Umbrella to Ltd - Restrictions

[Ticktock]

Hi, I took my first contract position last year, and only had a couple of days between interviewing and starting the position, so joined an umbrella company to get things moving quickly.
My contract is nearly due for renewal (which I'm expecting it will be), and when this happens I want to leave the umbrella company and move across to my own Ltd, which I'm in the process of starting up with an accountant now.
However, when I went to check my notice period with the umbrella company I found a section (not in the contract, but in T&Cs) basically stating that I won't do any business with the same end-customer for a period of 6 months after termination of my employment.

Do you think this is likely to be enforceable? I've been doing some research and see that the starting assumption for these terms is that they are void. If I ignored this, left the umbrella company and went through my Ltd anyway and got caught, would they be likely to try to enforce this term? If they succeeded, surely the penalty would only be 6 months worth of the fees they'd been collecting, so I'd still be better off as I'd save NIC, etc?

Any advice please? Thanks!

[NotAllThere]

Next time, read the contract before signing...

The term is ridiculous. They're not protecting any legimitate business relationship. I'd go along with it falling down on the restraint of trade argument. If you want a qualified opinion - ask a lawyer, such as Roger Sinclair.

[moggy]

first time i have ever heard of an umbrella comp having this term - most agencies yes - umbrella companies never. I would imagine that if they do its to cover contractors dropping the umbrella to go direct with their ltd comp and by passing the agency t's and c's that way rather than to enforce them for their own benefit, as if the umbrella did start to enforce this clause for their own good, people would soon post about it and they would go out of business.

[Sausage Surprise]

Never ever come across this and doubt if it's enforcable.

[Wanderer]

However, when I went to check my notice period with the umbrella company I found a section (not in the contract, but in T&Cs) basically stating that I won't do any business with the same end-customer for a period of 6 months after termination of my employment.

I'd just ignore it. I can't see how they could enforce this though they may make a big bluff and bluster about it. As you say, the very worst they could take you for would be 6 months of fees in a small claims court so no legal costs and that's presuming that they would win which they probably wouldn't.

The other thing to watch for is that working through an umbrella for a single engagement may mean that your expenses claims for travel and subsistence may not be payable...

[GillsMan]

My first contract was a three-monther, and I started with an umbrella co. At the end of the first three months, the client renewed, and I set up a Ltd co, cancelled the agreement with the umbrella co, and just continued like that really. No idea whether they had any such clauses, but I wouldn't have thought they'd be enforceable anyway.

[garethevans1986]

Same here Gillsman.

GE

[Ticktock]

Thanks all for the responses.

I've been speaking to a family friend (who happens to be a QC dealing with employment law).
His general opinion so far is that they may be able to enforce the restriction, but he's going to look at the contracts between myself and the umbrella, and the 3-way between myself, umbrella and agency.

Whether they would attempt to or not is of course another matter, as is whether their claim would be upheld, but I don't really want to get stuck in a legal battle when I could be working!

I think I'll speak to my agency, have them tell the umbrella company that when the contract expires then that's it, and then just go ahead.
Time to put my notice in with the umbrella company I guess!

[Clare@InTouch]

It's not a restriction stopping you from using another agency, rather than umbrella? Those are very common, but as above I've never seen a brolly include such a clause in their own contracts.

[MyUserName]

A previous agency told me that they did not allow contractors to switch from ltd to umbrellas in mid contract. I was not planning on it so I did not bother arguing.