Non Compete Clause in Contract

[skkumar]

Hi,

I have signed a contact and working for a client through consulting company (for last 18 months) and the consulting company is not raising the rates and iam losing 40% of my billing to the middle consutancy companies.

Myself(Limited Company) -> Consulting Company A -> Consulting Company B -> Client

Non Compete Clause in the contact i have signed to Consulting Company A

"Consultancy shall not during the subsistence of this agreement and for one year thereafter either solicit any business from a customer of or enter into any arrangement/aggrement with <Consultancy A> customers or porvide any service to <Consultancy A> customers except through <Consultancy A>.Consultancy agrees that <Consultancy A> may suffer irreparable harn and the damages suffered have been quantified as £25,000 for each violation plus 50% of the invoice raised by the supplier on such customer of <Consultancy A>.However, this stipulation is not applicable to the already existing customers of the Supppier"

Now the client is ready to take me through another consultancy company Consulting C, but my question is if i do a exit from the Existing Consultancy Company A and then join the same client by Consulting Company C, will this cause legal issue.

Basically Consulting Company A and Consulting Company B are taking 20% 20% from the billing and this relsults in 60% to me.

But Consulting Company C is ok to take 15% so ill be getting 85% for me.But i need to move from the existing contract.

Your suggestions and any legal issue and workaround will be of great help.

Thanks
SK

[northernladuk]

Negotiate with the consultancies and get them to reduce the 20% of 20% down to 15% of 15% so more drops in your pocket or you walk. You have been there 18 months so have good local knowledge which will be difficult to replace.

You are not going to get around the non compete clause. The whole reason for it is to stop you working for the client and the guys losing out, which is exactly what you are trying to do. The fact there will be a direct loss to Conultant A and B if you do this it will be very easy to enforce.

Techinically 20% of a rate that has already had 20% off is not 60%. It't 64% There you go. I have given you a 4% rise already

[SimonMac]

IANAL but doesn't non compete clauses stop you going direct, in the example given neither Consulting C or the end Client are a customer of Consulting A (only Consulting B is) so there is, in my opinion, wiggle room to throw enough doubt into the ambiguity of the contract if solicitors get involved.

[northernladuk]

IANAL but doesn't non compete clauses stop you going direct, in the example given neither Consulting C or the end Client are a customer of Consulting A (only Consulting B is) so there is, in my opinion, wiggle room to throw enough doubt into the ambiguity of the contract if solicitors get involved.

Re-reading it this could be true, only talks about customer of A but what you can gaurantee is if the solicitors get involved, or well before that even, all parties will drop the OP like a brick once trouble starts. Couple of snotty mails between all parties and the client will put any chances you have to bed. Maybe speak to C and make them aware of what might happen and are they willing to support it.

We don't know what other contracts exist between A and B or B and Client. I would expect it would include something around poaching staff. Surely if there wasn't the big offshoring guys would just be in a war of staff poaching?

May not be relavant but are Visas involved here?

[BlasterBates]

Hang on.....

The customer of Consulting company A, is consulting company B. Now is the client a customer of consulting company A? If not you're in the clear. You can't work for Consulting company B via another company but you might be able to go to the client via consulting company C.

Worth checking anyway, a get out of jail free .....maybe.

[Wanderer]

"Consultancy shall not during the subsistence of this agreement and for one year thereafter either solicit any business from a customer of or enter into any arrangement/aggrement with <Consultancy A> customers or porvide any service to <Consultancy A> customers except through <Consultancy A>.Consultancy agrees that <Consultancy A> may suffer irreparable harn and the damages suffered have been quantified as £25,000 for each violation plus 50% of the invoice raised by the supplier on such customer of <Consultancy A>.However, this stipulation is not applicable to the already existing customers of the Supppier"

It's pretty draconian - I doubt that it would stand up in court because you could argue it was an unreasonable restraint of trade.

Did you opt out of the Agency Regulations? If you didn't then this clause doesn't apply to you and is unenforceable. If you did sign that opt out then you've got a bit of a problem and perhaps you have learned a lesson about not opting out next time....

[Safe Collections]

If the contract is between two limited companies then it is the company that is held to the terms and not you personally.

As such if you were to incorporate a new Ltd company it would be free of any contractual obligations that your current Ltd company is held to.

If I were you I would still expect Consultancy A & B to throw their toys out of the pram when/if they find out...