictive contract clauses enforceable? if the Employment agency are not in a business with the Client ?

Please advice.

Thanks,

[perplexed]

The point of the clause is to prevent you jumping ship and returning through another agency.

In this instance, I'd would have thought ( IANAL ) it would be difficult for the agency to demonstrate a financial lo given end client severed relationship with them.

You could go through another agency, helps if client back that - if you've been there 5 years, then that implies you've a good relationship with client.

[ladymuck]

If you've been with the client for 5 years why aren't you on the payroll?

However, in answer to your question, the clause can only truly be enforced if the agency can demonstrate that they are suffering a financial loss due to you engaging with the client via another agency (or direct). If the client has terminated their contract with the agency then they know that no further income is forthcoming from them so you cannot be held accountable for any perceived financial loss. They may make angry noises at you but, as long as the client is willing to support you and confirm the upper contact was terminated before you moved to another agency, they don't have a leg to stand on

IANAL

[northernladuk]

Ladymuck covers the situation nicely so +1 to that. They can't use handcuffs just to cause a fuss when they have no further skin in the game. Screw them.

On a side note, how much do you know about Ir35? Time is not necessarily directly related it does erode your defense, particularly if you've got complacent and taken your eye off the ball.

Also exposes you to a huge amount of risk with the April 2020 changes coming up.

[BlasterBates]

Agree with the above, the handcuff clause is there to stop you changing agency mid contract or renewal, not to put you out of work by preventing you from working for the client in the event that the agency serves notice.

If a restrictive covenant protects a legitimate interest of the agency, then the clause is valid and enforceable

In determining what a legitimate protectable interest is, the courts will apply the 'Elephant Test.' This is a truly lawyerly invention: try and explain what an elephant looks like; you will find that you can't. But you know what an elephant is, and you recognise one when you see it. This is how the courts will seek to determine if there is a legitimate protectable interest--i.e. does it sound like it is fair?

In this case the agency would not be protecting a legitimate interest so don't worry about it.

[jmo21]

+1 to all the above.

The agency knows this too by the way.

They are simply trying to ring the last few pennies out of the contract by getting the end client, or you, to pay a fee to drop the clause.

And while you might well come at them armed with these facts, it might be too much hassle for the end client who might choose to let you go.

FWIW, almost the same happened to me and another contractor I was working with once, with a month left on both our contracts. The client really wanted us and chose to pay a fee, even though they really shouldn't have. Only difference was agency never told me to hand in notice, we just got informed that they were switching us onto another agent.

[VLKS]

Thanks everyone for your support and advice.

[VLKS]

If you've been with the client for 5 years why aren't you on the payroll?

However, in answer to your question, the clause can only truly be enforced if the agency can demonstrate that they are suffering a financial loss due to you engaging with the client via another agency (or direct). If the client has terminated their contract with the agency then they know that no further income is forthcoming from them so you cannot be held accountable for any perceived financial loss. They may make angry noises at you but, as long as the client is willing to support you and confirm the upper contact was terminated before you moved to another agency, they don't have a leg to stand on

IANAL

Thanks Ladymuck . Actually i am a contractor and have got my own Limited company. And therefore i don't want to be on the payroll.

[VLKS]

These are the actual wordings in the contract.

================================================== ===================
12 Restriction

12.1 The contractor shall not and shall procure that the contractor staff shall not supply services directly , or through any other person, firm or company, to any client for which it has carried out assignments either during an assignment or for a period of six months from its conclusion.

12.2 In the event that the contractor or the contractor staff breaches clause 12.1 the contractor shall pay to the employment business such fess as the employment business would be entitled to if the employment business had arranged the provision of services to the client (the engagement).Where the engagement is on a temporary basis the fees will be calculated at the rate charged by the employment business to the client less the pay rate specified in the assignment contract note which shall be multiplied by the total hours/days worked or to be worked during the engagement.Where the engagement is on a permanent basis the fee payable to the employment business fee shall be 20% of the commencing gross annual salary.
================================================== ===================

In the above clauses - "Contractor" means - My limited company , "contractor staff" means - Myself as an employee , "client" means - Company to whom i am giving service. , "employment business" means - the agency with whom i have my contract.

[VLKS]

In case in the future my current employment agency get to know the fact that i have joined back to the Client through some other employment agency , Are they legally allowed to contact me directly as they think i have breached the contract or they cannot contact me directly and they have to send me a court notice ? if they want their fees as mentioned in the contract clause 12.2.

Please advise.

Thanks,