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Legal Ease
Legal Ease, Lawyer
Category: Canada Business Law
Satisfied Customers: 100031
Experience:  I am a practicing lawyer and have also been an online professional for 5 years.
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I am an independent IT solutions provider. In October of

Customer Question

I am an independent IT solutions provider. In October of 2015 I contracted with a staffing firm to work at one of their clients. The parties : Contractor/Consultant (me), Staffing Firm, Client Tier 1, Client Tier 2. Basically, I sold my services to Staffing Firm, Staffing Firm to Client Tier 1, and Client Tier 1 to Client Tier 2.According to the MSA, the master service agreement, "The Consulting Services are to be rendered in support of Staffing Firm's provision of services for Client Tier 1 c/o Client Tier 2 ("Client"). " After being in this contract for about 12 months , with a few extensions of the contract in the interim, Client Tier 1 informs me that they will not need my services beyond the date October 31, 2016.However, Client Tier 2 expressed interest in retaining me exclusively to continue working for them beyond that date, and Client Tier 1 choose to opt out of the one-year non-compete agreement after termination of contract.So I continued working at Client Tier 2 with Client Tier 1 clearly not intervening in my further provision of services at Client Tier 2. However, at this point Staffing Firm got knowledge of my “extended/retained” contract work at Client Tier 2 and informed me that this is a breach of the non-compete agreement.I wanted to know what legal consequences there are if this case is brought to a court of law?
Submitted: 8 months ago.
Category: Canada Business Law
Expert:  Legal Ease replied 8 months ago.

Hello! My name is***** you for your question. I'm reviewing it now, and will post back again shortly.

Expert:  Legal Ease replied 8 months ago.

I am sorry this question has sat for so long. I read it and could not follow that facts so left it for the night and morning but no one else is answering.

Can you please try again and summarize what happened in a few sentences?

Thanks

Customer: replied 8 months ago.
I think I was clear enough. It is a multi-layer subcontracting agreement -- but my sole contract was with Staffing Firm. Client Tier 1 and Client Tier 2 are the two top layers in the setup.
Expert:  Legal Ease replied 8 months ago.

So you have a contract with a staffing firm and they place you with these clients?

Customer: replied 8 months ago.
I have an NCA with Staffing Firm.
Expert:  Legal Ease replied 8 months ago.

That I understand.

So what did you do that they say is in breach of that agreement and why do you feel it is not?

Customer: replied 8 months ago.
Contract with Staffing Firm terminated on October 31 2016. However Client Tier 2 created a new contract to engage me as Contractor starting Nov 1,2016. Client Tier 2 was never directly involved with Staffing Firm. Client Tier 1 was. But Client Tier 1 backed out and said they did not want to enforce any NCA clause.
Expert:  Legal Ease replied 8 months ago.

But what does your agreement say about competing?

Customer: replied 8 months ago.
34;Consulting Services are to be rendered in support of Staffing Firm's provision of services for Client Tier 1 c/o Client Tier 2 ("Client"). " I will find the actual NCA clauses and copy it a d paste it here a bit later
Expert:  Legal Ease replied 8 months ago.

OK

I will wait to read them.

Customer: replied 8 months ago.
The NCA clause:4.05 - Non-Competition / No Hire- Consultant covenants that it and any of Consultant's Employees shall not
perform services directly or through any other company (either as an employee, consultant or contractor) for
Client for a period of one (1) year after termination of this Agreement. Consultant also covenants that it and
any of Consultant's Employees shall not, during the term of this Agreement, and for one (1) year thereafter, hire
any Staffing Firm Employee or Staffing Firm Consultant, nor induce any Staffing Firm Employee or Staffing Firm Consultant to
terminate their relationship with Staffing Firm.
Expert:  Legal Ease replied 8 months ago.

So why do you feel working during this year is not in breach of the agreement? Would you not be performing the services you agreed not to perform?

I am just trying to get a good understanding of the facts. I am not saying you are in breach at all just yet.

Also is there a geographical boundary set or is this all that is said?

Customer: replied 8 months ago.
No geographical limitations so far as I know. By the original contract the non-compete only works when Client is defined as a combination of Client Tier 1 and Client Tier 2. So that's binding. Now that there is no such a Client anymore, as Client Tier 1 clearly was not interested in pursuing any NCA clause, so I thought Client Tier 2 is free to contract directly with me.
Expert:  Legal Ease replied 8 months ago.

I don't see where you are getting that.

From what I see there seems to be a blanket clause that talks about providing the services to anyone at all for the one year.

Is there something more that says it only relates to Client Tier 1?

Customer: replied 8 months ago.
34;anyone at all"??? I am not understanding this... there is the scope clause:
"Consulting Services are to be rendered in support of Staffing Firm's provision of services for Client Tier 1 c/o Client Tier 2 ("Client"). "
So as I see it, "Client" is defined as a cooperative relationship between Client Tier 1, and Client Tier 2. Now Client Tier 1 has backed out, no such alliance would exist.The payment goes from Client Tier 2 , to Client Tier 1, to Staffing Firm, and then to me. Each payment is deducted at a % at each level until it reaches me.
Expert:  Legal Ease replied 8 months ago.

But my concern is paragraph 4.05 doesn't way you cannot work for Tier 1 or Tier 2. It says you cannot provide services for one year. I am not sure what they meant to say or if there are other provisions that tie in but from my reading of the provision they just don't want you to compete at all for one year which is standard.

I don't know if there are other provisions that say something else but I don't see how any court would say you can cut them out and work directly with Tier 2 simply because Tier 1 won't work with you.

The idea is that you were getting placements from them and they don't want you to cut them out and work directly. That is a common set up.

In some cases the work around is to have Tier 2 essentially buy out your contract. So in this case they would make an offer to the firm to buy out the provision of the NCR.

Do you see what I mean?

But really you need a lawyer to consult with face to face who should read the whole contract at once rather than looking at isolated paragraphs.

Please feel free to post back with any follow-up questions you may have. If you don't have any then I hope I have earned a 5 star rating but if you don't feel that I have please don't hesitate to reply back and let me know what more I can do to assist you. Finally, please know that even after you rate me I will be here for you and you can ask follow-up questions if you think of them later on at no further charge of course.

Customer: replied 8 months ago.
You said "But my concern is paragraph 4.05 doesn't way you cannot work for Tier 1 or Tier 2. It says you cannot provide services for one year." But it does say "Consultant covenants that it and any of Consultant's Employees shall not
perform services directly or through any other company (either as an employee, consultant or contractor) for
Client for a period of one (1) year after termination of this Agreement. " -- here the word "Client" with a Capital "C" is defined as " Client Tier 1 c/o Client Tier 2 ("Client") ". So strictly speaking I don't think there is such a Client anymore because Client Tier 1 is not interested in pursuing any NCA clause.
Client Tier 2 was not explicitly mentioned as "Client" in the master service agreement.
Expert:  Legal Ease replied 8 months ago.

As I've said I cannot review the full document and this shows why you need someone to read it as I never saw that definition before.

But if you are correct and you can only not work with Tier 1 then you will be fine.

Customer: replied 8 months ago.
I pasted that clause @ 07 November 2016 10:38:"07 November 2016 10:38""Consulting Services are to be rendered in support of Staffing Firm's provision of services for Client Tier 1 c/o Client Tier 2 ("Client"). "
Expert:  Legal Ease replied 8 months ago.

But that is about your responsibilities. It is not about the NCR.

I don't think you are understanding the issue.

We know what you were to do. Your role was clear.

The NCR is not clear from the one provision but there are clearly others that tie in.

Customer: replied 8 months ago.
I think the definition of "Client" might be key here. The service agreement seems to indicate that the definition of "Client" is the combination of the two clients in some weird relationship. So if this goes to litigation I will stick to the definition of "Client".
Expert:  Legal Ease replied 8 months ago.

I don't think you should let this proceed to court without having a lawyer first read the full contract.

Customer: replied 8 months ago.
I feel like getting a second opinion from someone, who's dealt with multi-layer sub-contracting agreements. However I will pay for your time.
Expert:  Legal Ease replied 8 months ago.

There are no experts on the site that will answer. That was clear by how long this question sat.

I am glad you are going to pay me. That happens when you rate me positively.

But I think you need an actual legal opinion at a face to face consultation with a lawyer in your city.

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