Supply chain · 7 January 2019

Will a restrictive covenant cost me thousands of job opportunities?

restrictive covenant
To be enforceable, restrictive covenants need to be reasonable
Can an agent withhold payment from a self-employed contractor who has breached a restrictive covenant?

Following his series of articles drawing the distinctions between agents and distributors, Grid Lawfounder David Walker responds to a reader locked in a dispute with their sub-agent.

Question

Hi, I wonder if you could help me at all.

Im a self-employed contractor working through an agent who in turn works for another main agent. It is this main agent who works directly with the end client.

The rules for working with the end client have changed and the main agent can no longer sub-contract out all of the work. However, the sub-agent Im currently working for is not a main agent so is not allowed to bid for the end client’s work.

My contract expires at the end of the month and I have been approached by a main agent to work for them.

Ive accepted a position (but havent yet started work for them) but now my current agent has suspended all payments to me. They say I have breached my contract by accepting a new position with another agent because I have a restrictive covenant in my contract.

They also want compensation for a contract they were never going to have.

To date, I havent received any payment from them for two months. Can they do this?

If they can, it means that I will lose out on 1, 000s of job opportunities because of the industry I work in.

Any help and advice you can provide is greatly appreciated.

Thanks

Answer

Thanks for your question.

To be enforceable, restrictive covenants need to be reasonable and go no further than is necessary to protect a legitimate business interest.

From what you have said, it appears that the agent you are working for is losing their business through no fault of yours (or theirs), but simply due to a rule change.

You shouldnt be penalised for this and my view is that it would be unfair to stop you from working for someone else when they are in no position to provide you with any work.

Without knowing all the details or seeing the whole contract I can’t give you any definitive advice, but there doesnt appear to be any grounds on which they can legitimately withhold the payments that are due to you.


 

ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry, advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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