Need legal advice on restrictive covenant on a Freelance contract

[Lilaeg]

Hi,
I'm a foreigner, I'd like to have advice on the British restrictive covenant clause.

The situation:
I'm a freelancer contracting with a Company A through a Recruitment agency B.

Company A pays a lot of fees in order to hire me as a freelancer through the recruitment agency B.

Company A would like to hire someone directly, without going through the Agency B.

I would like to enter a partnership with a friend to work directly for Company A through his trading name, so we could offer them a lot more services than I currently do alone.

I would make slightly more money and I would be a lot cheaper than I currently am for Company A.

My contract contains a restrictive covenant that forbids me from entering into business directly with Company A.
The clause is as follow:
*The Sub-Contractor agrees that it will not (unless otherwise agreed in writing by the Recruitment Agency) accept any appointment or engagement with, or otherwise render any other services to the Client or to any associated company of the Client (“associated company” in this Agreement means any firm belonging to or to any holding company, subsidiary or company associated with the Client including any company that was a customer of the Client) at any time from the date hereof for a period of twelve months following the termination of this Agreement.

*Likewise, the Sub-Contractor will take whatever steps are necessary in order to ensure that the personnel identified in Schedule 1 (and/or any substitutes) will not (unless otherwise agreed in writing by the Recruitment Agency) accept any appointment or engagement with, or otherwise render any other services to the Client or to any associated company of the Client at any time from the date hereof for a period of twelve months following termination of this Agreement.

My questions are:
- Is my intention of doing business with Company A through my friend's trading name a clear breach of the restrictive covenant I signed with B?
- Is the restrictive clause reasonable, knowing that it is for a period of 12 months?
- What would be the implications if B knew I did some work for A through my friend's business?

Many thanks for your help and explanations.

[cojak]

We are not lawyers, we can give you advice but not legal advice.

[Lilaeg]

We are not lawyers, we can give you advice but not legal advice.

I have updated my request accordingly. thanks

[northernladuk]

My questions are:
- Is my intention of doing business with Company A through my friend's trading name a clear breach of the restrictive covenant I signed with B?

YES

- Is the restrictive clause reasonable, knowing that it is for a period of 12 months?

12 months is not enforceable as it breaches your human right to work or something. The first 6 months is however quite enforceable.

- What would be the implications if B knew I did some work for A through my friend's business?

You could be held liable for any loses incurred to B by going direct to A including interest and any damages they might be able to add.

To be honest the legal aspects of this are the least of your worries. What is more likely to happen is that word gets back to B, which it will, who will then throw a wobbler and hassle A so much that A will bin you to get rid of the problem. B may also decide to pursue you for loses. Once agents start fighting over contractors it is possible the client will just wash their hands of you, particularly if there is a legal implication. In some cases the client might back you up but if you are in clear breach of your contract I doubt it.

It isn't worth it. I would also argue going through a friends company is also not worth as it could go very painfully wrong. Don't mix business and pleasure.

[Wanderer]

- Is the restrictive clause reasonable, knowing that it is for a period of 12 months?
- What would be the implications if B knew I did some work for A through my friend's business?

Yes, I think 12 months is unreasonable, but I'm not a lawyer. To be honest, the more draconian the restraint of trade is the more chance you have of getting it overturned in court.

Did you Opt out of the agency regulations? If you didn't then the clause may be unenforceable. Also if you didn't opt out before you were introduced to the client the opt out may not be valid so the restraint of trade would be invalid too.

The agency will definitely kick up a stink if they find out.

These situations normally depend on what the client is willing to do. If they will engage you directly or via a third party and are happy to cut out the agency then I'd go ahead. You may get a lot of bluff and bluster from the agency or the client might tell them to shut up and go away.

Get yourself a proper legal opinion before you proceed...

[Hex]

12 months is not enforceable as it breaches your human right to work or something. The first 6 months is however quite enforceable.

It doesn't work like that. If a court decided that the 12 months was too much the court would throw out the whole clause, they would not reduce it to 6 months. They would either say that 12 months was OK, or that the clause was invalid.

It is a gamble whether you want to risk the opinion that 12 months is not enforceable. I'm not sure if there is a precident for this.

[northernladuk]

It doesn't work like that. If a court decided that the 12 months was too much the court would throw out the whole clause, they would not reduce it to 6 months. They would either say that 12 months was OK, or that the clause was invalid.

It is a gamble whether you want to risk the opinion that 12 months is not enforceable. I'm not sure if there is a precident for this.

Yes you are right, my bad wording. To be honest if you are at court stage with it I am sure any work you were trying to get by circumventing this would have evaporated so essentially screwing it up for you whatever the ruling.

[Vandalay]

I have done this once before and suffered no negative repercussions. It's not the most moral of things to do, but it makes sound business sense to do so. I'm sure agents will beg to differ.

If you are going to do it:

- Make sure the end client is aware of the sensitivity of what you're doing before you take any action, and ask for discretion to be exercised when dealing with the agent after the split.
- Just tell the agency you're taking some time out from work.
- Be very careful with your LinkedIn profile - remove any contacts from that agency, and restrict who can view your history on there.
- Don't deal with that agency again, as you'd have to lie on your CV, which is a big no.

That's my own experience, not advice. Expecting to be flamed now.

[northernladuk]

I have done this once before and suffered no negative repercussions. It's not the most moral of things to do, but it makes sound business sense to do so. I'm sure agents will beg to differ.

If you are going to do it:

- Make sure the end client is aware of the sensitivity of what you're doing before you take any action, and ask for discretion to be exercised when dealing with the agent after the split.
- Just tell the agency you're taking some time out from work.
- Be very careful with your LinkedIn profile - remove any contacts from that agency, and restrict who can view your history on there.
- Don't deal with that agency again, as you'd have to lie on your CV, which is a big no.

That's my own experience, not advice. Expecting to be flamed now.

Interesting that you say lying on your CV is a big no no but circumventing contracted handcuff clauses by devious methods so breaching contract is acceptable.

[Vandalay]

Interesting that you say lying on your CV is a big no no but circumventing contracted handcuff clauses by devious methods so breaching contract is acceptable.

Hence the last few words of my post. I know this has been talked to death on these forums, but if you've been on a gig for a year, and in my case the client was going to lay off all agency contractors as part of a company wide cull, but were still allowing direct consultants etc. My choice at the time was hit the bench, or circumvent the clause. There's no way the agent could have had a piece. Also my clause was 8 weeks, not 12 months. As far as the agent was concerned, the contract was finished and had run its term.

Apologies, should have clarified that my example is different to that above.