Whose IT contacts are they anyway?

Working as a self-employed contractor means working with a number of different individuals, some of whom may be clients of the company you work for, some of those may be contacts of your own. Some may be individuals who you get to know, and build up a rapport with, over the course of working for the company. Some you may even get to know socially.

So what happens when you stop working for your client and move to another position?

Commonly this question arises when a contractor's contract comes to an end and the contractor takes with him a copy of the database of names and addresses of his client's contacts.

This sort of action is very likely to be in breach of the terms on which the contractor is employed and could well lead to legal proceedings, a claim for damages and/or an injunction requiring the contactor to return the database and make no (further) use of it.

Aside from any contractual provision it is likely that the client will have intellectual property rights in the database that it can assert against the contractor. The client might even be in breach of its own data protection obligations in respect of its contacts if it does not seek to prevent the contractor from removing parts of the database that contain personal data.

Aside from the database itself though – what about individuals who have freely provided their details to the contractor, and who may be more than willing to instruct the contractor (rather than the client) on his own account? What about individuals that the contractor knew before working for the client or knows socially, outside of work?

Ultimately this all comes down to what restrictive covenants are in place in the contract between the contractor and the client, the way that they're drafted and whether they are enforceable.

Restrictive covenants come in different forms and might prevent a given contractor from carrying out similar work in a given territory or restrict the contractor from working, or offering to work, for the client's customers. They are usually limited to a period after the end of the contractor's contact.

How enforceable these restrictive covenants are may well depend on how they are drafted and indeed the scope of those covenants. Do they protect a legitimate interest of the business or are they intended merely to prevent any competition?

Clauses that are significantly more onerous than is required to protect the client's legitimate business interest (for example they cover a wider geographical area, last for longer, or are generally more restrictive than is necessary) are likely to be unenforceable.

Restrictive covenants placed on independent contractors by Employment Agencies or Employment Businesses (within the meaning of the 2003 Conduct of Employment Agencies and Employment Businesses Regulations) are also likely to be unenforceable as a result of those regulations.

Particularly where a contractor has a long contract with a client, the restrictive covenants put in place at the start of the contract do not cover all of the circumstances that the contractor will come across over the course of his or her work, so might restrict the contractor from working for (for example) paying customers of the client but not from contacting other contacts such as referrers, intermediaries, or contacts of other group companies of the client.

Ultimately though contractors should be aware that restrictive covenants can (and are) enforced by the courts and can in some circumstances prevent contractors from carrying out business for contacts they may come to believe are "theirs".

Where contractors are working on the basis of their current contract being a stepping stone to their next project or next stage of their career, checking and negotiating the scope of any restrictive covenants should be a key part of accepting a new assignment.

Article authored and supplied by Richard Nicholas.

Richard Nicholas is an IT lawyer with Browne Jacobson LLP (with offices in London, Birmingham and Nottingham)

Tuesday 13th Nov 2007
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