Restrictive covenant - working for third party clients

[beachcomber]

Hi I was wondering if anyone else had come up against this.

I am contracting for an advertising agency who's relationship with their client for whom I have been contracted to work for is coming to an end, and their will be no further work work placed with the agency by their client.

The end client has asked if I would be interested in contracting directly with them when my current and final extension ends at the end of the month. I have spoken with the Ad agency that I'm working for and they have no objection to me switching over to their former client, as they have no further work available, and they are keen to keep the relationship amicable with their former client.

My employment agency are however not impressed and claim that I cannot take this contract without their agreement as they're a third party client of theirs, and my contract forbids this for a period of 6 months.

I will be employed via another agency however this client have a closed list of approved suppliers and there is no possibility of it being opened up to include my current agents.

My agents have also stated that in line with the contract that I signed with them they would be seeking 50% of the total monies that I'd invoiced to date as compensation.

Can they really do this?

Has anyone else had a similar problem, and what was the outcome?

Clearly if this is a valid position I won't pursue this further, although it does surprise me that my agents are able to claim compensation should I work for a client that they have no prior relationship with.

[malvolio]

Hi I was wondering if anyone else had come up against this.

I am contracting for an advertising agency who's relationship with their client for whom I have been contracted to work for is coming to an end, and their will be no further work work placed with the agency by their client.

The end client has asked if I would be interested in contracting directly with them when my current and final extension ends at the end of the month. I have spoken with the Ad agency that I'm working for and they have no objection to me switching over to their former client, as they have no further work available, and they are keen to keep the relationship amicable with their former client.

My employment agency are however not impressed and claim that I cannot take this contract without their agreement as they're a third party client of theirs, and my contract forbids this for a period of 6 months.

I will be employed via another agency however this client have a closed list of approved suppliers and there is no possibility of it being opened up to include my current agents.

My agents have also stated that in line with the contract that I signed with them they would be seeking 50% of the total monies that I'd invoiced to date as compensation.

Can they really do this?

Has anyone else had a similar problem, and what was the outcome?

Clearly if this is a valid position I won't pursue this further, although it does surprise me that my agents are able to claim compensation should I work for a client that they have no prior relationship with.

Can they do this? Yes.

Do you take any notice? No.

If they have no possible financial intest in the client, they can't charge you for lost income since there won't be any. The most they can do is stop you working for th client for a sensible period of time. 6 months is not sensible unless you're something special.

However, I'd engage the client. They have the same vested interests as you do, plus a lot more muscle.

[northernladuk]

Prepare for a world of hassle for a short time though. The agent will probably try and spoil it for you with the client just to cut his own nose of. Fingers crossed the client can see though it. Some clients may just walk away from the whole affair to avoid any legal issues even though it appears there wouldn't in this case. Doesn't stop them threatening it.

[GB9]

That is almost exactly the same situation I ended up in working for a previous client that resulted in the agency withholding my company's last month's fee income and requiring legal intervention to resolve.

Although you may have signed a contract with a clause in it preventing you from doing so, it is almost certainly illegal and can be stuck out from the contract by a judge if it ended up in court.

Does it state 50% in the contract? Even that is excessive and could be struck out. If a judge doesn't like one clause in contract they are within their rights to strike through the entire contract.

In my situation the agency in question only took proper legal advice when they received a solicitor's letter and after that paid up pretty quickly.

If you have a legal insurance policy then use it to gain advice. If not then I suggest you spend an hour with a good contract lawyer (shouldn't cost more than £200-£300) and get their professional opinion.

The main danger is that the agency decides to sue you for the money and you need legal representation which will cost.

[northernladuk]

That is almost exactly the same situation I ended up in working for a previous client that resulted in the agency withholding my company's last month's fee income and requiring legal intervention to resolve.

Although you may have signed a contract with a clause in it preventing you from doing so, it is almost certainly illegal and can be stuck out from the contract by a judge if it ended up in court.

Does it state 50% in the contract? Even that is excessive and could be struck out. If a judge doesn't like one clause in contract they are within their rights to strike through the entire contract.

In my situation the agency in question only took proper legal advice when they received a solicitor's letter and after that paid up pretty quickly.

If you have a legal insurance policy then use it to gain advice. If not then I suggest you spend an hour with a good contract lawyer (shouldn't cost more than £200-£300) and get their professional opinion.

The main danger is that the agency decides to sue you for the money and you need legal representation which will cost.

It isn't illegal. If it was illegal someone would be facing criminal prosectution for doing it. You can put anything you want in a contract, it is an agreement... Is it enforceable is the question.

[GB9]

It isn't illegal. If it was illegal someone would be facing criminal prosectution for doing it. You can put anything you want in a contract, it is an agreement... Is it enforceable is the question.

Ok, it isn't enforceable then

[beachcomber]

Can they do this? Yes.

Do you take any notice? No.

If they have no possible financial intest in the client, they can't charge you for lost income since there won't be any. The most they can do is stop you working for th client for a sensible period of time. 6 months is not sensible unless you're something special.

However, I'd engage the client. They have the same vested interests as you do, plus a lot more muscle.

I've already tried this. The trouble is that my agent chose not to keep his powder dry, and came out all guns blazing and having come on strong to me with the whole "we will sue" approach got straight on the phone and threatened the Ad agency I'm working for.

I think he quickly realised that he had lost both myself and the agency as clients. So now I have the situation where he know's that he's nothing to gain from accommodating my request.

Although I had to smile, as he went onto brag that he got very little work from my ad agency anyway, and that he got most of his placements from TV companies, (in particular he mentioned a large satellite broadcaster) so he wasn't that bothered if the relationship with my agency ended.

Unfortunately, he seems to hold a very senior position within his agency. So, he obviously feels that he's bullet proof.

[Wanderer]

My employment agency are however not impressed and claim that I cannot take this contract without their agreement as they're a third party client of theirs, and my contract forbids this for a period of 6 months.

Most likely not enforceable though they will try.

• Did you sign the opt out the agency were so desperate for you to sign?
• Did you do it BEFORE your CV was put forward to the advertising agency?

If not, then the restriction is unenforceable. Most likely it's too broad to be enforceable anyway. As Northernladuk says, be prepared for some bluff and bluster from the agency though.

My agents have also stated that in line with the contract that I signed with them they would be seeking 50% of the total monies that I'd invoiced to date as compensation.
Can they really do this?

50% of the total? No!

As GB9 says, this is excessive. At very best, all they could sue you for their actual losses (ie, the actual profit on their lost margin) and this won't be anywhere near 50%. They are trying to scare you by talking tulipe. None of this is in writing, is it? Nah, didn't think so. It's just talk.

As your final statement, say that you will sue THEM for 100% of the value of the contract you have been offered if they illegally seek to prevent you working directly for the client. Give them a pre-estimate of this value and say that this is your last word on the matter. They are just trying to bulltulip you so don't enter into any further arguments with them, just blank them unless they go legal on you (which they won't).

[beachcomber]

Most likely not enforceable though they will try.

• Did you sign the opt out the agency were so desperate for you to sign?
• Did you do it BEFORE your CV was put forward to the advertising agency?

If not, then the restriction is unenforceable. Most likely it's too broad to be enforceable anyway. As Northernladuk says, be prepared for some bluff and bluster from the agency though.



50% of the total? No!

As GB9 says, this is excessive. At very best, all they could sue you for their actual losses (ie, the actual profit on their lost margin) and this won't be anywhere near 50%. They are trying to scare you by talking tulipe. None of this is in writing, is it? Nah, didn't think so. It's just talk.

As your final statement, say that you will sue THEM for 100% of the value of the contract you have been offered if they illegally seek to prevent you working directly for the client. Give them a pre-estimate of this value and say that this is your last word on the matter. They are just trying to bulltulip you so don't enter into any further arguments with them, just blank them unless they go legal on you (which they won't).

I did sign the opt out but after I had been given the role. - I'll learn remember not to sign the opt out for future contracts per your very good advice in that linked thread. The 50% thing was in the small print on page 4/5 of their contract, under a limitations section. I did think at the time it was excessive, but I felt it was a chicken and egg thing where by I could not get the contract unless I signed up for it, I also missed the 3rd party bit.

I've only ever had one contract with this agent (although this is my 3rd or fourth time here) each time they've sent me an extension notice, and not a fresh contract.

I'm beginning the think I've been very naive.

[northernladuk]

I did sign the opt out but after I had been given the role. - I'll learn remember not to sign the opt out for future contracts per your very good advice in that linked thread. The 50% thing was in the small print on page 4/5 of their contract, under a limitations section. I did think at the time it was excessive, but I felt it was a chicken and egg thing where by I could not get the contract unless I signed up for it, I also missed the 3rd party bit.

I've only ever had one contract with this agent (although this is my 3rd or fourth time here) each time they've sent me an extension notice, and not a fresh contract.

I'm beginning the think I've been very naive.

I wouldn't say you have. Most contractors don't know what Opt in/out means and just do as told so can't be blamed for that. An expensive lesson unfortunately but this is pretty rare hence most people not being bothered about opt in/out. If this happened a bit more often then everyone would be much more aware of it.

The fact you signed the opt out AFTER you have been given the role means it is invalid which is great(ish) news for you. The handcuff is now virtually worthless. You can only be tied to 14 weeks after start or 8 weeks after end of contract.

Details are...

2 Restriction on going direct: Regulation 10 limits the ability of an agency to validly restrict by contractual terms a contractor and a client making direct arrangements for future services which exclude the agency. Agencies typically impose restrictions which (if valid – and they are not always valid) would operate so as to prevent such direct dealings for periods of up to 12 months (sometimes even longer). Common law principles (clarity and certainty, and restraint of trade) govern the enforceability of such terms. Now, such terms will also have to satisfy the provisions of the new regulations in order to be enforceable, and where the regulations apply, the maximum effective period during which a restriction can prevent direct dealings will be the longer of 14 weeks after the first working day, and 8 weeks after the last working day.

As quoted from this page...

Opt-in, opt-out?Legal specialist Egos comments :: Contractor UK

Send this to the agent and point out the author is Roger Sinclair from Ergos who is a contract specialist.

So you have a couple of outs here...

Fight the agency and point out their handcuff is invalid as they have no further business with the client and start with your client immediately..

or point out the Opt Out is invalid as you had started and have 8 weeks off before starting with your client again.