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Contractor Doctor: If I sign a confidentiality agreement in my name am I inside IR35?

Dear Contractor Doctor,

I’m a limited company contractor and I’ve just started work on a six-month IT contract with a new client. I had my contract checked for IR35 by a consultant and it received the all-clear.

But I’ve been working on the assignment for only a week and I’ve been asked by my client project manager to sign a confidentiality agreement, which has been drawn up to include me personally as the ‘other party’.

If the confidentiality agreement is in my name, and not the name of my company, does that put me inside IR35?



Contractor Doctor says:

Assuming the agreement refers only to issues directly relating to confidentiality, signing a confidentiality agreement personally has no bearing on IR35 status. It is not unusual for an individual, rather than their business, to be named, although it is more common for the legal entity actually supplying the services to be the signatory of an agreement.

Confidentiality agreements, which can also be called secrecy or Non-Disclosure Agreements, or ‘NDAs’ for short, are standard commercial practice in many industries and suppliers are routinely expected to sign such agreements.

This is particularly true for those like consultants and contractors supplying services personally, but who are not employees of the client organisation and therefore not bound by employment contracts.

Clients can’t change contractual terms, in theory

Technically, the timing of Erin’s client’s request to sign the confidentially agreement could be challenged, as clients cannot change terms and conditions once the contract has been signed, unless they re-negotiate with the contractor.

So, for example, if the client demanded that the contractor signed the confidentiality agreement or the contract would be terminated, then if this provision was not included in the original contract signed by both parties then the contractor could refuse.

However, contractors must weigh up the options and consider the circumstances. It could be that the client itself has a new client that requires all sub-contractors to personally sign secrecy agreements, and if there is no downside for the contractor to sign, they would generate considerable goodwill with their client if they agreed.

Check that confidentiality is all that is included

Contractors asked to sign a confidentiality agreement should check carefully that the agreement only covers matter relating to confidentiality and that there are no clauses that conflict with or attempt to supersede the main contract.

It is particularly important that the confidentiality agreement contains no references to control, the right of substitution or other factors relating to IR35 rules and employment status. Under these circumstances IR35 could become an issue, and if in doubt contractors should seek professional assistance.

Clients cannot change terms and conditions mid-contract without requesting the contractor’s cooperation to re-negotiate. So if there are any clauses that, for example, attempt to withhold payment or enforce some form of financial bond or penalty, they should be struck out or a completely new contract negotiated.

Confidentiality agreements should be in proportion

Some confidentiality agreements can impose excessive conditions upon signatories, such as including a very broad scope of work, like code routines, designs or know-how which are the intellectual property of the contractor, or are for an excessively long period.

If the conditions appear excessively onerous, then contractors should challenge them, negotiate them out, reduce them, or ask a professional to review the agreement.

If the conditions appear excessively onerous, then contractors should challenge them, negotiate them out, reduce them, or ask a professional to review the agreement

A confidentiality agreement is not the same as a restrictive covenant imposed by an agency. All things being equal, the agency can quite justifiably require that the contractor does not go direct to the client and cut out the agency.

A client may also have a legitimate right to require that a contractor does not go and work for competitors for a period of time after a contract, but only if the contractor agrees to such an imposition. In a highly specialised field where only a few clients exist, such a requirement might be unreasonable in a confidentiality agreement.

Good luck with your contracting!

Contractor Doctor

Published: 31 January 2011

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