Early Termination - Work load not sufficient - Compensation ?

[jimbo45]

Hi there
I had a colleague who was terminated two weeks into a 3 month contract. The notice period on his contract was 4 weeks but he was told to pack up that same day. The reason for termination was that the Client had over estimated the amount of work required (although he suspects that they've now hired a "Permie" and decided to replace the contractor).

However the agency isn't paying anything other than the two weeks the contractor worked for citing some specific clause that the client can terminate AT ANY TIME even though this doesn't appear in the contactors contract except in the case of poor work or serious breach of company rules (e.g security / excessive use of internet for private purposes, drunk on company premises etc etc).

Should the contractor attempt to get the 4 weeks money -- especially as he turned down a 6 month (although slightly lower paying) contract or are the legal costs in the UK just too high so the agencies know they can get away with this type of behaviour.

Cheers
jimbo

[northernladuk]

Hi there
I had a colleague who was terminated two weeks into a 3 month contract. The notice period on his contract was 4 weeks but he was told to pack up that same day. The reason for termination was that the Client had over estimated the amount of work required (although he suspects that they've now hired a "Permie" and decided to replace the contractor).

However the agency isn't paying anything other than the two weeks the contractor worked for citing some specific clause that the client can terminate AT ANY TIME even though this doesn't appear in the contactors contract except in the case of poor work or serious breach of company rules (e.g security / excessive use of internet for private purposes, drunk on company premises etc etc).

Should the contractor attempt to get the 4 weeks money -- especially as he turned down a 6 month (although slightly lower paying) contract or are the legal costs in the UK just too high so the agencies know they can get away with this type of behaviour.

Cheers
jimbo

It is nothing to do with the agency. It is the client that is not paying. If the client doesn't pay the agent the agent can't pay the contractor. If he does no work he doesn't get paid. It is as simple as that.

You could try pushing for the cash but he will never get asked back to the client. Some people have done it and gotten away with it, most don't. It's is part of the risks of being a temporary resource.

If you do push for it there is nothing to stop the client saying that the contract has not been terminated, it continues to run until it is completed. There is, however, no work to do so the contractor get's no money. Same outcome but the contractor is still bound to the contract so it is in his best interest for the client to cancel the contract even though he doesn't really need to.

I reckon getting paid for work you didn't do would also cause problems with his IR35 status as well but I don't think that has been proved or challenged yet.

[centurian]

Check the contract again

There is probably a clause that says contractor only gets paid for work done, usually with a signed timesheet.

There is probably another clause that says ClientCo is not under any obligation to provide the contractor with work.

The combination of these two clauses effectively means that a contractor can be terminated immediately, for any reason, and with no payment. The notice period is utterly meaningless (on their side anyway).

[NotAllThere]

. If the client doesn't pay the agent the agent can't pay the contractor...

I've never signed a contract that says if the agent isn't paid, he doesn't have to pay the contractor. Generally, I get paid well before the agency gets paid.

Otherwise, exactly what centurian said. What is your contract with the agency?

[northernladuk]

I've never signed a contract that says if the agent isn't paid, he doesn't have to pay the contractor. Generally, I get paid well before the agency gets paid.

Otherwise, exactly what centurian said. What is your contract with the agency?

Indeed, in a normal business as usual situation I would agree but the OP states...

However the agency isn't paying anything other than the two weeks the contractor worked

As the agency won't be billing the client and the client won't be paying the agent then the OP isn't going to get paid is he.

[rambaugh]

Hi there
I had a colleague who was terminated two weeks into a 3 month contract. The notice period on his contract was 4 weeks but he was told to pack up that same day. The reason for termination was that the Client had over estimated the amount of work required (although he suspects that they've now hired a "Permie" and decided to replace the contractor).

Well you shouldn't be able to have your cake and eat it but that is essentially what the client is trying to do here. Not good business on their part if they are not willing to at least recompense some part of the early termination terms particularly given the fact it was a change in their own circumstances or a result of their own poor project planning.

Unfortunately they are unlikely to be obliged to pay any early termination from a legal stand point. However, things like trust, business reputation and good will are nonetheless important things that don't play out on paper and you can use these to negotiate with. State that you want to leave on good terms and aim to find a negotiated settlement for a shorter termination period (e.g. 2 weeks rather than 4 weeks).

[GillsMan]

I've never signed a contract that says if the agent isn't paid, he doesn't have to pay the contractor. Generally, I get paid well before the agency gets paid.

100% agree. Here's a clause that I saw in a contract from Silverlink Technologies:

"Fees [to MyCo Ltd] may be withheld or delayed if a client or customer of the Company [the Agency] who receives the benefit of the Services fails to pay the Company for any reason. If, having paid the Service Company the fees, a client or customer of the Company fails to pay the Company for the benefit of the Services for any reason, the Company may require the Service Company [MyCo Ltd] to repay immediately upon demand such fees as may be referable to the period in respect of which the Company has not been paid."

My response: "The relationship between the Company and the Client is not of concern to my company. We therefore cannot agree to the provision that we only receive monies if Silverlink receive monies. We would expect to be paid upon evidence being produced of completion of work, regardless of whether you have been paid. This Clause needs to be removed entirely".

Appreciate that this is a little off topic, but thought it would be interesting anyway.

As to the OP's question, personally I'd be leaving it. As someone else pointed out, a notice period is meaningless anyway, since there is no obligation to offer work. So the Client can just say, your contract runs until X date as normal, but we have no work currently. Same result = you can't invoice. It happens occasionally, but hopefully rarely.

One thing I do to avoid this happening is talking to the client during the initial meeting (interview) about why they need me. It sometimes might come across that I'm trying to talk myself out of a gig, but I'd rather ensure the client is sure they want to proceed with my services before they engage me, than have them realise a couple of weeks in that they don't need me. I had a meeting/interview last week with a utilities provider and pointed out that one of their permie/internal resources is pretty well placed to do the job. Sounds like a nuts thing to do, but if the Client does look for my assistance, I know that it will be needed as they will have considered every alternative.

[TheFaQQer]

Should the contractor attempt to get the 4 weeks money -- especially as he turned down a 6 month (although slightly lower paying) contract or are the legal costs in the UK just too high so the agencies know they can get away with this type of behaviour.

Always attempt. Always be prepared to get nothing or have to go to court to get it.

There are some posters on CUK who claim that they have done it and won, but I haven't seen anyone provide a court reference to support their posting here.

[Wanderer]

It is nothing to do with the agency. It is the client that is not paying. If the client doesn't pay the agent the agent can't pay the contractor. If he does no work he doesn't get paid. It is as simple as that.

Um, the contract is between the contractor and the agency. The contract that the agency has with the client is completely irrelevant. If the client doesn't pay the agency then that is the agency's problem, not the contractor's.

Check the contract again

There is probably a clause that says contractor only gets paid for work done, usually with a signed timesheet.

There is probably another clause that says ClientCo is not under any obligation to provide the contractor with work.

The combination of these two clauses effectively means that a contractor can be terminated immediately, for any reason, and with no payment. The notice period is utterly meaningless (on their side anyway).

There are two "probably"s there so we couldn't say for sure without seeing the contract....

"Fees [to MyCo Ltd] may be withheld or delayed if a client or customer of the Company [the Agency] who receives the benefit of the Services fails to pay the Company for any reason.

Good to see that you got that clause negotiated out, but my take on this is that I don't sign the opt out so this clause is unenforceable anyway.

Always attempt. Always be prepared to get nothing or have to go to court to get it.

Definitely, if you don't invoice for it then they definitely won't pay it! Hell, even if they don't pay because they aren't contractually obliged to pay it then you have an unpaid invoice to show HMRC when they review your IR35 status so that looks good.

Jimbo45, it's worth speaking to a legal advisor and have the contract reviewed to get an opinion on what the situation is with your specific contract.

Let us know how you get on, it's always good to know how these things pan out....

[Pondlife]

Definitely, if you don't invoice for it then they definitely won't pay it! Hell, even if they don't pay because they aren't contractually obliged to pay it then you have an unpaid invoice to show HMRC when they review your IR35 status so that looks good.

Won't you owe the VAT man 20% of this invoice value, paid or not?