Reply to: Conflict of Interest clause in (expired?) contract....

[craig1]

If you aren't opted out, then you can change agencies / go direct 8 weeks after the end of the last contract or 14 weeks after the start of the previous contract (which ever is later).

If they say anything, explain that you were opted into the agency regulations and to go away.

More accurately, you tell them you never opted out. You can't opt in to the regulations. That's what makes being caught the default position if you haven't opted out. If they get awkward and want to know "what regs?", they're "The Conduct of Employment Agencies and Employment Businesses Regulations 2003 (as amended)".

[expat]

My contract has this (where "the Contractor" is MyCo and "the Consultant" is me):

The Contractor shall not, and shall procure that the Consultant shall not, whether directly or indirectly through any company ..... etc etc

So doesn't that mean that MyCo is in breach if I work for the client through another Co?

[DirtyDog]

Actually...the 'old' agency never approached me about opting in or out of anything. In fact, until I started reading replies to this thread, I wasn't even aware of such a thing. I've been with the old agency for many years.....let them get on with the paperwork stuff...all I was doing was doing the work then getting paid by them!

A bit naive by me I suspect for not keeping up with stuff, but does this change anything?

G

If you aren't opted out, then you can change agencies / go direct 8 weeks after the end of the last contract or 14 weeks after the start of the previous contract (which ever is later).

If they say anything, explain that you were opted into the agency regulations and to go away.

[kal]

Actually...the 'old' agency never approached me about opting in or out of anything. In fact, until I started reading replies to this thread, I wasn't even aware of such a thing. I've been with the old agency for many years.....let them get on with the paperwork stuff...all I was doing was doing the work then getting paid by them!

A bit naive by me I suspect for not keeping up with stuff, but does this change anything?

G

Well if you didn't sign the opt out then you are in a better position IMO.

[IT Gnu]

And next time, don't sign the opt out and you won't find yourself in this situation...

Actually...the 'old' agency never approached me about opting in or out of anything. In fact, until I started reading replies to this thread, I wasn't even aware of such a thing. I've been with the old agency for many years.....let them get on with the paperwork stuff...all I was doing was doing the work then getting paid by them!

A bit naive by me I suspect for not keeping up with stuff, but does this change anything?

G

[Wanderer]

The contract was not "extended" formally, i.e. a new contract was not issued, however, I continued to work there for an additional 6 months until the end of September 2013.

By working and getting paid, there is an implied extension of the original contract on the same terms. It's not a great way to do business but it does have some basis in law.

I have now been approached by the company who wishes to engage my services again, but through a different agency (their new 'nominated' supplier now).

There is a chance that the agency could come after you but they would have to sue your company which will be a limited liability company and probably has no assets so it could just cease trading.

There is a lot of theory about this but in my opinion, the most likely outcome is that there would be a lot of bluff and bluster from the agency but they probably couldn't actually enforce this contract term for a number of reasons. Really, it's the client who has caused the agency a loss rather than you as the contractor and you could argue that the 6 month no compete clause is an unfair restraint of trade against a small business.

If the client is willing to take you on then go for it but for goodness sake don't breathe a word of it to the old agency or put your updated CV on the job boards or linked-in etc.

And next time, don't sign the opt out and you won't find yourself in this situation...

[SueEllen]

There's a difference in that scenario though. That's a person making a covenant then still breaking it by doing the work through a separate company. If your company makes a contract with another company, even if you're the sole director, then that's a separate situation altogether. Your company can sub it out, again if your contracts are sorted, making you, as a person, not the complete core of the contract. In the scenario you quote, you're the entire subject of the contract, in a well-written contractor contract then it's a company to company contract with you as a person a step away. (you - your company - agency)

Agencies aren't born yesterday - they try and ensure that both the company, the company's officers and any of it's staff who have been involved in the contract can't work for the client through another company. Likewise employers do this with their employees.

Unfortunately some of their anti-competition clauses are so badly worded that the clause won't stick if contested - so your first job is checking that the clause is likely to stick.

[craig1]

It would be interesting to know if this has been tried and how many times it has worked without issue or has not achieved the desired outcome. This in theory shouldn't work...



Piercing the corporate veil - Wikipedia, the free encyclopedia

There's a difference in that scenario though. That's a person making a covenant then still breaking it by doing the work through a separate company. If your company makes a contract with another company, even if you're the sole director, then that's a separate situation altogether. Your company can sub it out, again if your contracts are sorted, making you, as a person, not the complete core of the contract. In the scenario you quote, you're the entire subject of the contract, in a well-written contractor contract then it's a company to company contract with you as a person a step away. (you - your company - agency)

[DirtyDog]

The correct way is for the client to work with the agency to make them cheaper, or find a clause in their contract to enable them to stop working with them.

OK, you could do it that way as well

To be honest if I had a client in administration I would not be eager to work for them particularly if you are opted-out properly.

I can't imagine an agency wanting too much of their business if you were opted in, though.

[SueEllen]

The correct way to do it is to get the agency that you are contractually bound to to engage in a business relationship with the new agency. New agency then contracts with the client.

Someone has to pay for this additional link in the chain.

The correct way is for the client to work with the agency to make them cheaper, or find a clause in their contract to enable them to stop working with them.

To be honest if I had a client in administration I would not be eager to work for them particularly if you are opted-out properly.

[DirtyDog]

I have now been approached by the company who wishes to engage my services again, but through a different agency (their new 'nominated' supplier now).

The correct way to do it is to get the agency that you are contractually bound to to engage in a business relationship with the new agency. New agency then contracts with the client.

Someone has to pay for this additional link in the chain.

[DirtyDog]

I thought the whole purpose of suing someone was to recover losses

EDIT: i.e. no loss = no case

Punitive damages for deliberately breaching the contract?

You have a contract which stipulates that you must use that agency for a given period of time. You choose to break that contract, which you freely entered into. Therefore, you deserve to pay some financial penalty for breaching the contract.

[northernladuk]

The simplest measure to avoid all that, of course, is to simply contract through a separate company while caught in the tie-in period... After all, unless you're completely daft you ensure your contracts are fully tied to your company and not to you, you can be a named resource but a contract must be with your company.

It would be interesting to know if this has been tried and how many times it has worked without issue or has not achieved the desired outcome. This in theory shouldn't work...

A simple example would be where a businessman has left his job as a director and has signed a contract to not compete with the company he has just left for a period of time. If he set up a company which competed with his former company, technically it would be the company and not the person competing. But it is likely a court would say that the new company was just a "sham", a "fraud" or some other phrase,[1] and would still allow the old company to sue the man for breach of contract. A court would look beyond the legal fiction to the reality of the situation.

Piercing the corporate veil - Wikipedia, the free encyclopedia

[craig1]

As we're into the bounds of fully commercial multi-tiered contracts here, there's multiple points of law suit available to the agency.

One avenue: If the agent has a contract with client that says they have exclusive rights to you as a specific contractor for a set time then the client takes you on through another agency then that's a very clear breach. They'd then have a relatively clear case to get the equivalent of all their margin the client has paid to the other agency (regardless of what margin the other agency makes)

Avenue 2: They could get a simple injunction barring you from working with that client. They could target you, the client or both of you with equal effectiveness. A relatively cheap thing to get and they can get it ex-parte without you even knowing until the injunction hits your client's desk.

Avenue 3: If they think there's even the slightest possibility of the new agency knowing then they can claim tortuous interference with a contract against them. It's not unreasonable for an injured party, even if they've no provable monetary loss, to claim for punitive damages when they can show that the other party knew, or should have known, there was a contract in force. There have been cases where this has been won simply because the 3rd party knowing there had been work done there before didn't ask the question of whether there was a contract in place already for services.

Avenue 4: They could come after you for their margin for the period outstanding on the tie-in. Again, this can be quite a simple win for them if you've opted-out as you're then in the unprotected wilds of normal commercial contract law.

A final note, there have been cases where prohibited conduct was done within a constrained time period and the courts have ruled that it was so deliberately done in a way that breached the original contract that the entire new contract was deemed to be fair game for damages, even if the genuine damages to the original contract were very limited.

If it's just one contractor then the agency will probably just have a huffy fit about it but take it no further. If there are a number of other contractors involved then this could easily get into large scale losses for the agency that they'll be able to claim for and probably have a good chance of winning.

The simplest measure to avoid all that, of course, is to simply contract through a separate company while caught in the tie-in period... After all, unless you're completely daft you ensure your contracts are fully tied to your company and not to you, you can be a named resource but a contract must be with your company.

[Platypus]

This has been mentioned a significant number of times on CUK. Can someone provide a case reference where a judge said that (one which creates a precedent), or a law which details that?

I thought the whole purpose of suing someone was to recover losses

EDIT: i.e. no loss = no case