Restrictive covenant clause Restrictive covenant clause
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  1. #1

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    Default Restrictive covenant clause

    Hello there,

    I am relatively new to contracting, only started last November. However, I need some guidance with a way forward.
    Apparently there are two agencies involved between myself and the end client and as you can imagine, the commission is more than 100% of what I get, this is hurting both the ends, i.e the client and myself, specially with IR35 coming in.

    Now, the client is ready to hire me directly through one of their umbrella company but I am not sure what my legal position is? There is a restrictive covenant clause in my contract such as "The Intermediary and the Consultant shall not for a period of 12 months following the termination of the Assignment enter into any agreement to provide services directly, or through any other person, firm or Employment Business, to any Hirer for which he/she has carried out Assignments at any time during the previous 12 months "

    I have tried asking for a no objection certificate from my agent and he has obviously denied the same.
    Is there any way I can get hired directly to the end client? any help is much appreciated!

  2. #2

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    Quote Originally Posted by newbie49 View Post
    Hello there,

    I am relatively new to contracting, only started last November. However, I need some guidance with a way forward.
    Apparently there are two agencies involved between myself and the end client and as you can imagine, the commission is more than 100% of what I get, this is hurting both the ends, i.e the client and myself, specially with IR35 coming in.

    Now, the client is ready to hire me directly through one of their umbrella company but I am not sure what my legal position is? There is a restrictive covenant clause in my contract such as "The Intermediary and the Consultant shall not for a period of 12 months following the termination of the Assignment enter into any agreement to provide services directly, or through any other person, firm or Employment Business, to any Hirer for which he/she has carried out Assignments at any time during the previous 12 months "

    I have tried asking for a no objection certificate from my agent and he has obviously denied the same.
    Is there any way I can get hired directly to the end client? any help is much appreciated!
    Nope especially now the agent is aware and will be paying attention to it.

    The only thing the end client could do is to get the agency between them and your agency to drop your agency and see how things play out.
    merely at clientco for the entertainment

  3. #3

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    Why is the commission hurting the client and what has this to do with IR35?

    If the client is unhappy with the amount they pay to get a suitably qualified contractor they should be renegotiating the agreement with the agency. Either that or get a new agency in and agree a fixed rate of about 5% and everyone is happy. No need to start testing the legalities of the engagement.

    The other option is for the client to just dump the agency model altogether and go direct. If they do this it has the advantage of removing any handcuffs.

    The worst option is to try by passing the encumbant agency and agreements which brings in these complexities.

    Bottom line if the client wants you direct when the agent is still around the handcuff is very likely to stand. The agency is losing money by you going direct.

    As mentioned this is up to the client to sort. They can strong arm the agency with the threat of dropping their services if they don't play ball in this case. The other option is the client pays the agent off.

    Just going direct and risking the fall out from a handcuff which looks pretty solid without any of the options above is the wrong thing to do.

    Get your client to sort this out if its what they want.
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    Quote Originally Posted by northernladuk View Post
    Get your client to sort this out if its what they want.
    This. Anything else is going to just end up in pain.

    Your agency probably can't release you even if they wanted to (they don't) because their contract with the other agency probably doesn't allow them to.

    The only one with the power to change this is the client. They hold the money and the power. The agency isn't going to let go without getting some of the money they hoped to get out of your on-going work, or some other consideration. If they are dealing with you, since they are in a stronger position than you, it will cost more. If they are dealing with the client, who can always just terminate them if they are unreasonable, it will cost less.

    It's all about money. The agent wants X amount, but would settle for Y. If negotiating with you, they'll settle for Y plus something, if with the client probably Y minus something (since the client can turn it into them not getting anything).

    Just tell the client your contract with the agency doesn't allow direct, but if they can persuade the agency to allow it you'd be glad to do it.

  5. #5

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    Quote Originally Posted by northernladuk View Post
    Why is the commission hurting the client and what has this to do with IR35?

    If the client is unhappy with the amount they pay to get a suitably qualified contractor they should be renegotiating the agreement with the agency. Either that or get a new agency in and agree a fixed rate of about 5% and everyone is happy. No need to start testing the legalities of the engagement.

    The other option is for the client to just dump the agency model altogether and go direct. If they do this it has the advantage of removing any handcuffs.

    The worst option is to try by passing the encumbant agency and agreements which brings in these complexities.

    Bottom line if the client wants you direct when the agent is still around the handcuff is very likely to stand. The agency is losing money by you going direct.

    As mentioned this is up to the client to sort. They can strong arm the agency with the threat of dropping their services if they don't play ball in this case. The other option is the client pays the agent off.

    Just going direct and risking the fall out from a handcuff which looks pretty solid without any of the options above is the wrong thing to do.

    Get your client to sort this out if its what they want.

    The inflated rate is costing the client more for the same service that other contractors are providing.
    With the IR35 changes, I am renegotiating my day rate and the agency's are putting the difference (increase) back to the end client.
    The client is willing to hire me through another umbrella company at a lesser cost, I wanted to know what my legal risk exposure is, which seem quite high here.

  6. #6

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    Quote Originally Posted by newbie49 View Post
    The inflated rate is costing the client more for the same service that other contractors are providing.
    You mean they are paying 600 quid and getting a contractor worth 300 quid?

    With the IR35 changes, I am renegotiating my day rate and the agency's are putting the difference (increase) back to the end client.
    So you are going inside then?
    The client is willing to hire me through another umbrella company at a lesser cost, I wanted to know what my legal risk exposure is, which seem quite high here.
    It does so if that is what the client wants let them sort it out. Try and convince them to let you use an umbrella (proper one) that suits your needs rather than force you to use a list.
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  7. #7

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    Quote Originally Posted by northernladuk View Post
    You mean they are paying 600 quid and getting a contractor worth 300 quid?



    So you are going inside then?


    It does so if that is what the client wants let them sort it out. Try and convince them to let you use an umbrella (proper one) that suits your needs rather than force you to use a list.
    , yeah all contractors will be moved inside eventually (blanket approach), thanks for all the advice!
    Last edited by newbie49; 19th February 2020 at 16:29.

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    Quote Originally Posted by newbie49 View Post
    , yeah all contractors will be moved inside eventually (blanket approach), thanks for all the advise!
    Advice.

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