Contractors' Questions: What about contracting for a new client's rival?

Freelancer’s Question: What should contractors do about new clients and working for their rivals? I ask because a company has approached me, enquiring if I would be interested in contract work with them, but I’m already contracting for one of their direct rivals.

I'm happy with my existing client but do want to take on new clients too, as I can't rely on a single income source. Can an outfit demand that I tell them which other clients I am working for, if it is a direct competitor, or should I volunteer this detail as a professional courtesy?

Expert’s Answer: The starting point will be to consider the terms of any agreement which you have with in place with the company and your working relationship. There may be a term requiring you, for example, not to undertake work for a competitor without the prior consent of the company, or to promote the success/interests of the company. Such terms are often found in agreements between companies and self-employed consultants.

If, however, the nature of your work is such that the company engages your services as a self-employed contractor on an ad hoc basis or to carry out one-off projects, then I would expect you to have fewer ongoing obligations/responsibilities in respect of the company. In such circumstances and in the absence of any agreed terms to the contrary, you would normally be free to carry out work for competitors and not be obliged to inform the company who you are working for. It is therefore a matter for you whether you decide to volunteer such information as a matter of courtesy.

For example, if the company is likely to find out that you will be working with a competitor, they may feel that they should have heard it from you in advance.  However, you will also need to be mindful of your relationship with the new client and that it may not be appropriate to give their name to the existing client from a legal and commercial perspective.

Even if the nature of your work is more akin to having an ongoing consultancy relationship with the company, consultants (unlike employees) are not subject to an implied duty of fidelity towards the company, meaning that you would be free to provide your services to a competitor. In addition, unlike employees, consultants are generally under no implied obligation of confidentiality, although you should of course be mindful that making use of the company’s confidential information elsewhere may damage your relationship with the company and, in certain circumstances, may render you in breach of legal obligations, for example under the Data Protection Act 1998. Furthermore, the implied duty of trust and confidence which exists between an employer and an employee has not, thus far, been applied to stand-alone consultancy relationships. However, as mentioned above, you should check that there are no agreed/express terms to the contrary.

As you will see, self-employed contractors/consultants have more freedom to work with different companies and are not subject to the same implied duties as employees. This supports the view that you should not legally have to disclose your other client relationships to your existing client. However, you should check the terms of any contract and consider whether any terms have been agreed in correspondence or orally which may impose alternative obligations on you. In addition, you do of course need to be confident that the client company cannot try to assert that you are actually an employee of theirs, based on earlier working practices, and that you are therefore bound by the implied employee obligations.

Please note, this answer to your question is for general guidance only and should not be used for any other purpose.

The expert was Brabners LLP, a legal advisory to the Freelancer and Contractor Services Association (FCSA).

Editor’s Note: Related Reading –

Contractors’ Questions: How to draw up a contract?

Contractors’ Questions: What if I breach a restrictive clause?

Contractors’ Questions: Can I bypass the agent and go direct?

Thursday 8th Sep 2016