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Jenny McKenzie
Jenny McKenzie,
Category: UK Employment Law
Satisfied Customers: 6339
Experience:  10 Years of experience in Employment Law and HR
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Hi, I am an IT contractor operating through a limited company.

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Hi, I am an IT contractor operating through a limited company. I currently contract through agency X to IT Services provider Y, who uses my services on a contract with Government agency Z. I now want to move to another IT Services provider for Government agency Z working on a separate contract to the one I'm working on for IT Services provider Y. However, there is a restrictive covenant in my contract preventing me from working for either IT Services provider Y or Government agency Z without paying a fee to agency X (20% of value for 12 months).

The exact wording is "The Supplier shall and shall procure that the Representative shall (a) not during the Contract Term or thereafter for a period equivalent to the period of this agreement or, where there has been more than one engagement between the Supplier and Agency within the last two years, for the total period of all engagements within the last two years with the relevant Client or End User (but not being less than 3 months nor more than 12 months) either directly or indirectly (whether under a contract of services of for services or through any third party) provide any services to the Client or End User in any capacity except by contract through the Agency unless the Supplier shall first have paid to the Agency a fee of 20% the total remuneration including the value of benefits attributed by the HM Revenue & Customs agreed to be paid or provided by the Client or end User for the relevant period of provision of such services (but not exceeding 12 months) plus VAT; but this provision shall not affect the Supplier if it is , and has notified the Agency that it is, an Umbrella Company and the services referred to are services that (i) have not been sourced by the Agency or do not result from the introduction by the Agency of the Supplier to the Client, and (ii) are not performed or provided by the Representative. ".

(as previously highlighted on this forum) I believe that this is unenforceable under the doctrine of restraint of trade as any contractual term which seeks to restrict an individual's freedom to work for others or carry out his trade or business is illegal and unenforceable. I believe that the Agency can't show it has a legitimate business interest that requires protection and the protection sought is not reasonable, as I'm just going to work for someone else (all they have lost is the revenue of me working for them, not the business of supplying another body to IT Services provider Y).

Is this interpretation correct?
Hello and welcome to Just Answer, by way if background please can you tell me why you want to go through an alternative agency?
Customer: replied 4 years ago.

Hi Jenny,


I have been working as a Project Manager under my current contract for 2 years and need a change of scene (it’s like banging your head against a wall and now I just want to go and bang my head against a different wall). It’s not that I particular want to change agency, my concerns are if a different agency offers me a contract with a different service provider to the same end customer how enforceable is the restrictive covenant?


I should probably point out that I don’t think that the new contact I’m hoping to get offered would be directly available through my current agency as it is through a different service provider who has its own preferred suppliers (agencies).


I’m not trying to “cut out” the current agency, I am looking at a completely different contract role that just happens to be for the same end customer.




Hi Chris that does help.

If you were moving in the same role between agencies then clearly the restrictive covenants would (subject to reasonableness tests) be enforceable on the basis that the legitimate interest is the cut that the agency takes, if you went via another agency they would lose that cut and as the introducer they are entitled to receive it.

If you are cutting your ties and you happen to be placed in a different role by another agency within the period then on the basis that there is no legitimate business interest to protect as you pointed out in your initial question so whilst they might attempt to enforce the clause if they take it to court you would be able to defend on that basis.

This is particularly the case if this is a role they could not have placed you in due to the fact that they do not have the contract in respect of that role.

If you have any further questions please do ask. If you are satisfied with my answer I would be grateful if you would be so kind as to give my answer a positive rating. Thank you and all the best.
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