Post Termination Clause

Dub_Steve

Hi

I'm trying to get some information for a friend. She works in a job she really likes which she got through an agency. The agency is taking 1/3 of her salary. She would like to stay on at the company but needs a wage increase due to changes in her circumstances. Her contract is due to finish early next year. She would like to be hired directly through her employer.

The agency has included a clause in her contract that after her contract has been terminated she can not work directly or indirectly for her current employer for a period of 12 months.

Is this legal? If anyone knows who I call about this please let me know.

Thanks,

Stheno

It's not uncommon in contracts like the one your friend has. I've the same type of contract and have a similar clause

Mr. Loverman

Whether it's legal or not, can you imagine this being a court case?

Stheno

Mr. Loverman wrote: »

Whether it's legal or not, can you imagine this being a court case?

There have been court cases around this, last year Vodafone were in court over their non compete clause.

Mr. Loverman

An employee has been brought to court for taking a job direct with the employer?

Stheno

Mr. Loverman wrote: »

An employee has been brought to court for taking a job direct with the employer?

No it was for leaving to go work for a competitor.

I can imagine an agency pursuing it if they were to be losing 1/3 of income from a contract for e.g. a year.

Mr. Loverman

Yeah but they wouldn't pursue the employee... they'd go after the company.

Stheno

Mr. Loverman wrote: »

Yeah but they wouldn't pursue the employee... they'd go after the company.

If the clause is in the employees contract and not the contract the agency has with the company, do you not think they'd pursue the employee?

Graham

OP, the agency is unlikely (NOT GUARANTEED) to pursue your friend. The agency is however, quite likely to pursue your friends new employer.

Your friend was obviously prepared to accept the rates initially offered, likewise the employer must have been happy enough with the rates initially agreed with the agency. Sounds like they both signed contracts to that effect. Unfortunately this is unlikely to change just because your friend wants a bit more and thinks cutting the agency out of the deal is the way to get it.

The best thing your friend can do is talk to the agency, they may agree to cut their fees to keep the contract going. Likewise, the employer could approach the agency looking for a discount as it's now a long-term contract.

Alternatively, there's usually an option to pay the agency a recruitment fee if the company wants to employ your friend permanently.

Mr. Loverman

Let's say they bring the employee to court. What will happen? The judge says you must quit your job...?

Stheno

Mr. Loverman wrote: »

Let's say they bring the employee to court. What will happen? The judge says you must quit your job...?

No usually any cases I've read about the courts tend to find in favour of the employee

Mr. Loverman

Yeah that's my point really. I can't see how the recruiter would benefit from bringing the employee to court.

Greenmachine

Stuff like this that makes me hate agencies. I wish they would dissapear, with the likes of linkedin I would like to see them made redundant.

Mr. Loverman

Mr. Loverman wrote: »

Let's say they bring the employee to court. What will happen? The judge says you must quit your job...?

If the employer thinks they may end up in court they're hardly going to hire the person in the first place.

Mr. Loverman

Sure. My only point is I don't think the employee will end up in court.

Mr. Loverman

Mr. Loverman wrote: »

Sure. My only point is I don't think the employee will end up in court.

I would agree, it would be a PR disaster for the agency, no job hunters would want to touch them.

Graham

William Whining Tenseness wrote: »

I would agree, it would be a PR disaster for the agency, no job hunters would want to touch them.

Not sure what the PR disaster would be. Woman signs contract, woman now wants to ignore contract to get more money.

Graham

Graham wrote: »

Not sure what the PR disaster would be. Woman signs contract, woman now wants to ignore contract to get more money.

Since when do facts make a difference to how people perceive something?

Mr. Loverman

Graham wrote: »

Not sure what the PR disaster would be. Woman signs contract, woman now wants to ignore contract to get more money.

William Whining Tenseness wrote: »

Since when do facts make a difference to how people perceive something?

I came here to say something similar.

Joe Duffy and the like came to mind.

Dub_Steve

Hi all, firstly thank you for the responses.

There's a point I want to clarify. It's not that she has just decided she wants more money. In my op post I should have used deserves rather than needs. Poor choice of words on my part.

She signed that contract almost 9 months ago. When she first arrived in Ireland she had little work experience here. She also applied for a junior position. Since then she has gained a lot of experience, working late and even working on wkends. In the short time she has been there she has already been "promoted" and doing a seniors work. The main issue is when her contract is up for renewal it will have to be through the agency which will take 1/3 of her salary.

They have already taken 1/3 for a year which I think is quite enough, to want to continually take it from her I think is unfair. She likes where she works and would like to stay.

Stheno

Dub_Steve wrote: »

Hi all, firstly thank you for the responses.

There's a point I want to clarify. It's not that she has just decided she wants more money. In my op post I should have used deserves rather than needs. Poor choice of words on my part.

She signed that contract almost 9 months ago. When she first arrived in Ireland she had little work experience here. She also applied for a junior position. Since then she has gained a lot of experience, working late and even working on wkends. In the short time she has been there she has already been "promoted" and doing a seniors work. The main issue is when her contract is up for renewal it will have to be through the agency which will take 1/3 of her salary.

They have already taken 1/3 for a year which I think is quite enough, to want to continually take it from her I think is unfair. She likes where she works and would like to stay.

They will view it as they have gotten her the work, and are taking their cut.

I was thinking of this earlier, I work directly for the company I do, and several of my colleagues work via an agency and their agency takes a similar cut, and they've similar clauses in their contract.

She could look for work elsewhere? And btw, if she's in IT working late and weekends is a given.

Graham

Dub_Steve wrote: »

The main issue is when her contract is up for renewal it will have to be through the agency which will take 1/3 of her salary.

That 1/3 was never part of her salary, it is the agency margin. The fact she now wants it doesn't change that I'm afraid.

Stheno

Graham wrote: »

That 1/3 was never part of her salary, it is the agency margin. The fact she now wants it doesn't change that I'm afraid.

Yup, that's my point too, she entered into a contract at that wage, with a clause saying she can't work direct.

Graham

Stheno wrote: »

Yup, that's my point too, she entered into a contract at that wage, with a clause saying she can't work direct.

Absolutely, an absolutely standard part of most temp contracts, without it everyone would be working directly by the 2nd week.

seamus

In technical terms, non-compete clauses are not actually enforceable since they're an impediment to the employee's right to earn a living. That doesn't mean however that they're illegal.

http://www.hrpgroup.ie/non-complete-clauses/

In this case, the agency has the contract with the company and the employee has the contract with the agency. Part of the contract between the agency and the employer probably states that where the company takes up the employee directly within a certain timeframe, they are required to pay a fixed (or even commission-based) fee, same as they would with any candidate they headhunted.

So while it's very unlikely (nay impossible) that the employee will find themselves in trouble, the company themselves might decide that hiring her is too much hassle for them.

Dub_Steve

Graham wrote: »

Absolutely, an absolutely standard part of most temp contracts, without it everyone would be working directly by the 2nd week.

Do you work for a recruitment agency?

The issue is with her not being able to work for her current employer for 1 year after her 12 month contract is up

Stheno

Dub_Steve wrote: »

Do you work for a recruitment agency?

The issue is with her not being able to work for her current employer for 1 year after her 12 month contract is up

You're confusing who her current employer is here tbh

It's the agency, not the company the agency have a contract with

RentDayBlues

Dub_Steve wrote: »

Do you work for a recruitment agency?

The issue is with her not being able to work for her current employer for 1 year after her 12 month contract is up

But was she to be hired directly by the comoany the agency would get a once off fee and this would resolve the issue.

However, your friend needs to realise that were the company to hire her directly she won't get what she sees as the "full salary", they know what the agency is paying her as a salary and they pay a fee on top of this. Most companies will only offer the salary directly

Stheno

RentDayBlues wrote: »

But was she to be hired directly by the comoany the agency would get a once off fee and this would resolve the issue.

However, your friend needs to realise that were the company to hire her directly she won't get what she sees as the "full salary", they know what the agency is paying her as a salary and they pay a fee on top of this. Most companies will only offer the salary directly

Exactly especially if she is there as director of a limited company, no holiday pay, no employers prsi, no benefits from the company procuring someone from an agency

Mrs OBumble

Graham wrote: »

That 1/3 was never part of her salary, it is the agency margin. The fact she now wants it doesn't change that I'm afraid.

It's their margin, yes, and it covers holiday pay (8%) and employer PRSI (about 10%), as well as all the smaller costs (employers liability insurance, payroll administration costs advertising etc). Not nearly as lucrative when you factor them in.

It's more usual for these clauses to be in the company /agency contract. My guess is that the company are cheap and don't want to pay the break fee, so the agency reacted by putting the clause into their employee contracts.

The company may or may not be willing to hire her directly. If they are, then she can pretty much guarantee that the agency won't get her any work ever in the future.

Graham

Mrs OBumble wrote: »

It's their margin, yes, and it covers holiday pay (8%) and employer PRSI (about 10%), as well as all the smaller costs (employers liability insurance, payroll administration costs advertising etc). Not nearly as lucrative when you factor them in.

This

Mrs OBumble wrote: »

It's more usual for these clauses to be in the company /agency contract. My guess is that the company are cheap and don't want to pay the break fee, so the agency reacted by putting the clause into their employee contracts.

It's quite normal to find it in both sets of contracts. I can't recall ever seeing a professional services contract that hasn't included it.

The employing company will probably find they have an option of paying a one off finders-fee if they want to end the relationship with the agency. It's probably in the contract they signed and is likely to be 20% - 50% of the first years total package.