Restrictive covenant

[thunderlizard]

It's a bit late now, but a learning point for the future.

When starting work with a client where you've not been introduced by the agency, tell the agency to remove those handcuff clauses from the contract.

Every time I've asked for this, it's been accepted as the agency can't really handcuff someone they didn't find.

I did exactly this one time, years ago. Client told me to pick one of the agencies on their list and go via them. When confronted with their standard contract with the restrictive covenant in, I told them it wasn't appropriate, and with seemingly mild reluctance they agreed to take it out.

Fast-forward a year or two, when the client took that agency off its supplier list. "Not a problem" I thought, as there was no restrictive covenant to stop me hopping to one on their new list. What I hadn't expected was that the agency had left the restrictive covenant in their client-facing contract and ended up taking me down with them.

So I'd recommend, at risk of being an awkward so-and-so, you warn the client of this possibility and get them to take it out of their end too.

[Fred Bloggs]

The client is more than happy for me to move to another agency but how would that get around the covenant?

As far as I can see, this can realistically only happen if the client tells the agent they are moving you to another agency.

[northernladuk]

The client is more than happy for me to move to another agency but how would that get around the covenant?[/FONT][/SIZE]

So there are a lot of questions here and you need to be agile enough to understand the client and the agent to make it work.

Is the client happy because it's nothing to do with them and doesn't care or are they happy that they'll have your back, even against their contracted agent.
Is the person at the client that is 'happy' in a position to say that. The client manager might be but procurement/legal might not. Have you got the right person?
Does the agency have enough people on site to let one revenue stream go or are you their single source of income?
What is the clients relationship with the agency like?

The way to get around the handcuff clause, as with any contractual issue, is negotiation. The contract is an agreement of key principles. It isn't to say that each of those could be discussed and waived in some form. Notice periods for example. Contract says 4 weeks. Ask the client to leave in 2, if you do this and that they agree and off you go in 2.
Now in your case, the agent won't like it because they are losing revenue so the only way to negotiate it out is for the client to strong arm the agent. Keep me happy or lose business in a nutshell. All depends on the clients relationship with the agent and the clients willingness to fight your corner.

If the client is happy for you to move because they don't care and it's none of their business then there is very little you can do, the handcuff will stand.

[flyingshoe]

Thank you for all the responses, to answer some of the questions:

• Yes, the agency is doing the payroll, no brolly.
• Contract ends early next year and could last a good number of years as there is plenty of work.
• It’s an inside ir35 gig and employers NIC comes out of my day rate, so their 25% cut comes out before that.
• The client is more than happy for me to move to another agency but how would that get around the covenant?

[ladymuck]

It's a bit late now, but a learning point for the future.

When starting work with a client where you've not been introduced by the agency, tell the agency to remove those handcuff clauses from the contract.

Every time I've asked for this, it's been accepted as the agency can't really handcuff someone they didn't find.

[Fred Bloggs]

the only time I've switched agencies for a client is when the client insisted.
That made it way easier.

I was about to say the exact same thing. I think the OP will most likely only be able to do what he/she wants if they ask the client to move them to another agency. But the client may only use the one agent etc..... So there's details here we don't know about.

[Lance]

the only time I've switched agencies for a client is when the client insisted.
That made it way easier.

[SueEllen]

As for the rest - yep that clause should been removed before you signed it - it's going to be very hard to remove it now...

Agree with this even though the clauses tend to be generic.

For the current role no chance.

For a client of the end-client or a different role within the same client it depends mainly on how large the client is.

[WTFH]

It's perfectly possible that the agency is doing payroll* - were I an end client I would be insisting on it (because adding umbrellas simply adds supply chain risk).
* it may also explain why the margin is 25% (it's employer NI)

Good point, my mistake.

[eek]

Welcome, flyingshoe.

A couple of things...
1. You're not going through an agency for payroll. You'll either be using an umbrella or your own Ltd for it. Agencies don't do payrolls
2. Unfortunately you (or the client) chose the agency, and you should have negotiated with them before signing up. Now that you've signed up, you would have to re-negotiate.
3. How long is the contract for, and how long do you expect the gig to last?
4. Is it inside or outside IR35?

It's perfectly possible that the agency is doing payroll* - were I an end client I would be insisting on it (because adding umbrellas simply adds supply chain risk).
* it may also explain why the margin is 25% (it's employer NI)

As for the rest - yep that clause should been removed before you signed it - it's going to be very hard to remove it now...

[northernladuk]

No chance you are going to get a restrictive covenant removed. It's there to protect the agency's workstream, nothing more so they aren't going to take that out. You are saying you should have removed the restriction that this agent now relies on to stop you leaving and them losing money. You can guess their answer to that request.

Because it's there to protect their revenue and you are wanting to leave them so cutting their money off it's going to be bullet proof. You've no chance getting out of this one. Doesn't matter all the in's and out's and who got the gig, you are contracted to an agency and they make commission from you. If you leave that commission ends and they can claim loss as you breached the handcuff.

If they are taking 25% just go in and tell them the score. That's a ridiculous amount and you are going to walk unless they correct it. Best time to do this is at renewal though not mid contract. It was up to you to negotiate the rate and you signed at that rate so you are going to have to suffer it until next renewal.

You'll have to take a guesstimate at what a decent rate is for your negotiation. The larger the client and the more contractors they have then the agency margins are reduced. If it's a small client with only a few contractors the agency is going to have to charge more to cover their costs. You are looking at something like up to 10% for large clients, 15-20 for a small setup so if you are just one of a few there then 25% isn't a million miles off.

[WTFH]

Hello,

I have a restrictive covenant in my contract, which prohibits me from working for any other agency/employer with my current end-client for 6 months after the end my current engagement. Standard stuff but my case is a bit unique in that I was recommended for the role by an old colleague of mine and because I could not work for the end-client direct, I had to go through an agency for payroll. No investment from the agency side at all.

I would ideally like to move to another agency, one which doesn’t take 25% of my day rate. Would this covenant hold up in court given there is no investment to protect from their side? I didn’t apply for a job they were advertising for, it was all done for them.

I know I should have had this covenant removed before I started, I accept that I messed up there, so if there is nothing that can be done, then it is what I is.

Welcome, flyingshoe.

A couple of things...
1. You're not going through an agency for payroll. You'll either be using an umbrella or your own Ltd for it. Agencies don't do payrolls
2. Unfortunately you (or the client) chose the agency, and you should have negotiated with them before signing up. Now that you've signed up, you would have to re-negotiate.
3. How long is the contract for, and how long do you expect the gig to last?
4. Is it inside or outside IR35?

[flyingshoe]

Hello,

I have a restrictive covenant in my contract, which prohibits me from working for any other agency/employer with my current end-client for 6 months after the end my current engagement. Standard stuff but my case is a bit unique in that I was recommended for the role by an old colleague of mine and because I could not work for the end-client direct, I had to go through an agency for payroll. No investment from the agency side at all.

I would ideally like to move to another agency, one which doesn’t take 25% of my day rate. Would this covenant hold up in court given there is no investment to protect from their side? I didn’t apply for a job they were advertising for, it was all done for them.

I know I should have had this covenant removed before I started, I accept that I messed up there, so if there is nothing that can be done, then it is what I is.