Restrictive covenants

[BlackCountryContractor]

Hello

Last night with fellow contractors we were discussing the restrictive covenants placed in contracts aka “handcuff clauses” that most of us have encountered during our time in contracting. A suggestion was thrown on the table that the restrictive covenants were only placed between a contractor’s LTD and the agency and circumventing this would be possible by going through an umbrella company as it would appear if taken to court that it was an agreement between 2 companies and not on the individual as business transacted outside of the ltd company doesn't affect the restrictive covenant.

Now I was deeply skeptical as I mentioned to my colleagues that you normally sign the contract as a named representative of your ltd (added emphasis on the part of named) and therefore bound along with your ltd company to restrictive covenant while your LTD is still active.

Question: Am I wrong with my thinking on this or has this been something contractors been doing if they want to jump ship?

[Lance]

You are wrong. Yes it’s between company and company. Restrictive covenants for individuals are very difficult to enforce. Remember that you cannot see the contract between agency and client and there will be different restrictive covenants in those.

What is more common these days, is for a client to use only one agency, and no matter what route you get in there you will always be handled by that agency. For this reason it’s less relevant anyway. The advantage for the client is the agencies are on a fixed margin (around 12%).

[BigDataPro]

Generally the clause would say "...either directly or indirectly...". Whether it is enforceable or not is another thing.

[mike67]

The contract is company to company and so what you do personally is up to you. Agencies often include a provision to say that your company procures that you as an individual will not go directly or indirectly to the client except through them. This says that your company should get an agreement from you that you will not do this, but there is still no direct recourse from the agency to you as an individual if you go through an umbrella or a new limited company - the worst they could do is take action against you limited company which would potentially be in breach of contract for not getting the agreement from you not to go direct. If there are no surplus assets in your company, good luck to them if they decided to go after it.

[northernladuk]

The contract is company to company and so what you do personally is up to you. Agencies often include a provision to say that your company procures that you as an individual will not go directly or indirectly to the client except through them. This says that your company should get an agreement from you that you will not do this, but there is still no direct recourse from the agency to you as an individual if you go through an umbrella or a new limited company - the worst they could do is take action against you limited company which would potentially be in breach of contract for not getting the agreement from you not to go direct. If there are no surplus assets in your company, good luck to them if they decided to go after it.

Or the agency can point out a valid handcuff to the client or new agency so they drop you to avoid any legal hassle....

There are new rules about closing and opening new LTD's which are going to trip people up with fairly large warchests as well so that won't help.

[oliverson]

came on here expecting to find the conversation about convents and nuns getting out of their skin tight habits :-(

[northernladuk]

came on here expecting to find the conversation about convents and nuns getting out of their skin tight habits :-(

But you found a one day ban for posting inappropriate stuff in the prof forums instead?

[oliverson]

Father forgive me for I have sinned!

Now repented by removing said photo.

Amen

[northernladuk]

Father forgive me for I have sinned!

Father might. Cojak most certainly won't.

[cojak]

Be thankful I only came upon the report today...