I'm looking for a way out of a contract...

[Codger1]

I am looking for some advice on getting out of a contract with a staffing service agency.

This agency found an IT position for me with one of their clients where I have been working for the past 5 years (through my own corporation). During this time, the client and I were able to find out the hourly "cut" my agency collects (by finding out what my agency charges the client for my work and deducting what the agency pays my corporation). I also was able establish a close enough business relationship with the client to a point where we both agree that it'd be a good idea if both of us if we were able to buy my contract out so that they can save some money and I can make some more money. We roughly said we'd go 50-50, so assuming the agency's cut is $40, I'd make $20 more per hour, and the client would save $20 an hour. A good deal for everyone, except the agency, which I think after 5 years, has been collecting enough.

I reviewed my contact and I have signed the basic confidentiality and non-solicitation and competitive clauses which basically prevent the client and I from doing what we plan on doing.

I spoke to the client and we agreed that it would be a good idea to have the client to approach the agency (as if it was their own idea) and ask them if there was a possibility of them purchasing my contract out so that my corporation (i.e. me) could work directly for them. They came back and told me that the agency flat out said, no. Which didn't surprise me, who wouldn't want to make $40/hr off of someone else (over 5 years, assuming I work 40 hours a week, that's approximately $400,000) for doing more or less, nothing.

So I am trying to figure out what my other options are if I want to work for this client directly and not get into any legal trouble. My questions are:

- Has anyone been in this situation and was able to cut out the agency in a legal manner?
- Since the contract is with my corporation and the agency, can I just dissolve my corporation and create a new one which the client can newly hire and then technically let go of my old corporation (and the agency)?

I was planning on speaking to a lawyer, can anyone recommend a good lawyer (or law firm) who knows how to deal with these type of cases? I am in Toronto.

[eiad77]

What is the exact wording of the non-competition clause? If it's too broad it won't be enforceable.

[Codger1]

What is the exact wording of the non-competition clause? If it's too broad it won't be enforceable.

Something along the lines of:





You agree that during the term of this agreement and for a period of one year following the expiry or termination you will not:
1) Solicit, interfere with to entice away from us any independent contractor or employee of ours or the client.
2) Take on permanent or contractual assignments with the client without our involvement or prior written approval.

[pimom]

If the "you" in the contract was you signing as an officer of the corporation, the temp agency and the client were contracting with the corporation, not you personally. You could start a new corporation to deal with the client - the new copr would be a "legal person" separate from the the one who contracted with the temp agency.

[damnos]

I reviewed my contact and I have signed the basic confidentiality and non-solicitation and competitive clauses which basically prevent the client and I from doing what we plan on doing.

You basically trying to do what the clause in your contract specifically designed to stop. The agency found you the client and of course they don't want to be cut off. Although 5 years sound like a very long time to me, usually the contract is only for 1-2 years, I dont know how you end up with 5 years.



I was planning on speaking to a lawyer, can anyone recommend a good lawyer (or law firm) who knows how to deal with these type of cases? I am in Toronto.

A lawyer might be able to find a loophole in the contract (or the way you structure your corporation) that might be able to get you away from this. Mind you, you possibly burning bridges with other potential client in the future if the agency spread the words, just a thought to keep in mind.

[Syne]

You've been there for 5 years.. Why are you even still working with a temp agency?

Wouldn't this leave you with several opportunities to allow the contract to expire, so that you could continue your relationship with the client contract-free?

Does this agency expect to get a finder's fee cut forever?

[keano]

One of my friends is going through a very similar situation as you....note the following is not to be considered legal advice and you should consult a lawyer on this matter.

A friend of mine was the franchisee of a business, where in the contract, it states that he cannot run another business as well. He decided to start something else up, but he had signed as an officer of a corporation. In other words, one he created to get around the same clause in the contract as the OP's. Anyway, he went ahead and started a business and whole mess ensued, to make a long story short.

Basically, you could sign an agreement as yourself being an employee of said company and close the corporation. It would make the original contract signed between corporation and agency unenforceable due to the fact the corporation would cease to exist.

[Codger1]

If the "you" in the contract was you signing as an officer of the corporation, the temp agency and the client were contracting with the corporation, not you personally. You could start a new corporation to deal with the client - the new copr would be a "legal person" separate from the the one who contracted with the temp agency.

"you" in my contract is clearly defined as my corporation.


You basically trying to do what the clause in your contract specifically designed to stop. The agency found you the client and of course they don't want to be cut off. Although 5 years sound like a very long time to me, usually the contract is only for 1-2 years, I dont know how you end up with 5 years.


A lawyer might be able to find a loophole in the contract (or the way you structure your corporation) that might be able to get you away from this. Mind you, you possibly burning bridges with other potential client in the future if the agency spread the words, just a thought to keep in mind.

My initial contract was 1 year and has been renewed every year since.



You've been there for 5 years.. Why are you even still working with a temp agency?

Wouldn't this leave you with several opportunities to allow the contract to expire, so that you could continue your relationship with the client contract-free?

Does this agency expect to get a finder's fee cut forever?

That contract expired many times before. It is just that I like the people I work with, my bosses, the pay and the flexibility. Otherwise, I'd be somewhere else and wouldn't have created this thread :)

[yads12]

IANAL

These non compete clauses are designed for this very reason. No company wants to contract out a person only for them to get poached. The only thing you might be able to do is challenge the 1 year clause as being unreasonable. However, you will have to wait before you can work for the client again as 6 month clauses are very common and basically impossible to get around.

[Abel4Life]

The easiest way:

When the contract is up for renewal, have the CLIENT negotiate with the agency to waive your non-compete or at least a modified contract. Keep in mind, the agency wants to obtain future business from the client so they would not want to screw up the relationship over a single resource. The client has the power to make it happen just like they can simply not renew your contract or even kick you out during the duration of the contract.

I've seen contractors switch vendors with the same client, go on contract to perm agreements etc. It's all possible.

[scuba2day]

IANAL

These non compete clauses are designed for this very reason. No company wants to contract out a person only for them to get poached. The only thing you might be able to do is challenge the 1 year clause as being unreasonable. However, you will have to wait before you can work for the client again as 6 month clauses are very common and basically impossible to get around.

You should talk to a lawyer about this. However, the damages to the agency would be the lost revenue for the one year stated in the contract. If you expect the relationship with the client is going to be more than one year then you will come out ahead in the long run. If you are lucky, the agency may not come after you. If they do then you can settle for the one year lost revenue or try to negotiate for something less. Again get some legal advice first but it seems the sooner you act the better.

[Syne]

That contract expired many times before. It is just that I like the people I work with, my bosses, the pay and the flexibility. Otherwise, I'd be somewhere else and wouldn't have created this thread :)

You misunderstand.

All I'm saying is simply don't renew the contract with the middle-man next time it rolls around. I assume that when your job contract expires, so does the no-competition agreement. At this time, you become a free agent and I don't see why you can't form a direct relationship with the client. What is stopping you? Why do you keep signing this contract when you can work directly for the client?

In fact, the more I think about it, the more insane it sounds for this agency to take a cut on your pay over a 5 year period. I'd be absolutely livid if I were you. What exactly is their role? Do they facilitate payroll? I've long thought that an agencies job should start and end at a headhunting fee. These agencies love to wedge their way between workers and employers and after a while the relationship just becomes parasitic.

[komal]

You misunderstand.

All I'm saying is simply don't renew the contract with the middle-man next time it rolls around. I assume that when your job contract expires, so does the no-competition agreement. At this time, you become a free agent and I don't see why you can't form a direct relationship with the client. What is stopping you? Why do you keep signing this contract when you can work directly for the client?

In fact, the more I think about it, the more insane it sounds for this agency to take a cut on your pay over a 5 year period. I'd be absolutely livid if I were you. What exactly is their role? Do they facilitate payroll? I've long thought that an agencies job should start and end at a headhunting fee. These agencies love to wedge their way between workers and employers and after a while the relationship just becomes parasitic.

I'm sure the non-compete covers some time period after the contract is ended. That is basically the whole point of a non-compete, so that at the end you can't just turn around and screw over your employer.

Otherwise people would do this all the time and agencies would lose their clients.

[particleman]

Most no-competition agreements extend 2-5 years after the contract or employment ends. Meaning he would have to wait several years after the termination of the contract to work there. If they were the way you described them, no-competition clauses would be pointless.

I agree that any agency that takes a cut of your pay for 5 years is a bit ridiculous. I thought most only took a cut for the first 6 months to a year.


You misunderstand.

All I'm saying is simply don't renew the contract with the middle-man next time it rolls around. I assume that when your job contract expires, so does the no-competition agreement. At this time, you become a free agent and I don't see why you can't form a direct relationship with the client. What is stopping you? Why do you keep signing this contract when you can work directly for the client?

In fact, the more I think about it, the more insane it sounds for this agency to take a cut on your pay over a 5 year period. I'd be absolutely livid if I were you. What exactly is their role? Do they facilitate payroll? I've long thought that an agencies job should start and end at a headhunting fee. These agencies love to wedge their way between workers and employers and after a while the relationship just becomes parasitic.

[Syne]

It would be like if Plenty of Fish followed you around five years into your marriage and said, "Hey, you guys look happy and since I set you up.. how about another kickback?"

[Truemana]

Non-competition clauses are almost unenforceable. We were told by our law professor in final year that if we ever have a contract with one in it, sign it immediately. As a previous poster already stated, it's nearly impossible for them to contain the appropriate amount of scope and almost exclusively rely on the ignorance of the signer.

[yads12]

It would be like if Plenty of Fish followed you around five years into your marriage and said, "Hey, you guys look happy and since I set you up.. how about another kickback?"

Terrible analogy. OP is a sub contractor and has enlisted a company to find him work, the company finds him a contract and as part of the contract with him, takes a cut of his hourly wage. Now he wants to cut them out of the arrangement.

[FrogPrince]

This sounds totally ridiculous (and illegal). I would've never signed a contract like this.

Besides finding the OP the job, what else does the agency do on a regular basis that warrants them to get a piece of his earnings for five years?

EDIT: This sounds like form of extortion.

[Abel4Life]

Most no-competition agreements extend 2-5 years after the contract or employment ends. Meaning he would have to wait several years after the termination of the contract to work there. If they were the way you described them, no-competition clauses would be pointless.

I agree that any agency that takes a cut of your pay for 5 years is a bit ridiculous. I thought most only took a cut for the first 6 months to a year.

I disagree. Where is this 'most' coming from? To my knowledge the industry standard is 6 months to 1 year for this specific type of non-compete. For the type of non-compete in which you sell your company and you cannot open a company that directly competes with the company you sold I believe those 2-5 year ones can exist.

[damnos]

My initial contract was 1 year and has been renewed every year since.


This is what I dont get - why have you been renewing with the agency rather than going straight to the source? Does your "non-compete" clause also explicitly forbid you make direct connection with client AFTER your initial contract with them expire?

non-compete in standard employment contract such as if you are a full time employee of X you can't move job to any of X competitor within the same province within Y months, but the clause in your situation (contractor-agency-client) relationship might be a bit different.

[kmarcie]

I agree that it's ridiculous the agency takes a cut out of your pay when they've done 'nothing more than finding you the job' as the above poster has stated. Yet OP didn't have to agree to this initially but was desperate enough for the job to agree to it. The agency has to survive on something.

People scorn at employment agencies as soon as they have a job and their job is stable, but nobody forced anyone to go with an employment agency.

My question is: what are the actual chances for the agency to come after the OP? I've been in contracts before where I would leave before the contract ends, and in 2 cases the employers never came after me for breaking the contract early nor asked for any compensation back.


This is what I dont get - why have you been renewing with the agency rather than going straight to the source? Does your "non-compete" clause also explicitly forbid you make direct connection with client AFTER your initial contract with them expire?

Basically after OP stops renewing the contract, there is a 1 year period where he can't work the same employer (the 'source'). So that is why he renewed. Had he not renewed, he would not be able to work the same employer until 1 year later, at which point it is probably safe to say the company would have hired a replacement.

[Abel4Life]

I agree that it's ridiculous the agency takes a cut out of your pay when they've done 'nothing more than finding you the job' as the above poster has stated. Yet OP didn't have to agree to this initially but was desperate enough for the job to agree to it. The agency has to survive on something.

People scorn at employment agencies as soon as they have a job and their job is stable, but nobody forced anyone to go with an employment agency.

My question is: what are the actual chances for the agency to come after the OP? I've been in contracts before where I would leave before the contract ends, and in 2 cases the employers never came after me for breaking the contract early nor asked for any compensation back.

Slim to nil.

The agency would not want to risk their client relationship and also legal fees.

Leaving a contract before it ends happens all the time. This is nothing new. People either get a FT job, find a better opportunity or an entire list of other reasons. They are just forced to find a backfill which is another reason why they have agencies.

[Conquistador]

What's the name of this agency? Is it one of the big ones?

My experience with these agencies, as an employer, is that if we want to hire someone who we have contracted, there is a buyout clause. The longer someone has been on contract, the less the buyout amount is.

Seems bizarre to me (and apparently others in this thread) that this would continue for five years before the employer would come to the realization that they wanted to (a) hire the contractor and (b) that it would be one hell of a lot cheaper to do so. Also seems strange that the OP took this long to come to this realization as well.

[eiad77]

After reading through the wording of the contract, I think it would be relatively hard to convince a court to not enforce that clause on the basis that it is over-broad. It only prohibits you from taking existing clients/employees and only lasts for one year. I am not very familiar with this are of law though. I almost never think it's worth it to see a lawyer, but it might be worth it for you. Make sure it's a lawyer experienced in this area of law though.

[Codger1]

This is what I dont get - why have you been renewing with the agency rather than going straight to the source? Does your "non-compete" clause also explicitly forbid you make direct connection with client AFTER your initial contract with them expire?

non-compete in standard employment contract such as if you are a full time employee of X you can't move job to any of X competitor within the same province within Y months, but the clause in your situation (contractor-agency-client) relationship might be a bit different.

The first line in my non-competitive clause states that I can't entice the client away from them.


What's the name of this agency? Is it one of the big ones?

My experience with these agencies, as an employer, is that if we want to hire someone who we have contracted, there is a buyout clause. The longer someone has been on contract, the less the buyout amount is.

Seems bizarre to me (and apparently others in this thread) that this would continue for five years before the employer would come to the realization that they wanted to (a) hire the contractor and (b) that it would be one hell of a lot cheaper to do so. Also seems strange that the OP took this long to come to this realization as well.

It is one of the big ones.

I think what is important to point out to all the people who have said that the agencies haven't gone after them when they prematurely left the contract is that when you leave the contract you are not taking money from the agency. However, what I'm trying to do is directly take away this position from the agency and all their potential revenue from this position. Big difference.

I was hoping someone that has experience with the law would be able to give some pro bono advice. I'm pretty sure my next move is to find a good lawyer and see what they say.

Thanks for all the comments.

[Syne]

I'm still not satisfied with the details of this situation.

How can you entice a client away when you're not offering the same, or even similar service as the agency? They are offering your work as a service. You are offering your work as a service. Are they saying that they own the rights to your work?

[Codger1]

I'm still not satisfied with the details of this situation.

How can you entice a client away when you're not offering the same, or even similar service as the agency? They are offering your work as a service. You are offering your work as a service. Are they saying that they own the rights to your work?

I think what they do with their non-competitive clause is try to make sure I don't compete with the client for this particular position from the time I am there up to 1 year after I am no longer there. That's the way I interpret it, whether that is legal - well, I am sure it is not legal, unless I sign a contract that stipulates this very clause. My only hope is that I can find someone who can help explain what laws I have on my side to see if it is even worth pursuing. I had the idea of just declaring "bankruptcy" for my own corporation and just having the client hire my new corporation.

[SpillOnAisle9]

I'm still not satisfied with the details of this situation.

How can you entice a client away when you're not offering the same, or even similar service as the agency? They are offering your work as a service. You are offering your work as a service. Are they saying that they own the rights to your work?

Syne ... you really don't understand the business model here

There are 2 types of agency setups

- pure headhunters that take a set finders fee and move on
- the type of arrangements the OP is in (usually supply arrangements say with the fed gov't)

In the second type the agency OWNS the contract

The closest business model I always come up with to explain it is

OP = hooker
AGENCY = pimp
Client = John

Now consider what happens to hookers that want to go around their pimps. It's the same arrangment just a little more civil

This is from 30 years in IT with 20 as a contractor (hooker)...the current contract I've been on has been for 5 years and
will probably go another 5. I have a clause in my contract that says I have to pay my pimp if I leave all the money they
would have made with me in the position....not really enforceable but I signed it without reading it.

The non-competes are enforceable if they are narrowly defined i.e. That client, doing that job in that location

[nerak]

Yeah, I think those terms are way too broad. It does not specify in what capacity that work is, or even location for that matter. I was thinking that if the company has another location and you go work in that location, that it would be valid, because you could be "competing" outside the agency's market.

[Syne]

Syne ... you really don't understand the business model here

There are 2 types of agency setups

- pure headhunters that take a set finders fee and move on
- the type of arrangements the OP is in (usually supply arrangements say with the fed gov't)

In the second type the agency OWNS the contract

The closest business model I always come up with to explain it is

OP = hooker
AGENCY = pimp
Client = John

Now consider what happens to hookers that want to go around their pimps. It's the same arrangment just a little more civil

This is from 30 years in IT with 20 as a contractor (hooker)...the current contract I've been on has been for 5 years and
will probably go another 5. I have a clause in my contract that says I have to pay my pimp if I leave all the money they
would have made with me in the position....not really enforceable but I signed it without reading it.

The non-competes are enforceable if they are narrowly defined i.e. That client, doing that job in that location

Thanks for the explanation. I guess I get the business model, but I'm not sure how it benefits anyone except the pimp beyond the initial headhunting. Maybe in a revolving door scenario I could see where the agency is constantly bringing in fresh blood.. but in cases where it's long-term, the pimp just becomes an unnecessary middle-man. Why wouldn't the company set up stipulations for long-term employees?

.. or is the agency absorbing some of the costs of job security such as pension, medical benefits, vacation, severance etc. ?

[Truemana]

Thanks for the explanation. I guess I get the business model, but I'm not sure how it benefits anyone except the pimp beyond the initial headhunting. Maybe in a revolving door scenario I could see where the agency is constantly bringing in fresh blood.. but in cases where it's long-term, the pimp just becomes an unnecessary middle-man. Why wouldn't the company set up stipulations for long-term employees?

.. or is the agency absorbing some of the costs of job security such as pension, medical benefits, vacation, severance etc. ?

Risk. The agency assumes the risks of employment. They had to build the customer base in the first place, and provide facilities of your employment. You have to consider when a company skims off your charge-out rate, that you're essentially forfeiting some wage in exchange for reducing your own personal risk. It's the same as anywhere in business. People are rewarded for assuming risk, not only value of services or products. Some people have higher risk tolerances than others, and can be rewarded for it.

That said, as possibly in the OP's case, he may no longer see value in paying for the risk that the agency assumes. When I buy a product, I always assess whether I find the product personally worth the price I'm paying. If I can personally justify it, regardless of whether some one else can justify the same price for the same product, then I will purchase it.

[NutsandBolts]

My question is: what are the actual chances for the agency to come after the OP?

Well I only know of one such case, a friend of mine is a truck driver and they routinely use headhunters/brokers. He has a 5 years contract that he decided not to honor, they came after him. The details I don't know.



Risk. The agency assumes the risks of employment. They had to build the customer base in the first place, and provide facilities of your employment. You have to consider when a company skims off your charge-out rate, that you're essentially forfeiting some wage in exchange for reducing your own personal risk. It's the same as anywhere in business. People are rewarded for assuming risk, not only value of services or products. Some people have higher risk tolerances than others, and can be rewarded for it.

That said, as possibly in the OP's case, he may no longer see value in paying for the risk that the agency assumes. When I buy a product, I always assess whether I find the product personally worth the price I'm paying. If I can personally justify it, regardless of whether some one else can justify the same price for the same product, then I will purchase it.

I am completely lost with what you are trying to say here....

Risk. The agency assumes the risks of employment. They had to build the customer base in the first place, and provide facilities of your employment.
What risks? The agency assumes no liability what so ever with the employee. As a previous employer that was looking into this service, there is a due diligence clause meaning as long as they tried not to send a daycare a pedophile, they are in the clear.


in exchange for reducing your own personal risk
What risk. If you get caught stealing at this job...what its not responsible? don't like the job, quit, with or without an agency, they don't like you, your out, with or without an agency.

I am sorry if I completely missed the point in your post (it happens :razz:) but the way its was explained to me is that their (agency) fees are supposed to cover the time and money involved with having to do the hiring process yourself.

Regards

[SpillOnAisle9]

I am completely lost with what you are trying to say here....

What risks? The agency assumes no liability what so ever with the employee. As a previous employer that was looking into this service, there is a due diligence clause meaning as long as they tried not to send a daycare a pedophile, they are in the clear.



Financial risk...us hookers don't have to chase the John for the money. The one I'm on now pays Net-15 from date of
receipt of invoice to the pimp. The Feds can take up to 3-4 months to pay.

Admittedly I'm more familiar with federal gov't contracts i.e. standing offers, supply arrangements etc. The agencies that bid
on this work need to meet certain mandatories (financial, security clearance etc) to deal with the Feds. Not just anyone is invited
to present candidates..although there are different vehicles such as TBIPS and THS that are easier to grab on to.

In Ottawa it gets even more involved. My wife works for an agency that has qualifed to bid on certain contracts and
they have won the right to provide the resources but sometimes they can't find the resource when the Feds do a call-up.
Rather than lose the work (have the Feds go to the next agency on the list) they will often find another agency
that has the body but is not allowed to offer the body....in this scenario there are 2 pimps....yup

Essentialy the Feds don't want to deal with individuals. They want to deal with companies with bench strength and
a track-record. Not all companies qualify....In my 30 years I have only ever done one direct contract with the
Feds and it was a very special case and the amount qualified for a sole-source deal.

Going back to the OP's situation...he has both a a potential legal issue if he attempts to break the contract as well
as an ethical issue. He signed the contract 5 years ago in good faith. He didn't need to go around the agencies
back to find out what his bill rate was. This is supposed to be private information between the agency and the
client. Yes it's not fair but his time to negotiate all this was before he signed 5 years ago.

This is why I will only deal with 'Open Book' agencies where I know what the client is paying out of the gate. When
an agency calls you and says "what do you want in your pocket?" I always say "80-85% of what you're getting
because 15-20% is fair. If they add "you get paid when we get paid" it goes to 10%

OP should remember 3 things

- He would not have ever found this opportunity without the agency
- He can be replaced with one phone call to the agency
- There is somebody out there right now that can do what he's doing and will do it for less...guaran-frikkin-teed

The ethical way to go on this is to intiate a dialogue with the agency and ask for a raise...but even then when
I've tried that in my 5 year gig I get pushback saying "you can be replaced"....and I know they're right. So it's a
bit of a Catch-22..especially being an old-fart.

Sorry for the wall'o Text

[NutsandBolts]

Financial risk...us hookers don't have to chase the John for the money.

Oh OK, yes of course if you are being paid from the agency and not from the employer.
Thanks for pointing that out

:cool:

[Truemana]

I am completely lost with what you are trying to say here....

What risks? The agency assumes no liability what so ever with the employee. As a previous employer that was looking into this service, there is a due diligence clause meaning as long as they tried not to send a daycare a pedophile, they are in the clear.


What risk. If you get caught stealing at this job...what its not responsible? don't like the job, quit, with or without an agency, they don't like you, your out, with or without an agency.

I am sorry if I completely missed the point in your post (it happens :razz:) but the way its was explained to me is that their (agency) fees are supposed to cover the time and money involved with having to do the hiring process yourself.

Regards

I might have explained it poorly, or misunderstood the OP's details in the thread. I am talking about investment and business risk, not legal risk. In general anyway, a contracting employee doesn't have to worry about finding projects, obtaining benefits packages, negotiating office lease agreements, etc. All the overhead stuff. That stuff isn't negligible by any means, and shouldn't be expected to be provided at cost or discount to a contractor.

The fact is (contractual non compete clauses aside), if the OP doesn't feel the money he is "paying" for valuable services that the agency offers (the difference in his wage and charge out rates), he can go start his own business and charge the client directly. Plenty of people don't feel comfortable being self employed or starting a business, because it carries risk, including financial, professional, legal, and personal.

[NutsandBolts]

I might ======>and personal.

Gottcha, understood