Handcuff clause - is it enforceable if the "assignment" comes to its natural end? Handcuff clause - is it enforceable if the "assignment" comes to its natural end?
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  1. #1

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    Default Handcuff clause - is it enforceable if the "assignment" comes to its natural end?

    Hello (been using the search function),

    Currently contracting through an agent to a large company.

    The contract Schedule has the assignment end date as 31/12/2018.

    The end client has told me they are not going to renew in the new year.

    My "opt out" terms and conditions state:

    RESTRICTION
    The Consultancy shall not and shall procure that the Consultancy Staff shall not for a period of 6 months following the termination of the Assignment supply the services of the Consultancy Staff directly, or through any other person, firm or company, to any Client for whom it has carried out the Assignment at any time during the previous 6 months (save in the case of supply through an Employment Business or recruitment consultancy with whom the Consultancy was also registered at the date of commencement of the Assignment).

    TERM AND TERMINATION
    This Agreement shall commence on the date set out in the Schedule and shall continue until completion of the Consultancy Services to the reasonable satisfaction of the Client at which time this Agreement shall expire automatically unless previously terminated by the Employment Business of the Consultancy giving the other party the period of notice specified in the Schedule.


    There are more terms, but I can't type them all out.

    So, if I get to the end of the Assignment (ie 31/12/18), then this Agreement expires, and the handcuff no longer applies?????

    Many thanks for any help......

  2. #2

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    Unless the client wants you to continue working for them one way or another within the handcuff period it's irrelevant.

    If they want you back within the handcuff period they may use the same agency so no issue.

    If they want you back direct or as an employee then they will be aware of similar restrictions in their contract with the agency and will be willing to resolve that to offer you the work in the first place.

    You need to give us more info on why you are worried about the handcuff clause to get more specific feedback.
    Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.

  3. #3

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    Quote Originally Posted by Hobosapien View Post
    Unless the client wants you to continue working for them one way or another within the handcuff period it's irrelevant.

    If they want you back within the handcuff period they may use the same agency so no issue.

    If they want you back direct or as an employee then they will be aware of similar restrictions in their contract with the agency and will be willing to resolve that to offer you the work in the first place.

    You need to give us more info on why you are worried about the handcuff clause to get more specific feedback.
    Hello,

    The end client is having a policy of getting rid of “agency contractors” as they want to move to staff long term. But short term they want to use larger companies to supply people, but not agencies with “one man bands”.

    I am in talks with one of these “larger companies” to get in via that route (one man band Ltd Co to larger company to end client”).

    Simple question, does the “this agreement ends when the assignment ends” get rid of the handcuff????

    It won’t be a “termination”, it will come to its end “naturally”.

    I don’t know the terms between the agency and the end client, but normally they are “back to back” and should hopefully reflect the terms between me and the agency.
    Last edited by thewanderer; 1st December 2018 at 09:32.

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    An early example of an over-reaction to the threat to change the IR35 rules in the private sector it seems: let's pay 50-100% more for the same staff because we don't understand how IR35 works rather than ensuring our contract resources are engaged outside IR35 in the first place.

    But to answer the question "...6 months from the termination of this agreement..." is not invalidated by the termination of the agreement but enabled by it. So it will apply. And, just as a kicker, going back via a third party will still breach that condition, because it's there to protect the agency's income stream from that client.
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    Quote Originally Posted by malvolio View Post
    An early example of an over-reaction to the threat to change the IR35 rules in the private sector it seems: let's pay 50-100% more for the same staff because we don't understand how IR35 works rather than ensuring our contract resources are engaged outside IR35 in the first place.

    But to answer the question "...6 months from the termination of this agreement..." is not invalidated by the termination of the agreement but enabled by it. So it will apply. And, just as a kicker, going back via a third party will still breach that condition, because it's there to protect the agency's income stream from that client.
    My contract with the agency is outside IR35. Substitution, no mutuality and no direction and control.


    But..... the agreement is NOT being terminated. The terms of this agreement “expire automatically” when the assignment ends. That’s how I read it.

    If it was terminated today, with two weeks notice then that clause would be invoked.

    “This Agreement shall commence on the date set out in the Schedule and shall continue until completion of the Consultancy Services to the reasonable satisfaction of the Client at which time this Agreement shall expire automatically unless previously terminated by the Employment Business of the Consultancy giving the other party the period of notice specified in the Schedule.”

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    Quote Originally Posted by malvolio View Post
    An early example of an over-reaction to the threat to change the IR35 rules in the private sector it seems: let's pay 50-100% more for the same staff because we don't understand how IR35 works rather than ensuring our contract resources are engaged outside IR35 in the first place.
    It’s not an overreaction, the terms have been in place since early 2016.

    The end client wants to ensure the “knowledge” is retained “in house” due to the nature of the project.

    It’s irrelevant that in the team I provide services to that I’ve been there the longest......

  7. #7

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    The clause is there to stop you changing agencies renewal time as well as mid contract, which is fair enough. However if the agency is unable to secure any work for you it is doubtful that the agency can enforce it to prevent you working there.

    The Courts are sensitive to the issue that these non-dealing covenants can restrict freedom of employment, and will only enforce them when they are very clearly protecting the business interests of the agency.
    The point is the judiciary view these clauses with a great deal of scepticism. The clause is acceptable if it is protecting a legitimate commercial interest of the agency, but in this case if the agency is no longer an agency the client will deal with then you are not harming their commercial interest.

    The fact is agencies include these clauses as a deterrent, they're not going to enforce it if there is doubt about winning in court.
    Last edited by Contractor UK; 25th May 2019 at 13:19.
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    To be sure you may need to seek legal advice as they love pouring over contract clauses and whether the wording is intact in terms of being enforcable for your specific scenario.

    I agree that on that wording that 'termination' doesn't look like it applies when the contract ends naturally by not being renewed but I'm an optimist and agency would argue that the renewal didn't take place as a way of circumventing the terms rather than terminating it.

    If the client is looking to retain knowledge why not offer you a permie position, where they would pay off the agency if necessary to break the hancuffs?

    Are there other contractors looking to do same in that the client is offloading more contractors in this way via a new third party consultancy style arrangement? If so then the issue is not yours but the client's and consultancy's in that they have to put in place what they want and pay off the agency if necessary.

    Personally I'd seek the work and worry about the handcuff if the agency ever found out about it. At that point they either will want paying off to cover their loss of potential income, or decide whether to take it to court. If you are the only one in this position with the client and agency then less likely the agency will find out than if there are multiple contractors being diverted the same way by the client at the agency's loss.
    Last edited by Hobosapien; 1st December 2018 at 11:12.
    Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.

  9. #9

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    Quote Originally Posted by Hobosapien View Post
    To be sure you may need to seek legal advice as they love pouring over contract clauses and whether the wording is intact in terms of being enforcable for your specific scenario.

    I agree that on that wording that 'termination' doesn't look like it applies when the contract ends naturally by not being renewed but I'm an optimist and agency would argue that the renewal didn't take place as a way of circumventing the terms rather than terminating it.

    If the client is looking to retain knowledge why not offer you a permie position, where they would pay off the agency if necessary to break the hancuffs?

    Are there other contractors looking to do same in that the client is offloading more contractors in this way via a new third party consultancy style arrangement? If so then the issue is not yours but the client's and consultancy's in that they have to put in place what they want and pay off the agency if necessary.

    Personally I'd seek the work and worry about the handcuff if the agency ever found out about it. At that point they either will want paying off to cover their loss of potential income, or decide whether to take it to court. If you are the only one in this position with the client and agency then less likely the agency will find out than if there are multiple contractors being diverted the same way by the client at the agency's loss.

    I will get a “commercial terms review” done by QDOS.

    If the agency manages to get a renewal out of the end client I need to “reject” the renewal, so I’m not “in contract” and the clause gets invoked.

    But the agency isn’t really doing much for me.

    I think I’m in the minority in the team I am in, in the “not being extended” situation.

    Ive told the agency that the end client wants staff people in.

    I’m trying to get in via a “larger company“ into a slightly different but related team.

    It’s a very complex situation to manage with internal end client company politics.

    At the end of the day, I enjoy the work and enjoy the end client and would like to stay in that place doing contract work.

    Thanks for your help

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