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Contractor Doctor: Can I contract direct for my client if I have no agency contract?

Dear Contractor Doctor

I recently responded to an IT contract ad posted by a recruiter and, after a chat with the agent that did not include any mention of terms and conditions or the Conduct Regulations, my CV was forwarded to the client. The client interviewed me by phone and, after negotiating and agreeing rates, offered me the contract.

I was therefore surprised to receive a call from the agent the next day insisting that I take a rate cut of 15% on the client’s instructions. The saga continued with the client contacting me directly, saying the agency had demanded a £95 per day fixed fee and had told the client it would contact me to negotiate down my rate. The client is unhappy with the agent’s conduct and said that they would not pursue the contract through them.

Can I work direct with the client with no agency paperwork or contract in place?

Thanks

Karen

Contractor Doctor says:

“Based on the above facts, the agency would appear to have failed to fulfil its obligations to the contractor and the client under the Conduct Regulations,” explains Roger Sinclair of contractor legal specialist Egos.

“If the contractor and client decide to contract directly, it is difficult to see on what basis the agency is entitled to make a charge. It would be up to the agency to show that it should benefit from an independent arrangement between the contractor and the client.”

However, Sinclair warns that all the facts of the case may not yet be clear, and the client may be unwilling to take the risk if there is an agreement in force between it and the agency. “Securing professional legal assistance to resolve this issue would help the contractor to be clearer about her position,” he adds.

The Conduct Regulations: benefits for contractors

Although an agency is under no obligation to ask a contractor to opt out of the Conduct of Employment Agencies and Employment Businesses Regulations 2003, if it does not then the ‘Conduct Regs’, will apply by default.

Regulation 14 requires the agency to obtain agreement from the contractor for the terms that will apply to their arrangement before providing work-finding services,” continues Sinclair, “and Regulation 15 requires the agency and contractor to agree at least a minimum rate.”

It would appear that the requirements of neither regulation has been satisfied, leaving the agency in breach of the legislation if the contractor has not opted out. It would also leave the contractor in a position to do what she wishes.

Regulation 6 also prevents an agency from taking action that would cause a contractor any detriment when taking up a work opportunity with any person,” says Sinclair. “This provision may enable the client and contractor to make their own direct arrangement without the agency’s involvement.”

The Conduct Regulations: benefits for clients

Clients also enjoy some protection under the terms of the Conduct Regulations, as Sinclair explains: “Regulation 10 contains restrictions that govern when an agency can make a charge to the hirer other than when making supplies of a contractor’s services.

“The agency should also have agreed the terms of engagement, its margin and the rate of pay of the contractor with the client before introducing the contractor.”

And if the Conduct Regs apply, they will take precedence over any existing agreement between the agency and the client. This could make a contract with restrictions on the client unenforceable and unlawful.

The agency is on uncertain ground

“Based on what we know about this case, the client can do what it wants unless there is a valid legal reason, and it would be the agency’s responsibility to demonstrate such a reason,” says Sinclair.

Based on what we know about this case, the client can do what it wants unless there is a valid legal reason, and it would be the agency's responsibility to demonstrate such a reason

Roger Sinclair, Egos

“Otherwise, on what basis is the agency entitled to make a charge in the event that the contractor and client make an independent arrangement? If the agency tries to renege on previously agreed rates then it should not be surprised if the contractor and client don’t react well, and seek to make other arrangements which exclude the agency.”

In conclusion, Sinclair warns that not all clients will be willing to take the risk of dealing direct with a contractor: “Contractors finding themselves in this position may wish to establish whether the client will contract directly, as often the manager responsible won’t understand the issues and so won’t want to accept responsibility for risks he does not understand.

“This does not necessarily mean that the contractor need lose the contract if they seek professional advice to help determine, manage and communicate the level of risk of contracting direct.”

Published: Monday, July 23, 2012

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