Agency Exclusion Contract Clause
One of the major reasons why contractors are not able to take the next step to become real small businesses with multiple clients is the agency exclusion contract clause that agencies put on their contracts. This is to safeguard themselves from losing commission and their clients.
This is the main reason that many contractors don‘t see themselves as small businessmen. It’s why they don‘t start touting and quoting for extra work from their ‘clients‘. Unfortunately, legally, they are not their clients. The agency exclusion contract clause doesn’t allow contractors to approach the client for new work prevents a host of small, dynamic IT businesses from springing up across the country.
Can’t Contact Client for up to a Year
It‘s not just that they are not able to approach the client while they are there, but they are not allowed to approach the client for up to a year after they have finished the contract. One agent told me that this agency exclusion contract clause was worthless. Other people say that it is a restraint of trade.
I don‘t know the legal position on this. However, it is fair to say that because it is there, virtually all contractors abide by it. One can understand agencies putting this clause on. However, it stymies all attempts to create a real small business. Therefore contractors seldom make any attempts to try and get other work at any of the companies that they work.
This is a great shame, both to them, and potentially the country‘s economy. A whole raft of potential IT entrepreneurs and ventures die at birth.
Contractors Group IPSE
What can anyone do about this?
One idea would be for the Contractors Group, IPSE, to lobby the Government to create some legislation that would outlaw some of the clauses, whilst still protecting the agency against contractors who may jump ship and go direct a few weeks into their contract.
Better still would be an agreement between IPSE and APSCo, the agents‘ representatives, on what the contract should say and what it shouldn‘t. They both have a standard contract that takes most contractors outside IR35. There‘s no reason why they shouldn‘t address this clause at the same time.
Agents may well be missing out on opportunities here. There‘s no reason why agents can‘t share in the benefits, where a contractor looks for fresh work from the client, e.g. to take over part or all of a project, or to look after a part of, or all of, a system, or to provide new software to the client. Because the clause is there the vast majority of contractors won‘t even attempt to get this extra business.
It would be better if the clause in the contract said that the contractor had to come to some accommodation with the agency. They can work out the details. That’s where a contractor does find fresh business from the client. This is in both their interests. It is much better than a clause which states that the contractor can‘t talk to the client about new business.
Is this extra business there?
In my experience as an IT Director it is there – just nobody attempts to try and get it. I would have been pretty happy for contractors to approach me with a cost effective solution to some of the problems that we had. They would get a good reception. They just didn’t do it. It wasn‘t worth it. ‘The Clause‘ stopped them.
I‘m sure that if the agency got first shot at filling any vacancies for the contractor‘s new area of business that he or she won, then this would be good for them. There are a lot of solutions that you could use to overcome this problem for the benefit of everyone involved. Stopping the contractor from looking for new business just hands the whole of that area over to companies like IBM, EDS and Accenture.