Reply to: Umbrella to Ltd - Restrictions

[LisaContractorUmbrella]

All umbrella companies should be employing all the contractors who work with them under an over-arching Contract of Employment rather than acting as an employment business as defined in the conduct regs. If they don't then the contractor will not be entitled to claim travel and accommodation expenses; the over-arching contract should contain clauses which confirm mutuality of obligation and also continuity of employment, if it doesn't then any assignment worked on by the contractor will become a permanent workplace rather than temporary, hence the loss of entitlement. The umbrella company will sign the opt-out of the conduct regs as they are bound by the business to business contract issued by the recruitment agency.

HTH

[Lauren G]

Umbrella - Ltd

To quote:
"13.1 You hereby agree that you shall not (without the prior consent in writing of the Company) for a period of 6 months immediately following the termination of your employment with the Company, indirectly or directly or through an agency or otherwise and whether on your own behalf or in conjunction with or on behalf of any other person, firm, company or other organisation, (in any Capacity whatsoever), (a) be employed or engaged in, or (b) perform services in respect of, or (c) be otherwise concerned with the Customer for whom you were carrying out an Assignment, provided always that the provisions of this clause 13.1 shall apply only in respect of Services with which you were either personally concerned or for which you were responsible whilst employed by the Company during the 12 months immediately preceding the termination of your employment. "

Unfortunately, below that is states:
"13.3 The provisions of clauses 13.1 and 13.2 above shall only apply if you have opted out of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 in respect of that Assignment."

And of course I was stupid and rushed to get started, so signed the Opt Out... I'll know better next time.

I am in the exact same situation as you - with the same Umbrella company it seems from the clause quoted above. Can you let me know if it was resolved?

Thanks.

[TheFaQQer]

The agency regulations Section 32(9) states that they shall not apply where a work-seeker which is a company, and the person who is or would be supplied by that work-seeker to carry out the work, agree that they should not apply.

I don't know if the umbrella can be construed as being a "work-seeker which is a company" in this situation? From what Sue-Ellen says, they can't but it sounds like some umbrellas and agencies think it is possible to opt out in this say.

Oh my goodness. Have we found another grey area in the regulations...

PCG guide:

Q I work through an umbrella company, and they are asking me to sign an opt-out. Is the umbrella company affected by this legislation and if so, can they ask me for an opt-out?
A Yes, the umbrella company comes under the Agency Regulations. You may opt out of the Agency Regulations as requested, but the notice letter - whichever form it takes - must also be signed by a signatory on behalf of the umbrella company.

I take that to mean that both umbrella and contractor need to sign the opt out. Whether that is appropriate after the changes to umbrellas, I don't know. The guide is dated 2007.

[Wanderer]

The umbrella itself needs to opt out, and the worker needs to opt out as well. I can't remember whether that's in the PCG guidance or in the regulations themselves - I've read it somewhere (from a proper source and everything!) but I'm too tired to think about where I read it.

The agency regulations Section 32(9) states that they shall not apply where a work-seeker which is a company, and the person who is or would be supplied by that work-seeker to carry out the work, agree that they should not apply.

I don't know if the umbrella can be construed as being a "work-seeker which is a company" in this situation? From what Sue-Ellen says, they can't but it sounds like some umbrellas and agencies think it is possible to opt out in this say.

Oh my goodness. Have we found another grey area in the regulations...

[TheFaQQer]

I wondered about that for a while. I thought it would be impossible for an umbrella worker to opt out I'm not so sure now.

The umbrella itself needs to opt out, and the worker needs to opt out as well. I can't remember whether that's in the PCG guidance or in the regulations themselves - I've read it somewhere (from a proper source and everything!) but I'm too tired to think about where I read it.

[SueEllen]

I wondered about that for a while. I thought it would be impossible for an umbrella worker to opt out I'm not so sure now.

I looked at the pages of our "favourite" umbrella company and they make absolutely no mention of Conduct of Employment Agencies and Employment Business Regulations.

The reason being is that they use the Swedish Derogation Model and consider contractors employees which in turn means they have to have proper employment contracts. This is to deal with the Agency Workers Regulations.

If other umbrella companies are using the same model to deal with the AWR then the Conduct Regulations are not applicable. Simply because the umbrella company as the employer has a blanket right to decide their restraint of trade clause.

Oh and I've looked at another two well-known umbrellas and they use the word "employee" to describe the contractors that join them.

Edited to say: I wonder what model these umbrella companies with the badly written clauses use and whether they are actually UK based. I've heard of umbrella companies based outside the UK who legally deal the tax affairs of UK residents but avoid giving their workers holiday pay and paying employer's NI, so the workers are not entitled to benefits.

[Wanderer]

But as copied into the umbrella contract the clause is complete nonsense.

I wondered about that for a while. I thought it would be impossible for an umbrella worker to opt out I'm not so sure now.

Consider the case where a LTD company is used as an intermediary, both the LTD company and the worker must elect to opt out of the agency regulations. In the case where the worker is the director and sole shareholder of the company the opt out is authorised by the same person - it's pretty clear cut.

Where the intermediary is an umbrella company, it may be possible that the opt out is valid if the umbrella company and the worker separately agree to opt out. Of course the umbrella is going to agree to this - there is no risk to them and if they don't then they will find themselves shunned by many agencies. If the worker refuses to opt out then that's their fight to have with the agency as far as the umbrella is concerned.

In fact it wouldn't be hard for an umbrella company to have a blanket restraint of trade clause that covers all agencies which is legally enforceable and difficult to challenge.

The reason this doesn't happen is that workers will typically have a free choice of which umbrella company they use. If an umbrella tried this stunt then they would find that no contractors workers would use them - there are lots of other brollies that they can use...

[SueEllen]

The umbrella is just passing on the opt out request from the agency. It's up to the person who does the work to choose if they want to opt out - see section 32(9).

But as copied into the umbrella contract the clause is complete nonsense.

The umbrella company can easily copy and amend the clause so it's actually relevant to the services they provide.

Other agencies and consultancies do that when there is a chain of them before you get to the end-client.

In fact it wouldn't be hard for an umbrella company to have a blanket restraint of trade clause that covers all agencies which is legally enforceable and difficult to challenge.

If a contractor was p*ssed off with the agency they could take the umbrella company to court and show the clause as written is unenforceable.

[Andy Hallett]

I've never heard of a Brolly stopping a worker switching to a limited company, as long as they do the right notice etc.

A lot of Umbrella companies have sister company accountancy firms now for PSC's, if you are really concerned see if you can switch to company supported by them.

[Wanderer]

Anyway what has the 'opt out' to do with the brolly.....they are not subject to agency regulations?????

The umbrella is just passing on the opt out request from the agency. It's up to the person who does the work to choose if they want to opt out - see section 32(9).

I guess that one of the reasons that agencies want people to go LTD or umbrella is that if they payroll their workers then it is impossible for them to opt out...

[Taita]

I wouldn't worry about it. they can't hold you to that - looks more like they have ripped off an agencies contract and haven't even bothered to read their own t's and c's. Can't see any contractor using them if they tried to enforce that. name them.

Agreed. Clauses copied from an agency contract. In the case of the agency they probably can enforce to protect their vested interest in supplying you (contractor) to the client.

However, umbrella cannot claim a vested interest as they do not supply your services to the client. No money changes hands between client and umbrella if you are going through an agency so they have no direct business interest to protect. Clause is unenforceable but they maybe awkward about releasing your last payment to you!

On the other hand if they are trying to say that you cannot supply your services to the agency other than through them, the wording is wrong but they may have a point although you would have to get a particularly stupid judge to uphold the brolly's view!

Anyway what has the 'opt out' to do with the brolly.....they are not subject to agency regulations????? Apologies for repeating the pronouncements of others but this sort of shoddy, badly considered, badly implemented contract documentation gets my goat!

[SueEllen]

Woops. But did you opt out before you were introduced to the client? If you were already introduced then you can argue that the opt out wasn't valid.

Makes no difference - umbrella companies don't provide work seeking services so the OP can easily point out the opt-out is null and void as the regulations don't apply.

Personally I would say nothing, ignore the umbrella company and then if they continue to harass you, let them take you to court.

They are extremely unlikely to and if they do they would rely on the restraint of trade clause being an "Employment Business" when instead they should be arguing it using something else.

[grant32]

The employment t&cs I received from one of the major umbrellas (can I mention them?) just this week also have these restrictions (only applies if opt out). I will ask them if they can remove this clause but I'm expecting resistance.

[Wanderer]

"13.3 The provisions of clauses 13.1 and 13.2 above shall only apply if you have opted out of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 in respect of that Assignment."

And of course I was stupid and rushed to get started, so signed the Opt Out... I'll know better next time.

Woops. But did you opt out before you were introduced to the client? If you were already introduced then you can argue that the opt out wasn't valid.

[Taita]

I wouldn't worry about it. they can't hold you to that - looks more like they have ripped off an agencies contract and haven't even bothered to read their own t's and c's. Can't see any contractor using them if they tried to enforce that. name them.

Absolutely agree. Clause ripped out of an agency contract. Cannot see how changing your style of business or appointing another accountancy firm (new brolly) can be prevented by the existing brolly. As another poster has stated, their legitimate business interests are not, in any way, tied into the supply of your services to the ClientCo, unlike the agency.