Contractors' Questions: What if I breach a restrictive clause?

Contractor's Question: I have a contract with a recruitment agency to work as a freelancer for one year at an organisation, but I will most likely want to leave the contract before it expires. However the contract states that I cannot work directly or through another agency for the same client organisation for several months after the contract is finished. What happens if I act to the contrary of this statement and if I do, what consequences should I expect? Lastly, is it fair for a recruitment agency to contractually impose this restriction on me?

Expert's Answer: Such 'restriction' clauses are usual in freelance contracts with recruitment agencies in the UK. From the agency's point of view, they are trying to protect themselves by preventing contractors from simply ending the contract and working for the company they have been placed in directly.

However, the courts will not always enforce such clauses. On the one hand, courts try to avoid restricting an individual's freedom to carry on business as they wish, and yet on the other hand, they try to uphold the principle that contacting parties are free to agree whatever terms they want and that the courts will enforce the terms agreed.

If you breached the term and the agency wanted to enforce it, they must prove that the term was a reasonable one, while taking into account all the facts relating to how the agency conducts its business and your situation. This will really boil down to the length of time the restriction is to last for: a few months is likely to be enforceable but not a few years.

If the clause is held to be reasonable, a court might grant them an "injunction", i.e. a court order to stop you from working for the company. It can also order you to pay over to the agency all the profits you received from working for the company.

It is common in agency contracts for the company, or you, to agree to pay a recruitment fee to the agency if you start working directly for a company you have been placed with. It might be that you or the company could negotiate with them on this front at least.

The expert was Gary Cousins, solicitor and co-founder of Cousins Business Law.