Conflict of Interest clause

[mkant]

Hi - any takers on where I stand here, pretty please?

The situation: for the last 3 years I’ve worked part-time 0-100 hrs per month for a consultancy company (CC). The contracts are yearly, renewable in July. One of the CC’s many clients is a FTSE 100 company (FTSE), and this is the work I’ve been helping with.

I've got to know one of the FTSE's IT managers and he's not happy with the rates CC are charging. He’s interested in me contracting direct for the FTSE. I’m also not happy with the rate I’m getting from CC, it was cut by 10% last year, at a time when CC increased their rates to the FTSE. The CC cited "normal business practice" to me when I discussed it with them, and told me to take the rate cut or leave.

Of course, I have the usual Conflict of Interest clause in my contract that says I cannot provide services to the FTSE "for 6 months after termination of this agreement".

However, in July 2009 my contract was never officially renewed. The CC have always been slack about this, and last year I never bothered to chase it up. So although I’ve continued to work for the CC on the same basis since July 2009, and have been getting paid, I have no signed contract for this period.

So I’m wondering where I stand legally on this.
Am I no longer bound by the Conflict of Interest clause, as I no longer have a signed contract?
Or is there a presumption that because my working relationship is the same, I am still bound by that clause in my expired contract?

Hope that’s clear

Michelle
x

[Durbs]

Of course, I have the usual Conflict of Interest clause in my contract that says I cannot provide services to the FTSE "for 6 months after termination of this agreement".

If that contract contains a written end date of July 2009 then i don't think it would be enforceable. Think these non-compete things are difficult enough to enforce even with a written contract.

You are currently working under an implied oral contract which is itself legally binding (for example if the CC suddenly turned round and said that they were not going to pay you this month after realising they have no contract with you, you'd have a good case for getting that money) but in an oral contact, you have no way of proving what was mutually agreed so it would be judged on what is 'fair'.

Are you in the PCG - maybe phone their helpline as they would be better placed to advise on this.

[jim2406]

IANAL (i am not a lawyer):

If you get found out, you'll get a letter shouting at you, and also CC probably won't want to work with you again.

Doubt anything would happen beyond that.

These things are hard to challenge in court and it's only worth their taking legal action against you for loss of earnings, if they can prove it, they think they'll win, and the potential damages outweigh the legal fees and general pain-in-the-arse factor.

There's never any guarantees though, I've been in a similar situation before and was advised by my brother (solicitor) that it is a legal grey area, but it would be extraordinarily rare for such a contract to be enforced beyond 6 months.

Depends how well you sleep at night I guess. If you're a worrier, don't do it, if you are OK with the potential risk, however small, go for it.

[centurian]

There probably would be a presumption of continuation of the contract. I'm sure you would have argued that if they had suddenly stopped paying you after signing your timesheet.

However, these clauses are extremely difficult (but not impossible) to enforce - and the lack of a written contract may give you sufficient wriggle room.

The probably wouldn't bother, but bear in mind that legal action for loss of earnings could be significant. If FTSE does tulip-loads of business with CC per year and as a result of you breaking the restriction, CC loses that business, they may try to chase you for that.

Were you Ltd in your dealings with CC. If so, you could probably close Ltd and either go umbrella or a new company with FTSE.

[northernladuk]

If you get found out, you'll get a letter shouting at you, and also CC probably won't want to work with you again.

To be honest if it makes them some money they may change their mind. I have a friend that jumped ship in similar fashion, lot of words and upset and 8 months later he was back with them. It's not a dead cert this one.

I did like the line nothing has been officially signed.... nice little get out clause that.

I for one have heard of plenty of fall outs about this kind of thing but have never heard about legal action and up until that point its just people sulking

[XLMonkey]

Michelle,

for this sort of a scenario you will need a proper lawyer type thing. But... since you asked

1. You do have a contract with the CC, and the terms of the contract are the ones that were written down. The expiry date of 2009 is irrelevant. A court would almost certainly take the view that the terms of the original contract were still in force, since you have continued working for them, and they have continued to pay you.
2. You are bound by the Non-Compete clause (not conflict of interest, that's something different), provided that it was drafted correctly in the first place. These are perfectly enforceable in law, provided that they are between two limited companies. (they are much much more difficult to enforce between a company and an individual, but in your case the CC would be suing your limited company, not you)
3. I have encountered situations where the CC pursued a claim against someone who went direct to the client. It does happen, but its rare, and generally the CC will pursue the client, not you (since the client has more money).

Your best bet is probably to get the client to deal with it, rather than you taking the risk (it is "normal business practice" for a big client to explain to a consultancy firm that if they don't sort their act out then they will suddenly lose lots of business - sounds like they deserve a bit of a kicking). But, if you are going to go direct, then you should definitely get a proper lawyer to look at the terms of your contract and give you a definitive view of your position.

[Manic]

Also, what is the exact wording of the clause, many stipulate you are not alowed to solicit business from the client, but in this scenario you're not, as they are asking you.

[Hex]

As mentioned earllier consider closing down your limited company and creating a new one to contract direct to the client. The 6 months exclusion will be against your existing Limited.

It won't stop the CC coming after the client mind, but that is their lookout.

[mkant]

You are all most kind, and offer good thoughts. I def don't wish to close down the company though, there are various reasons why this won't be happening.

There's a mix of opinion out there, but I do see that the terms of the original contract are still in force. So I'd have to tread carefully, and prob pay for some good legal advice (roll eyes, I did that once before and I wasn't impressed).

What is the exact clause?

During the lifetime of this agreement and for a 6 month period after its termination, the Company (me!) and any personnel thus supplied hereby undertake not to accept contracts to supply goods and/or services to the CC's customers where this could have a financially damaging effect on the CC.

Bother. I'm easy-going, pay me a fair share and I'm gruntled. But fair share has turned into squeezing-me-dry here, and I'm disgruntled.

[Manic]

So an employee of your company is not allowed to accept work there, seems a little restrictive to me. And what does "could be financially damaging mean"?

Mine says this:

The Consultancy shall not, without prior written consent of the Company, for a period of 12 months after the termination of the contract whether on his own account or in conjunction with or on behalf of any other person, firm or company:
Solicit or deal with Customers of the Company and The Client who were customers or potential customers at any time during the period of 12 months immediately preceding the termination of the contract;

12 months is a little long and probably unenforceable, however you see that I am not allowed to solicit business, I would expect the client has a similar clause preventing them from approaching me.