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taratill
taratill, Solicitor
Category: Employment Law
Satisfied Customers: 6305
Experience:  15 years experience of advising on employment law matters
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I am an IT consultant and provide consultancy services through

Customer Question

I am an IT consultant and provide consultancy services through my own Limited Company, Unified Consulting Ltd. In April 2012 my company entered into a 2 year “Consultancy Services Agreement” with Sytel Reply Ltd, an IT consultancy, to provide project consultancy services to Vodafone, who use the services of Sytel Reply for resourcing projects, among others on the Preferred Suppliers List (PSL). After approx. 18 months I left to take another 4 month project in a different part of Vodafone, working through another consultancy, after providing 4 weeks notice to Sytel and Vodafone as per the “Consultancy Services Agreement”. This project is due to finish at the end of this month.
I was Instant Messaging (IM) with a colleague / friend of mine who works in the part of Vodafone I had previously worked in via Skype, informally catching up in general as we often do, and one of the subjects that came up was the fact my contract was due to end and that I was unsure whether it would be extended or not. He made a comment “if I am still at vf I will take you back no problem” and that he was interviewing for people (note he is not the actual hiring manager) for another project. I said I could be interested and next thing the hiring manager, who I had a very good working relationship with, Skyped me herself asking if I’d be interested in working on the project as she and her manager would like me to do so, to which I said yes I’d be interested.
Things progressed and the subject of who I would engage through was discussed as my Ltd. Company doesn’t have a direct consultancy agreement with Vodafone and it would need to be done through one of the companies on the PSL. Both the hiring manager and her manager, via IM, indicated that they would prefer on this occasion to use a different company than Sytel because they are too expensive and would be outside the budget available, and instead use one which was “easier to manage”, which was fine by me as I didn’t much like their way-of-working, or the Sytel Managing Director (MD) himself. And also they needed to get something setup very quickly due to end of FY budgets, and apparently using a specific different company would allow this as they had a different type of agreement with Vodafone. I was then introduced to this company, Seven Principles, by the hiring manager and they were asked to put together a proposal based around using the consultancy services of Unified Consulting, which they quickly did after receiving a proposal from Unified Consulting, and things moved forward, with the Purchase Order about to be raised to them next week.
In the meantime however the MD of Sytel heard of this and that my company wasn’t engaging through them, and met with the manager of the hiring manager and told him that my company is still bound by the previous “Consultancy Services Agreement” and could not engage through another company due to a Non-Solicitation clause in there:
1. Non-solicitation
1.1 Service Provider shall not at any time either during this Agreement or within 12 months of termination of a Project for a Company Client or Company Client Customer (‘Restricted Party’) without Company’s prior written consent, either on its own account or on behalf of any other party:
(a) actively market to a Restricted Party or, either directly or indirectly, solicit or attempt to entice away from Company that Restricted Party’s business which is connected to or is similar in nature to the Services provided; or
(b) take any deliberate action which interferes (or is likely to interfere) with any commercial relationship between: (i) Company and a Restricted Party; (ii) Restricted Parties; or (iii) Company and any other third party with whom Company has a contract to provide services to the Restricted Party.
1.2 Neither party shall, and will procure that its employees and subcontractors shall not, without the other party’s prior written approval, endeavour to solicit the services of (either directly or indirectly through the services of a third party) or employ any individual employee or contractor of the other party (and in the case of Service Provider, any employee of a Restricted Party) either for itself or for any other third party during a Project and for a period of 12 months after its termination.
Note that in here the Service Provider is Unified Consulting, Company is Sytel, and the Restricted Party is Vodafone.

I spoke with the manager and informed him that I did not believe this to be the case, as for one thing I didn’t actually solicit for the work and was instead contacted by the hiring manager after an informal chat with my colleague / friend, and also that they preferred I engage through Seven Principles anyway and had introduced me to them, which he is happy with and wishes to proceed with them.

I therefore need to know whether Sytel would have any chance of suing me / my company if they decided to try and do so, or in bringing any kind of legal challenge?
Submitted: 2 years ago.
Category: Employment Law
Expert:  taratill replied 2 years ago.

taratill : Hello my name is XXXXX XXXXX I am happy to help you today. Is this contract based in the UK?
Customer: Hello Jenny, yes it is.
Expert:  taratill replied 2 years ago.
Is the company likely ot suffer a significant financial loss as a result of this?
Customer: replied 2 years ago.
No, they will just lose out on whatever % margin they would have added onto my daily rate, which would not be significant.
Expert:  taratill replied 2 years ago.
In that case the real risk of them taking action to persue you under the covenants is very slim. This is because it costs tens of thousands of pounds in legal costs to raise a claim and the reality is that it is not worth them bringing a claim unless they are likely to lose a significant sum of money.

On the face of it the restrictive covenants themselves are enforceable provided they were not drafted in a manner that is wider than necessary to protect a legitimate business interest.

The company may struggle to estalish that 12 months is a reasonable period of time to prevent you were doing this so you could run an arguement on that basis, in the unlikely event that the were to try to enforce.

If you have any further questions about this please do ask. If I have answered your question I would be grateful if you would take the time to rate my answer. Thank you and all the best.
Customer: replied 2 years ago.
Hello Jenny, from what i have read I had thought that these would not be enforceable for a number of reasons e.g. due to them being a "restraint of trade", the fact i didn't solicit Vodafone as such, and that they wished to use another company themselves for valid reasons. Also I'm not actually taking business away from them as its not as if they already have someone doing the work and that i am taking this away from them. But you have stated that the covenants would be enforceable, meaning none of these actually count?

Also, if they did decide to pay tens of thousands to raise a claim, and won, would my company then be liable for these costs? As you say it sounds unlikely, but just want to understand the possibilities?
Expert:  taratill replied 2 years ago.
Hi restraint of trade is an issue but the courts find that so long as the covenants are not more widely than necessary to protect a legitimate business interest they are enforceable.

You could run an arguement that you did not solicit but you will note that the clause includes indirect solicitation. Even enaging in conversation could come within that description.

I think on balance, as I said earlier, it is highly unlikely that they would attempt to enforce, if they did it would be against the party to the contract which might be your limited company or it might be you.

If you have any further questions please do ask.
Customer: replied 2 years ago.
And would i / my company be liable for their costs were they to win?
Expert:  taratill replied 2 years ago.
Yes, although this is theoretical.

Obviously as the contract is with the company you could wind the company up. If there is no company there is no legal person to sue.
Customer: replied 2 years ago.
Ok, so at what point would you see that as being a good thing to do? Now, just in case, or only in the event of this going further i.e. a claim being raised?
Expert:  taratill replied 2 years ago.
Do you still need to trade through your company?
Customer: replied 2 years ago.
At least for another month as i will still need to invoice at the end of the month for the current work i am doing.
Expert:  taratill replied 2 years ago.
WEll in that case you should not wind the company up at this stage.

Once you are done trading through the company then if you wind it up provided the company is the other party to the restrictive covenants and not you personally then there is no personal risk to you.

Due to privity of contract they would not be able to sue you personally.

If you have any further questions about this please do ask. If I have answered your question please do take the time to rate my answer as I am not otherwise credited for my time.
taratill, Solicitor
Category: Employment Law
Satisfied Customers: 6305
Experience: 15 years experience of advising on employment law matters
taratill and 2 other Employment Law Specialists are ready to help you
Customer: replied 2 years ago.
Thanks very much Jenny.
Expert:  taratill replied 2 years ago.
No problem, all the very best for the future and enjoy the rest of the weekend.

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