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,

nuac

I cannot see how the agency can enforce such a clause against the employee.

Even if the agency has an agreement with the employer on this, I doubt if a court would enforce it

GerardKeating

nuac wrote: »

I cannot see how the agency can enforce such a clause against the employee.

As the OP said, the employee has the clause in her contract, so signed it, and might not be able/willing to fight in court.

nuac wrote: »

Even if the agency has an agreement with the employer on this, I doubt if a court would enforce it

I would also imagine they also have a clause in the employers contract, while X works for you, you pay is loadsa money, they might rather get a new employee than continue to pay.

leeroybrown

Regardless of the legal enforceability there's a very strong chance that signing the contract would be enough to let the agency get an injunction barring her from working for them pending a legal action. When it comes to employment an injunction and some careful legal delay tactics is as good as not having the job. If she wants to do this specialist legal advice would be good idea.

billy few mates

I used to do a lot of contracting many moons ago and this was a standard clause in almost all (if not all) the contracts I worked under. It was basically designed to stop someone trying to cut the agency out of their share of the money for recruiting and supplying me etc. i never had to test the laws on it but I did know of one or two companies who then went on to employ the contractor directly but only after they'd served out their 'no recruitment' clause, presumably because the company had a similar agreement in place with the agency....

MarkAnthony

leeroybrown wrote: »

Regardless of the legal enforceability there's a very strong chance that signing the contract would be enough to let the agency get an injunction barring her from working for them pending a legal action. When it comes to employment an injunction and some careful legal delay tactics is as good as not having the job. If she wants to do this specialist legal advice would be good idea.

I'd question the assertion that an injunction would be easily obtained. Under Campus Oil one of the conditions of the test is whether or not damages would be an adequate remedy, I'd argue they would almost certainly be adequate in this situation. That said I completely agree with you that legal advice should be sought.

OP you are looking at a restraint of trade clause. They are legally enforceable however they are treated with a high degree of judicial skepticism. For what it's worth, off the top of my head without any research, this one looks reasonable - however - legal advice should be sought.

As for who to contact - flac.ie and employmentrights.ie may be of some assistance. The best of luck.

Victor

Potentially, the client business just buys out the agency.

Employee should be careful not to compete with their actual employer - the agency.

JimsAlterEgo

Normally in this scenario, the company comes to an agreement with the agency for a lump some figure.

plodder

What's the purpose of a clause like this? Presumably, to bully the employee into signing another contract so the agency can filch a third of his/her income for another year. It sounds a bit like indentured servitude to me, and if it isn't explicitly illegal, it certainly should be.

I think it depends totally on the attitude of the employer though. If the employer wants the person as an employee, then the agency should take a hike, but I would seek legal advice after sussing the employer out first.

Graham

plodder wrote: »

What's the purpose of a clause like this? Presumably, to bully the employee into signing another contract so the agency can filch a third of his/her income for another year. It sounds a bit like indentured servitude to me, and if it isn't explicitly illegal, it certainly should be.

Presumably it's to allow the agency to cover the costs of running their business. Nothing indentured about it, OP's friend is free to leave at any time.

plodder wrote: »

I think it depends totally on the attitude of the employer though. If the employer wants the person as an employee, then the agency should take a hike, but I would seek legal advice after sussing the employer out first.

Both sides agreed to use the services of the agency for a given ongoing fee, all parties signed contracts to that effect. I'm assuming no parties were forced at gunpoint to sign the contracts. In your considered legal opinion what has changed to invalidate the contracts?

JimsAlterEgo

only scenario OP might have a case if they werent told about the clause or it was buried in the small print.

plodder

Graham wrote: »

Presumably it's to allow the agency to cover the costs of running their business. Nothing indentured about it, OP's friend is free to leave at any time.

In my opinion anyway, taking a third of someone's salary (for a year) is more than adequate compensation for the service provided. I think it would be a form of indenture, if the contract played out in the way I suggested and the employee particularly wants to stay with the employer, and there aren't similar opportunities available elsewhere. Forcing someone to leave their employer for 12 months is an artificial device contrived just to bully the employee. It has no other purpose that I can see.

Both sides agreed to use the services of the agency for a given ongoing fee, all parties signed contracts to that effect. I'm assuming no parties were forced at gunpoint to sign the contracts. In your considered legal opinion what has changed to invalidate the contracts?

This isn't a legal opinion (I'm not a lawyer anyway) but the question is whether the contract term is itself legal (ie enforceable). I'd be truly astonished if it was, but that's why I suggested that the OP get actual legal advice. And I think the law should be changed if necessary to remove all doubt.

Graham

plodder wrote: »

In my opinion anyway, taking a third of someone's salary.

Agencies don't generally take anyones salary, they charge the employing company a percentage of the contractors salary for services rendered, employers PRSI, sick pay, holiday pay, staff costs, advertising costs etc etc etc.

That 1/3 the OP is quoting was never part of his friends salary/rate, however much she would like it to be.

plodder wrote: »

Forcing someone to leave their employer for 12 months is an artificial device contrived just to bully the employee. It has no other purpose that I can see..

For the OP's friend, 'the employer' is likely to be the agency, the company that she works in on a day-to-day basis will be her employers customer.

The stipulation in the contract is to prevent companies/individuals availing of the services of an agency for an agreed fee, then trying to avoid payment of that fee by side-stepping the agency.

plodder

Graham wrote: »

Agencies don't generally take anyones salary, they charge the employing company a percentage of the contractors salary for services rendered, employers PRSI, sick pay, holiday pay, staff costs, advertising costs etc etc etc.

That 1/3 the OP is quoting was never part of his friends salary/rate, however much she would like it to be.

There isn't enough information in the OP to conclude that. The employer could be paying the PRSI, sick pay etc himself

For the OP's friend, 'the employer' is likely to be the agency, the company that she works in on a day-to-day basis will be her employers customer.

Again, not enough information to conclude that.

The stipulation in the contract is to prevent companies/individuals availing of the services of an agency for an agreed fee, then trying to avoid payment of that fee by side-stepping the agency.

But, the issue is not the fee. It's whether after 12 months, you are a free agent or not.

Graham

plodder wrote: »

There isn't enough information in the OP to conclude that. The employer could be paying the PRSI, sick pay etc himself

Again, not enough information to conclude that.

But, the issue is not the fee. It's whether after 12 months, you are a free agent or not.

In the absence of specific information, I'm basing my assumptions on what is the norm in the recruitment industry for temporary/contract staff.

OP's friend is a free agent, she can leave at any time at no cost to herself. The only thing she cannot do is work for the agency's customer (aka the company) for a period of twelve months.

This is usually stated quite unambiguously in plain English in the contracts signed by all parties.

The company will probably have the option to employ the contractor directly for a single payment finders fee should they so wish.

plodder

Graham wrote: »

In the absence of specific information, I'm basing my assumptions on what is the norm in the recruitment industry for temporary/contract staff.

OP's friend is a free agent, she can leave at any time at no cost to herself. The only thing she cannot do is work for the agency's customer (aka the company) for a period of twelve months.

.. which is the whole point of the conversation. What if the exclusion period was 48 months, or ten years? Would that still be legal? What if there were no other comparable jobs in the area where the person lived? I don't think it's reasonable imho and should be made illegal if it isn't already.

This is usually stated quite unambiguously in plain English in the contracts signed by all parties.

I'm sure the contracts signed by indentured servants were quite unambiguous in plain English, too

Graham

plodder wrote: »

.. which is the whole point of the conversation. What if the exclusion period was 48 months, or ten years? Would that still be legal? What if there were no other comparable jobs in the area where the person lived? I don't think it's reasonable imho and should be made illegal if it isn't already.

That's a whole lot of whatiffery.

plodder wrote: »

I'm sure the contracts signed by indentured servants were quite unambiguous in plain English, too

Plain English probably didn't help much if you hadn't been to school or couldn't read, different times and not really relevant. I have made the assumption the OPs friend is able to read.

Carawaystick

Graham wrote: »

In the absence of specific information, I'm basing my assumptions on what is the norm in the recruitment industry for temporary/contract staff.

OP's friend is a free agent, she can leave at any time at no cost to herself. The only thing she cannot do is work for the agency's customer (aka the company) for a period of twelve months.

This is usually stated quite unambiguously in plain English in the contracts signed by all parties.

The company will probably have the option to employ the contractor directly for a single payment finders fee should they so wish.

Can she set up a shell company and get the shell company to do work for the agency's customer, employing her to to that shell company's business?

Fred Swanson

This post has been deleted.

JimsAlterEgo

Fred Swanson wrote: »

This post has been deleted.

usually the company doing the hiring wants to keep on amicable terms with the agency so will usuually pay them off

MarkAnthony

Carawaystick wrote: »

Can she set up a shell company and get the shell company to do work for the agency's customer, employing her to to that shell company's business?

Fred Swanson wrote: »

This post has been deleted.

See Cummings v Stewart 1911 1 IR 236

While this was one company setting up another company to avoid existing legal obligations the same applies to individuals and the form of the business will be looked into see:

Guilford Motor Company v Horne [1933] Ch 939

Graham

Carawaystick wrote: »

Can she set up a shell company and get the shell company to do work for the agency's customer, employing her to to that shell company's business?

It would be very unusual for the contract not to include a 'directly or indirectly' section.

plodder

PROTECTION OF EMPLOYEES (TEMPORARY AGENCY WORK) ACT 2012

12.— (1) Any provision of an agreement (whether a contract of employment or not, and whether made before, on or after the coming into operation of this Act) that purports to prohibit or restrict the conclusion by a hirer with an agency worker, assigned to work for that hirer, of a contract of employment after the assignment concerned has concluded shall be void.

(2) Subsection (1) shall not operate to prevent an employment agency from obtaining reasonable recompense from a hirer for services rendered by the employment agency to the hirer in respect of the recruitment, training and assignment of an agency worker who is subsequently employed by the hirer under a contract of employment.

I think a third of a year's salary is more than reasonable recompense

Graham

plodder wrote: »

PROTECTION OF EMPLOYEES (TEMPORARY AGENCY WORK) ACT 2012


I think a third of a year's salary is more than reasonable recompense

Based on what calculations?

How much did you allow for Employers PRSI, sick pay, holiday pay, admin costs, financing costs, advertising, management costs, office expenses, insurance, utilities, tax, profit?

plodder

Graham wrote: »

Based on what calculations?

How much did you allow for Employers PRSI, sick pay, holiday pay, admin costs, financing costs, advertising, management costs, office expenses, insurance, utilities, tax, profit?

Of course it depends on each case. But, it would seem sensible to me if the agency aims to cover all of this out of the money it makes during the contracted period.

Graham

plodder wrote: »

Of course it depends on each case. But, it would seem sensible to me if the agency aims to cover all of this out of the money it makes during the contracted period.

Playing devils advocate, I would argue that anything that has been paid so far is not relevant.

Your quote appears to cover recompense for an agency where the agency worker is subsequently employed by the hirer under a contract of employment. As that hasn't happened yet, I would imagine the single payment 'finders-fee' that is usually specified in the contract comes into play.

The industry norms for such fees can often be in the region of 18% - 50% of the first years combined package value.

plodder

Graham wrote: »

Playing devils advocate, I would argue that anything that has been paid so far is not relevant.

Your quote appears to cover recompense for an agency where the agency worker is subsequently employed by the hirer under a contract of employment. As that hasn't happened yet, I would imagine the single payment 'finders-fee' that is usually specified in the contract comes into play.

The industry norms for such fees can often be in the region of 18% - 50% of the first years combined package value.

If such an arrangement is agreed between the agency and the hirer, then fair enough. But, if not ... ?

Also, I'm not getting from that law anything about money's earned by the agency during the contract not being relevant to the recompense that would result from the hirer employing the person afterwards.

Graham

plodder wrote: »

If such an arrangement is agreed between the agency and the hirer, then fair enough. But, if not ... ?

If not, then you have probably found the only agency in the state dumb enough not to protect its revenue stream. Make the most of it because it's a mistake any agency will only make once.

Here's the long and short of it:

If you use an agency, somebody, somewhere is paying for it (or will be paying for it). If you don't like that, avoid the agencies.

Isn't that much easier than trying to wriggle out of a contract some time in the future?

plodder

Graham wrote: »

If not, then you have probably found the only agency in the state dumb enough not to protect its revenue stream. Make the most of it because it's a mistake any agency will only make once.

Here's the long and short of it:

If you use an agency, somebody, somewhere is paying for it (or will be paying for it). If you don't like that, avoid the agencies.

Isn't that much easier than trying to wriggle out of a contract some time in the future?

I'd have to know the specifics of the case to have an opinion on that. But, the fact that this contract stipulation has been made illegal, suggests it was never fair, and is now clearly unenforceable, if it ever was. And that is a situation I am happy about. Good on the EU for a change!

Graham

plodder wrote: »

I'd have to know the specifics of the case to have an opinion on that. But, the fact that this contract stipulation has been made illegal, suggests it was never fair, and is now clearly unenforceable, if it ever was. And that is a situation I am happy about. Good on the EU for a change!

I can't remember ever seeing an agency contract where the finders-fee/buyout option wasn't already included. Generally speaking an agency is quite happy to take their profit monthly as a margin or in a lump sum as a finders fee.

It's generally permanent jobs (non-recruitment agencies) that have tried to include the 'you can't work for customers' for 12 months clause.