Contractors' Questions: Are contractual changes a trick I can challenge?

Contractor’s Question: The team of IT contractors I’m on was informed  of a change to the billing and payment system we use. We were told we would be removed from the existing payment system and registered to our outsourcer's system. Despite having been employed via a third party agency that was originally responsible for processing our contracts and salary payments, this third party remains ‘in the loop;’ as they are still our direct employer as such.

Last week our contracts were amended to incorporate the outsourcer as the new paying authority in lieu of the agency. We were told in writing there would be no changes to our contractual Terms and Conditions apart from some workplace-related 'Special Conditions' which I have sent to ContractorUK for this question.

No additional changes were mentioned (to rates for example), nor did any of us receive copies of the revised contracts. Approvals were all done online via our respective companies, with only the ‘special conditions’ being new – the initial Ts&Cs stood, we were told. 

But now we’ve  been notified by the outsourcer that mandatory furlough periods will be introduced next month. This implies that the contracts now appear to be based on the outsourcer's employment conditions and not the agency’s conditions we had originally subscribed to. Previously, we never received any notifications relating to furlough periods.

We are not directly employed by the outsourcer, yet it now seems that we are, by virtue of the fact that we have  to sign over to their new timesheet, billing/payment system and Ts&Cs containing furlough periods. Are there any grounds to challenge such an arrangement and the deceitful process enforced to get us to move to the new payment system?

Expert’s Answer: From the outset it is difficult to be conclusive without more in the way of facts and evidence, despite the useful summary and ‘special conditions’ you’ve sent to me via ContractorUK.

Nevertheless, there are two imperative points: are you legally bound by the new contractual terms that have been added to the revised contract? Secondly, if you are, then are there any grounds to challenge the new contractual terms?

The third party agency cannot vary the existing terms and conditions without providing some form of consideration (i.e. money) as the contract may be rendered unenforceable if this were to materialise. It is also worth deliberating whether the third party agency has the authority to bind you and the other IT contractors.

Furthermore, according to English case law, the terms and conditions which are not immediately visible to the other contracting party will be effectively incorporated into the relevant contract as long as reasonable steps are taken to bring the existence of the terms and conditions to the notice of the other party before the transaction is concluded.  

If established, misrepresentation can affect the validity of the contract. In order for you to have a successful action, the contractors would need to show that a false statement had been made, inducing them to enter into the agreement. The outsourcer must have known the terms were wider than what was originally disclosed to the IT contractors. Even if it was reckless in this regard, it can still be deemed liable for misrepresentation. The burden of proof lies on the contractors and they will have to demonstrate the following:

  • the outsourcer has made a false statement which it either knew to be false, was reckless as to whether it was true or false or was made without reasonable grounds for believing its truth;
  • the outsourcer intends that the IT contractors rely on the statement; and
  • the contractors have consequently suffered a loss.

The key component of loss however, is missing from the facts. We do not know if you or the other contractors have suffered some form of loss. If no loss has been incurred or it has been relatively minor, then the costs of taking legal action may outweigh any benefit that follows. Moreover, initiating proceedings may affect you ability (and the ability of your colleagues) to secure future contracting work; information about such events are hardly ever concealed behind closed doors for too long in the world of contracting.

The expert was Mekael Rahman, trainee solicitor at Lawdit Solicitors.

Wednesday 6th May 2015
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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