Contract clause question, end of contract agreement

[NotReallyButSeriously]

During this Agreement and for a period of twelve months after its expiry or termination the Consultant and/or the Consultant Personnel shall not directly or indirectly be retained employed or their services otherwise secured by the Client, Associated company or Subsidiaries other than through agency without agency's prior written consent. This restrictive clause shall also apply to any company or organization that our client has introduced the Consultant and/or the Consultant Personnel to provide the services on their behalf.

Should the Consultant and/or Consultant Personnel be retained employed or otherwise secured by the Client, Associated company, Subsidiaries or client’s customer in contravention of Clause 15.1 above, the Consultant shall pay to Agency a sum equal to thirty per cent of the fees that would have been payable if the period of this agreement were twelve months.

So I have this clause in my contract, not that it's really any bother to me. But is it normal for an agency to include a period of twelve months after its expiry in a clause like this? Is this in any way longer then average? 30% seems very high as well, is this likely to be their cut in my contract at the moment, or is it likely to just be for these type of clauses?

I suppose if the company wanted me back after 9 months for some more work and weren't happy with the agency they originally used, I'd legally have to abide by these terms and pay away a whole 30% lol.

[Wanderer]

So I have this clause in my contract, not that it's really any bother to me. But is it normal for an agency to include a period of twelve months after its expiry in a clause like this? Is this in any way longer then average? 30% seems very high as well, is this likely to be their cut in my contract at the moment, or is it likely to just be for these type of clauses?

I suppose if the company wanted me back after 9 months for some more work and weren't happy with the agency they originally used, I'd legally have to abide by these terms and pay away a whole 30% lol.

Simple answer to that: DON'T Opt out of the agency regulations. If the agency try to leave it in the contract then it will be struck out as null and void and you will have absolutely NO lock in with the agency. Result!

[PSK]

Concerning the legals, I’ve seen similar. More experienced contractors will be better placed to advise how outrageous this duration and % is. Some people might try and say this duration will be an unenforceable restraint of trade (I vaguely recall ICS v Hart had very different circumstances but a 12 month restraint wasn’t found to be unreasonable in that case).

It’s difficult to read a contract term in isolation – is the term ‘fees’ defined elsewhere? This isn’t drafted very well but I’m not certain whether the intention is they’re after 30% of the fees you’d be due from the client at that time (if you get paid £500 a day by the client for the follow on work then you owe that agency £150) or could it be 30% of their present rate (a fraction of a fraction, a lower rate than at present given they’d not done any work to secure the follow on contract).

You might also be concerned about the ‘associated company or subsidiaries’ as this seems to be written a little too wide. I’ve seen similar attempts before as they wouldn’t want to leave an easy, artificial means to prevent them claiming their fee such as by you agreeing with the client to contract with a different legal entity that is operationally part and parcel of your original client. It might not be a problem in the client is a ‘narrow’ organisation (single site, single legal entity) but might be a problem if they are operationally ‘fragmented’.

Whether the agency would find out is a different question other posters have commented on already).

Please note, don’t take your legal advice from me.

[NotReallyButSeriously]

Concerning the legals, I’ve seen similar. More experienced contractors will be better placed to advise how outrageous this duration and % is. Some people might try and say this duration will be an unenforceable restraint of trade (I vaguely recall ICS v Hart had very different circumstances but a 12 month restraint wasn’t found to be unreasonable in that case).

It’s difficult to read a contract term in isolation – is the term ‘fees’ defined elsewhere? This isn’t drafted very well but I’m not certain whether the intention is they’re after 30% of the fees you’d be due from the client at that time (if you get paid £500 a day by the client for the follow on work then you owe the agency £150) or could it be 30% of their present rate (a fraction of a fraction, a lower rate than at present given they’d not done any work to secure the follow on contract).

You might also be concerned about the ‘associated company or subsidiaries’ as this seems to be written a little too wide. I’ve seen similar attempts before as they wouldn’t want to leave an easy, artificial means to prevent them claiming their fee such as by you agreeing with the client to contract with a different legal entity that is operationally part and parcel of your original client. It might not be a problem in the client is a ‘narrow’ organisation (single site, single legal entity) but might be a problem if they are operationally ‘fragmented’.

Whether the agency would find out is a different question other posters have commented on already).

Please note, don’t take your legal advice from me.

Well I assumed from reading the contract that they meant 30% of the rate I'd get through my new contract, which if I had a contract for £500 to keep things easy, then I am assuming they want a massive cut. I was just wondering whether this is normal for agency as it seems long to me and a hell of a lot of money. Is this something to look out for in future contracts and would you bring this up with the agency if you find this in your clause?

What would you consider reasonable?

BTW, can you edit out the agency name from what you've written, I didn't want to disclose it as I have no qualms with the agency and didn't want it to seem like a name-and-shame. Must of missed editing it in my original post.

[VectraMan]

the Consultant shall pay to Agency a sum equal to thirty per cent of the fees that would have been payable if the period of this agreement were twelve months

That would appear to say the fee for breaking the agreement is 30% of 12 months worth. So if you go back for a day within the period, you still pay 30% of 12 months, not 30% of the fee for the day.

30% is probably their fee for permanent employees (i.e. 30% of the first year's salary).

I had one that was 12 months, and several that were 6 months. I don't think there's anything particularly unusual about it.

[PSK]

I've removed the agent's name from my post.

For what it's worth, I think 12 months is on the long side, 6-8 months much more reasonable but if it were an attractive role, this Clause wouldn't stop me taking it.

Of the potential meanings of "the Consultant shall pay to Agency a sum equal to thirty per cent of the fees that would have been payable if the period of this agreement were twelve months", I think 30% of your payments from the client isn't reasonable given they have presumably earned out their investment in your appointment during the original term of the engagement. If it's 30% of their current fee - a smaller payment than they're on now then that feels much more reasonable. I doubt it's the following but I can see a logic based on a recruitment fee model - If it's 30% of the total annual fees you'd receive if you worked for the client for a year even if you only work a day then I wouldn't sign up to that.

All in all, it would depend how attractive a role is and what other options you have but the issues only arise if you do follow on work for a client that will only get to know you if you perform this contract so I wouldn't negotiate yourself out of this contract.

I can see why you'd assume it's 30% of your day rate but reading this Clause in isolation, I don't think that's the only reading. If you don't feel comfortable negotiating with them to remove or amend this Clause, perhaps you might ask them to explain in writing using other words what their interpretation of this Clause is. If you're agreeing to pay them 30% of their current fees then it would give you a reason to be told what the current fees are. They probably won't want to tell you so might be more willing to amend this?

I really don't like how widely the 'associated subsidiaries' part is drawn and wouldn't sign up to that unless the client is close to a single firm in a single location hence you wouldn't lose anything.

If you do sign up and work for the client or any of it's associated companies later, best keep that off your Linked In profile and suchlike.

Good luck.

[Wanderer]

For what it's worth, I think 12 months is on the long side, 6-8 months much more reasonable but if it were an attractive role, this Clause wouldn't stop me taking it.

"14 weeks of the start of the first assignment or within 8 weeks of the end" is a reasonable period and it's the maximum defined by the agency regulations. Just don't opt out of the agency regs and you avoid all this lock in bulltulip and penalty clauses.