Contract Restriction Covenant Terms

[bbp]

Hello everyone,

Hope you all enjoyed your holiday break!

Can someone please clarify this for me? I have an opportunity with a past client to go direct but the last agency contract has a restriction term:

The Contractor shall not at any time during the Contract Period or within the period of six months immediately following the termination of this Agreement knowingly provide services of the same or similar nature to the Services to the Client except with the prior written permission of the Company.

Its been more than 4 months now since my last contract ended. But the Service has been defined as :

The Company has been engaged for the Project by the Client. The Company will be subject
to the instruction of the Client’s project manager in connection with the Project.

My understanding is since the definition of Service is very generic, the restriction term is not enforceable as long as my new contract can be defined properly. Is this correct?

Any help appreciated.

Thanks

[ladymuck]

Check with the client if they still have a business relationship with the agency.

If the agency has been dropped from the PSL then there is no business for them to be losing and there's no issue.

If the company still work with the agency then you need to make them aware that by asking you to go direct they are asking you to breach your contract with the agency and recommend they check their contract with the agency to make sure they are not doing the same. I would be looking to the client to resolve this as they have the fee paying relationship with the agency. This does risk either (a) you waiting two months to start work, or (b) you not getting the gig.

[northernladuk]

I think you are probably OK regarding the handcuff for that length of time but an enquiry to the client as to their relationship with the past agency wouldn't do any harm.

The Company will be subject
to the instruction of the Client’s project manager in connection with the Project.

Your IR35 status is a different kettle of fish though.

[rootsnall]

Did you opt out of the agency conduct regulations ?

[Lance]

after that period of time one of the key questions must be about how likely the agency are to find out.
If they have nobody else on site then you can just crack on.

[bbp]

The agency still has a relationship with the client & they do have their employees working there. So, they'll definitely know. The client does not seem to have any problem hiring me as they are the ones that contacted me and are still interested even after mentioning this term.

My question is solely on the enforceability of the restriction covenant with it being so vague. I know it was not IR35 friendly but the work is genuinely outside so no issues. It's just the agency being lazy to provide me with specific terms for the contract - which I'm hoping will work in favour for me.

[northernladuk]

The agency still has a relationship with the client & they do have their employees working there.

Their what? You mean the agency reps or did you mean contractors through the agency? If the agency/client is big enough to have a dedicated resource on site going direct might be more difficult than we thought. Who from the client is hiring you and telling you everything is OK? Are you sure you are speaking to the right person that can make these decisions?

So, they'll definitely know. The client does not seem to have any problem hiring me as they are the ones that contacted me and are still interested even after mentioning this term.

So, in this case the handcuff is unlikely to stick but the agency does have the grounds to cause trouble. The only thing you should be wary off is the client dropping you because they don't want to get in to a legal spat with the agency. You need to point the situation out to the client and ask if the client would be comfortable strong arming the agency. A quick 'let this one lie as you get a lot of business from us' type chat should make it go away but make sure it's someone that has the authority to do so. This shouldn't be coming from your client manager, it should be someone that handles contracts. It wouldn't be unheard of for the client manager to have gotten in completely wrong and client legal has a different idea which will trump his.

My question is solely on the enforceability of the restriction covenant with it being so vague. I know it was not IR35 friendly but the work is genuinely outside so no issues. It's just the agency being lazy to provide me with specific terms for the contract - which I'm hoping will work in favour for me.

Negotiation is your way out of this one so enforceability is a bit of a moot point.

[Lance]

As NLUK says, this is probably the hiring manager extending beyond his knowledge/competence.

Another approach you could have is to suggest they wait 2 months.

Or go through the agency anyway. It's no skin off your nose. Just cos the hiring manager wants to save some money doesn't mean it should become a commercial risk for you. Ask yourself what exactly is in it for you to go direct. Do you want 30+ day payment terms?

[rootsnall]

The only thing you should be wary off is the client dropping you because they don't want to get in to a legal spat with the agency. You need to point the situation out to the client and ask if the client would be comfortable strong arming the agency.

I've been in a few of these over the years and the clients always have a backbone of jelly.

[northernladuk]

I've been in a few of these over the years and the clients always have a backbone of jelly.

Same here.