Restrictive covenants -- from contractor to perm

[Adlopa]

I've been offered a perm position at a client I've been contracting at – contractors are being phased out in favour of perms (they've now all been dropped from the department I was working in).

My contract contains the usual covenant -- essentially "three months either directly or indirectly (contract of service or a contract for service)" -- but I'm unsure about how this works for contractor-to-perm transitions. (And the start date would be < 3 months.)

Since the client has terminated the contract with the agent and won't be renewing, I can't see how this covenant would work practically in this case -- the agent loses nothing by me going perm.

So is there anything to worry about here? I've yet to discuss this with the agent -- I'd like some idea of what to expect first...

This 2009 thread seems to be the most recent about how restrictive covenants work when switching from contractor to perm at the same company, but it didn't seem to go anywhere.

[Old Greg]

I've been offered a perm position at a client I've been contracting at – contractors are being phased out in favour of perms (they've now all been dropped from the department I was working in).

My contract contains the usual covenant -- essentially "three months either directly or indirectly (contract of service or a contract for service)" -- but I'm unsure about how this works for contractor-to-perm transitions. (And the start date would be < 3 months.)

Since the client has terminated the contract with the agent and won't be renewing, I can't see how this covenant would work practically in this case -- the agent loses nothing by me going perm.

So is there anything to worry about here? I've yet to discuss this with the agent -- I'd like some idea of what to expect first...

This 2009 thread seems to be the most recent about how restrictive covenants work when switching from contractor to perm at the same company, but it didn't seem to go anywhere.

I always presumed that a contract between YourCo and an agency (which you signed in your role as Company Director) does not bind what you do as an individual independently of YourCo. I'm interested if anyone can challenge this.

[WTFH]

I'd suggest discussing it with the client. They may also have a restriction clause in their contract with the agent, and if you handle it well, you get the client to sort it out with the agent, keeping you out of those discussions.

[TheCyclingProgrammer]

I always presumed that a contract between YourCo and an agency (which you signed in your role as Company Director) does not bind what you do as an individual independently of YourCo. I'm interested if anyone can challenge this.

That depends very much on what the clauses in your contract say (and whether or not they would stand up in court).

Simple solution in this case would be to get the agency and ClientCo to talk to each other. They have a contractual relationship too. Let them sort it out.

[Old Greg]

That depends very much on what the clauses in your contract say (and whether or not they would stand up in court).

Simple solution in this case would be to get the agency and ClientCo to talk to each other. They have a contractual relationship too. Let them sort it out.

That depends too. I am 90% sure that the agency that MyCo has a direct contract with has no relevant clauses in its contract with the client.

[northernladuk]

That depends too. I am 90% sure that the agency that MyCo has a direct contract with has no relevant clauses in its contract with the client.

It may not but any sensible overarching contract should have an anti poaching clause in it. Someone has dropped a bollock if it hasn't. How enforceable it is when the relationship is actually ending is questionable though.

Either way it never goes legal and negotiation is the way to deal with it.

[northernladuk]

And if you are going perm doing the same role make sure you keep your IR35 insurances going for another full year

[Adlopa]

And if you are going perm doing the same role make sure you keep your IR35 insurances going for another full year

Yeah, as mentioned in a separate related thread, I'll be leaving my Ltd as-is for at least 6 months as a potential escape route and then assess whether I'm likely to be able to stick at being permanent for at least another 2 years before winding it up in some way.

[Old Greg]

It may not but any sensible overarching contract should have an anti poaching clause in it. Someone has dropped a bollock if it hasn't. How enforceable it is when the relationship is actually ending is questionable though.

Either way it never goes legal and negotiation is the way to deal with it.

The overarching contract between client and agency is a big-client-standard-T&C-take-it-or-leave-it contract.

[northernladuk]

Yeah, as mentioned in a separate related thread, I'll be leaving my Ltd as-is for at least 6 months as a potential escape route and then assess whether I'm likely to be able to stick at being permanent for at least another 2 years before winding it up in some way.

I mean from the fact HMRC will try and class you as a disguised permie and will come after you for the tax they think you should have paid like a permie. Highly unlikely but if you slip seamlessly in to a permie role they'll think they've got a slam dunk case for you paying permie tax all along. The argument does have some merits hence keeping your insurance against it valid for a while after you've migrated.